New Jersey gets its first captive

New Jersey has approved the State's first captive insurance company under New Jersey's new captive insurance law that became effective in May. The issued certificate of authority becomes effective July 1, to the Prudential Insurance Company of America to form a pure captive - Prudential New Jersey Captive Insurance Company (NJCAP). NJCAP becomes the first official domestic captive firm established through a law Governor Chris Christie signed in February of this year.

"It is fitting that Prudential, a Newark-based domestic insurer, charters the first captive insurer in New Jersey," said Considine. "Prudential's new NJCAP is a great way for the company to better manage its risk and is yet another example of how the Christie Administration creates a better regulatory environment for the New Jersey corporate community."

Prudential established NJCAP to manage risk in a portion of its life insurance and annuity policies. As a New Jersey based captive, NJCAP will have a New Jersey based management team and board of directors and will be subject to New Jersey captive insurance laws, regulation and oversight. As a New Jersey-domiciled insurer, Prudential Insurance Company of America remains subject to the general corporate and insurance laws and regulations of the State. As a result of this, DOBI maintains regulatory oversight for both the parent company and the captive insurer.

"We are pleased to be the first company to establish a captive for reinsurance purposes in New Jersey, and appreciate the level of collaboration with the New Jersey Department of Banking and Insurance on this initiative," said Beverly Barney, vice president and actuary for Prudential.

Captive insurance companies are insurance companies established with the specific objective of financing risks emanating from their parent group or groups. Previously New Jersey law did not allow captive insurance companies in the State. This caused major New Jersey employers to establish captive insurers in other states and countries. Without this law, companies like Prudential would have needed to go to another jurisdiction to form its captive. With this law, however, Prudential was able to form its captive with its home state regulator and thus keep the "NJ" in "NJCAP."

Captives allow businesses to gain greater control of the organization's ability to identify, manage and finance insurable risks. The potential advantages include: greater control in risk management and claim activities, paying lower premiums, federal tax savings, tailoring coverage to their specific needs, and direct access to reinsurers.

"New Jersey's captive law is one additional way that the Garden State is growing more business opportunities and improving the economy during the Christie Administration," said Considine. "We welcome Prudential's new captive insurance company as the first captive in New Jersey and expect many more firms to form new captives or to relocate existing ones here."

Companies seeking to form a new captive will find a new section on the Department's Web site called "Captive Corner." The site will provide an online "one-stop-shop" with information for companies seeking to establish captive insurance companies including regulatory guidance, forms and links to admission packets, information on registering to be an approved captive insurance company manager, accountant or actuary, as well as contact information.

The site, www.state.nj.us/dobi/division_insurance/captive/index.html, will provide all the steps necessary to successfully enter the New Jersey captive market.