Captive Insurance-Still a Great Idea for New York (Around New York‪)‬

As I was reviewing the legislative introductions this week I noticed a sight that warmed my heart. On March 24, 2009 a bill which would authorize the formation of a captive insurance company by the New York State Thruway Authority (TA) was introduced in both houses of the New York legislature. The compelling idea of captive insurance is apparently alive and well in New York. This development came soon after I finished my column for the previous issue which dealt with a budget proposal to change the income tax status of privately held captives which derived over 50 percent of their income from non-premium sources. Such a proposal, if enacted could have a negative effect on the formation and continuance of New York captives. Just when I believed that New York didn't appreciate the benefits of captive insurance, I spotted this hopeful sign. The legislation, if enacted, would pave the way for the formation of the third New York public captive insurer--the first two public captives were formed by the Mass Transit Authority (MTA) and the City of New York. The type of captive contemplated by the Thruway Authority would be a broad-based captive model, housing a variety of risks, in a manner similar to the MTA captive. (The New York City captive was formed solely to house the residual risk to New York City due to the clean-up of the World Trade Center site in the aftermath of the September 11, 2001 terrorist attacks.) Technically, the bill amends Section 7002 of the Insurance Law to add the Thruway Authority, and its statutory subsidiaries, to the list of entities qualifying as an "Industrial Insured", therefore giving them the right to form a captive insurance company.