Governor George E. Pataki and New York City Mayor Michael R. Bloomberg announced new legislation that will allow a wider range of businesses the opportunity to utilize captive insurance companies to retain, fund, and better manage some of their risk.
The proposed bill will also allow for the formation of a pure captive insurance company by New York City to provide coverages for liability relating to or arising out of activities in or near the World Trade Center site in response to the attacks of September 11, 2001.
“The new legislation will mean New York City will now have important insurance coverages it greatly needs relating to the tragedies of September 11th,”Governor Pataki said. “The Federal Emergency Management Agency specifically authorized the creation of a New York City captive and the City explored various options and decided that the formation of a captive insurance company was in its best interest for claims arising out of the clean-up effort at and near the World Trade Center.
“Our policies of cutting taxes, controlling spending, and eliminating red tape have strengthened the State’s business climate. This bill reaffirms my commitment to pursuing policies that result in creating business opportunities and jobs in the State of New York,” Governor Pataki said.
New York City Mayor Michael Bloomberg said, “The City of New York, together with State officials and the New York Congressional delegation, has fought long and hard for federally-paid insurance to protect the City and its contractors for claims arising from the massive debris removal work done in the World Trade Center. This legislation is necessary for the City to expedite the payment of claims relating to this effort.”
The new State captive legislation contains several provisions to help the State’s business community. The bill provides a new risk transfer vehicle, known as a sponsored captive insurance company, which permits various participants to use the same vehicle to self-fund their risks. The bill in addition, creates additional flexibility by lowering the threshold for businesses to form single parent captives and to participate in a group captive. As well, public entities that meet appropriate standards will also be permitted to form captives.
The U.S. Congress recently passed legislation directing the Federal Emergency Management Agency (FEMA) to provide the City of New York with up to $1 billion in coverage for the City and its contractors for claims arising from debris removal performed after the collapse of the World Trade Center buildings. The federal legislation also directs the City of New York to use such funds to establish a captive insurance company or other such appropriate insurance mechanism.
Superintendent of Insurance Gregory V. Serio said, “The new State captive legislation also creates greater flexibility and allows businesses and public entities new opportunities to avail themselves of greater choices for more efficiency in managing and financing risk. Given the contraction of the commercial insurance market around the country, the new legislation affords even more of New York’s businesses a valuable option by offering the use of captives as an alternative form of insurance. The New York State Insurance Department is proud of its status as both a facilitator of insurance coverage for New York’s businesses and industry regulator of safety and soundness in the best traditions of financial regulation. The Department stands ready to help New York’s businesses manage their risk, save money and gain greater control of their corporate futures.”
Empire State Development Corporation Chairman Charles A. Gargano said, Companies from across the State, across the Nation, and around the world are expanding their operations and investing their futures in New York. This important legislation is yet another example of Governor Pataki working to improve the business climate of New York and his commitment to pursuing pro-business, pro-growth policies.”
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