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TUCSON, Ariz.-New York state is not jumping into the captive business too late to develop into an important domicile, asserts an attorney for the state's insurance regulators.
"When we put the proposal together and got it to the governor's office, that was a concern," said Peter J. Molinaro, associate counsel of the New York Insurance Department. "But, we still believe growth is left in this field."
The captive insurance industry's growth during the extended soft market is evidence that organizations continue to look to this alternative risk-financing arrangement, he said during a panel discussion at the 24th Annual Captive Insurance Cos. Assn. conference in Tucson, Ariz.
New York regulators in September 1995 unveiled their plan to establish a captive domicile in New York, which they said would fit well in Gov. George Pataki's economic development plan (BI, Sept. 18, 1995).
Mr. Molinaro expects that the governor's office soon will release a bill that would authorize the state to establish a captive domicile. Last year's
bill died in the Legislature due to inaction. Mr. Molinaro said the bill was introduced late in the session when lawmakers were dealing with morepressing workers compensation reform and budget bills.
Noting that Manhattan is home to many large corporations, Mr. Molinaro said, "We want to provide an option to New York companies so they don't have to go elsewhere."
As a financial leader, Manhattan has "a lot to offer" captive owners,
he said. "We hope to enhance our role as a financial leader in the world and enhance the job situation."
But, shortly after New York regulators announced their captive plans, risk managers at several major companies said they would not consider relocating their captive insurers to New York unless the state offered clear advantages over other domiciles.
Mr. Molinaro, though, said New York does not intend to compete with other onshore or offshore captive domiciles by trying to lure away current captive owners. New York would be targeting untapped sources of captive business, he said.
He noted, for example, that public entities and religious groups already have expressed their interest in captives to New York regulators.
By helping those organizations as well as other potential captive owners move into this type of alternative risk-financing arrangement, "We'll actually help the captive industry grow," Mr. Molinaro said.
"It's sort of like when you put one large supermarket across the street from another. The theory is the additional traffic the one will attract will help both."
Panel moderator Henry H. Traendly, chairman and president of Crest Hill (Ltd.) Bermuda in Hamilton, asked Mr. Molinaro how, specifically, New York regulators plan to show they support the captive industry.
Regulatory attitude toward captive owners, which has undermined ambitious captive growth efforts in other states, will be the key, Mr. Molinaro responded. "The bill is only the first step. We need to have the right regulatory attitude and flexibility this industry needs."
For example, the New York Insurance Department is committed to establishing a separate bureau for captive formation.
"We'll be a consistent group of people, so you won't be getting pinch-hitters all of the time," Mr. Molinaro said.
That unit also would gather "complaints, suggestions and also hopefully kudos," he said.
Some other members of the panel, though, had different ideas for potential new captive owners.
Kymn Astwood, Bermuda's top insurance regulator as registrar of companies, welcomed additional competition, which he called the "best remedy for complacency."
In making his sales pitch to potential new captive owners, he said Bermuda offers them "one-stop shopping." The island domicile's numerous insurers and reinsurers can "enhance captive programs," he said.
Captive tax expert attorney P. Bruce Wright, a partner with LeBoeuf, Lamb, Greene & MacRae, added that establishing a captive offshore could be more tax efficient than establishing an onshore captive.