Flexible legislation is necessary, he explained, because the insurance market has changed to a point “where lines that nobody ever thought would leave the market are leaving the market. We can now set the capitalization and surplus accordingly, since there are no statutory minimums.”

Mr. Ingram said the states goal is to be recognized as “the onshore laboratory,” and as the “most progressive market for insurance and financial services in the United States, if not the world.”

The competition now, he said, is with offshore domiciles. Risk managers now have “no reason to go offshore,” he said. “We want to level the playing field and say, Bring your business to us and let a U.S. regulator oversee this.”

South Carolinas new provisions are designed to:

Simplify re-domestication procedures for captives moving into South Carolina from other domiciles.

Establish a new category of captive insurer–a Special Purpose Captive Company–which gives the department more flexibility in approving captives that might not fit into other categories.

Prorate the statutory minimum tax quarterly.

Establish a special fund to be used for expanding and improving captive programs and promoting the state as a domicile.

Clarify provisions under which third-party business is allowed.

In New York, which last month reported two captives and one application pending, the insurance department has proposed new legislation to allow sponsored captives, as well as to “add flexibility for corporations and public agencies and authorities that wish to self-insure,” said Insurance Superintendent Gregory V. Serio, in a statement.

The new legislation, SB 6591, introduced into the Senate by Sen. James Seward, R-Oneonta, who chairs the Insurance Committee, is designed to give “even more of New Yorks businesses a valuable option by offering the use of captives as an alternative form of insurance,” Mr. Serio said.

The legislation would “curtail the trend” for businesses and public entities to look outside the state when “implementing their risk management strategies if they involve the formation of captives,” Mr. Serio added.

According to a memorandum issued by Sen. Seward, SB 6591 would:

Reduce the net worth threshold for pure captives to $25 million from $100 million, and allow smaller businesses to join group captives.

Amend the law to include sponsored captives. Each sponsored cell would have to be fronted by a licensed insurer, reinsured through a New York authorized or approved entity, or secured by a trust fund backed by a letter of credit.

Amend the definition of “industrial insured” to include a pure captive insurance company.

Allow group captives to insure the risks of the affiliated companies of industrial insureds.

Amend the definition of “industrial insured group” to include risk retention groups.

Authorize one or more sponsors to form a captive, or to establish and maintain one or more protected cells to insure the risk of one or more specified participants.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 1, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.