New Jersey Department of Banking and Insurance
CIT catches up with Crosby Sherman of the New Jersey Department of Banking and Insurance to talk about new laws, cell formation and poaching captives
Why did New Jersey decide to enact a captive law, which became effective in May 2011?
The captive law was enacted as a part of governor Chris Christie’s initiative to grow business opportunities within New Jersey and to provide the opportunity for businesses already headquartered in New Jersey to form or relocate their captive without having to leave the state. With the concentration of Fortune 500 companies and a sophisticated financial services infrastructure in New Jersey, I like to say we have a ‘captive audience’ here, so why not take advantage.
What are the specifics of the law and how does it ensure both a sustainable and prosperous environment for captives?
Those familiar with captive insurance will find the New Jersey law quite familiar as the core provisions were modelled after Vermont’s successful law. Capitalisation requirements and premium taxes are virtually identical.
What has interest in establishing a captive in New Jersey been like?
Interest has been strong and continues to grow. The word has gotten out and it seems the inquiries increase weekly.
New Jersey welcomed Lumerica Insurance Company from Vermont earlier in the year—how much of a coup was this for the state?
Lumerica was our second re-domestication of a captive insurer to New Jersey, the first being Ports Insurance Company from New York. Ports America Holdings, parent to Ports, and BASF, Lumerica’s parent, are companies with significant presence in New Jersey. We were excited they had the confidence in the state, the department and its processes to move their captives to New Jersey.
The state also approved its first cell captive recently—how important are these types of captives to the state? What makes New Jersey a good place for them to set up?
Cell captives appear to be a trend within the captive world that allow middle market companies to realise the benefits of a captive due to cost savings, etc. For the same reasons discussed above and below, New Jersey should be considered when thinking about a cell captive.
How has New Jersey’s insurance department worked to develop the state as a viable US captive domicile?
The department has staff dedicated solely to the regulation of captives. The commissioner recognised early on the need to have this staff in place if New Jersey was to be a contender. John Talley, the assistant chief, and I are approachable, aim to be responsive and are willing to listen. We have developed a reach-out programme to help our service providers educate prospective captive owners on the particulars of captive insurance in New Jersey.
What does the department make of NRRA clarifications and the chance of these being acted on at the federal level?
The Non-admitted and Reinsurance Reform Act (NRRA) has raised awareness in the captive world of issues involving state self-procurement taxes, but there’s some disagreement about whether a clarification at the federal level, if one could be gotten, would accomplish what folks are looking for. Some are concerned that specifically excluding captives from the NRRA could actually have negative consequences for the captive industry. This is an area that might benefit from more deliberation.
Federal intervention in state insurance law is often criticised—what are your thoughts on this?
State insurance regulation has proven to be very effective and continues to improve as the globe grows smaller and state regulators get smarter and work ever more closely together. Working through the NAIC, state regulators will continue to engage with federal and international regulators alike to ensure insurance regulation appropriately protects the public while remaining fair and balanced.
