New York State Acts To Rev Up Its Captive Business

By Caroline McDonald

NU Online News Service, Jan. 20, 1:48 p.m.EST?New York officials said they have ramped up efforts toexpand the captive insurance business domiciled in their state,adding a new director, a new group captive and forming anassociation for the domicile.[@@]

New York Insurance Superintendent Gregory V. Serio recentlyannounced the hiring of David Ahl as director of captivedevelopment under the direction of Peter Molinaro, senior deputysuperintendent.

Mr. Aul's expertise in economic development, as well as hisinsurance background, Mr. Serio said, makes him uniquely qualifiedfor the needs of the department's captive group?which was formedearlier this year.

Growing the domicile has been "a priority for the governor'sadministration," Mr. Serio told National Underwriter.

The state's first move in that direction, he noted, was thepassage of the captive law in 1997. Out of that came the creationof a captive for the Metropolitan Transportation Authority.

"Curiously enough," he said, "a government agency is using thecaptive statute to reconstruct their insurance program?and I wouldsay to great benefit."

These benefits, he said, were evident in terms of dollars savedby the MTA over the last five years and its increased attention torisk management.

He added that, "as we went through disruptions in the marketplace, whether it was 9/11 and the hard market that followed or theloss of Reliance and Kemper, the MTA has been able to maintain asteady course of coverage as well as claims management because theyheld so much of the control within their own captive."

Mr. Serio continued that the success of the '97 act has allowedthe domicile to aggressively pursue expanding the number ofcaptives in New York?which began in 2003 with four captives andended with 18 licensed entities and two applications pending.

Mr. Serio also announced CAPCO Holdings, which will offer amechanism for 14 financial institutions to provide excess insurancefor investors in case they sustain losses as a result of a bankruptor otherwise financially troubled investment firm.

CAPCO, he said, was put together as a group captive to "coverthese investment houses for their liability beyond the SIPC[Securities Investor Protection Corporation] protections providedby the federal government."

He noted that this is a marketplace that has "essentially driedup among the traditional carriers. We were gratified to be able toprovide an option to the New York-based investment houses as we didand basically reform the market for that," he said.

Mr. Molinaro told NU that formation of a New Yorkcaptive group is in the works. As a regulator, he said, "it's notour role to be the physical organizer, but we have used our role asfacilitator with an organization that manages associations of thiskind to help them with the formation of the New York CaptiveInsurance Association."

The company is CINN Worldwide Inc., located in Mt. Vernon, N.Y.He added that an announcement will go out "within the month. We'reexcited about that and have offered our offices as a location forthe first meeting of the NYCIA."

Mr. Molinaro said, "We really believe that we've put together avery successful formula here in New York, and the addition of DavidAhl is another step in bringing more talent and resources to thegroup." He said the industry has reacted favorably "to the kind ofservice we've given," which includes issuing a license inthree-and-a-half days.

Though the department's minimum guarantee is 30 days, "if youneed something done, we tell folks, because the group is separatedfrom insurance department functions, we are able to move muchfaster," he said.

Mr. Molinaro said the department has had a "great deal" ofresponse from the New York business community. "Every week we meetwith potential organizers of a captive insurer to discuss New York,discuss options with them, and we're receiving calls on a dailybasis," he said.

Mr. Ahl joined the department from the Empire State DevelopmentCorporation, where he was senior director of industry development.Previously he was director of industry development, responsible forbusiness development in the insurance industry. Mr. Ahl formerlyworked at the department as special assistant to thesuperintendent, where he worked on venture capital legislation, thedepartment said.