Michigan Gov. Jennifer M. Granholm signed captive legislation into law yesterday, adding the state to the list of about 30 U.S. captive domiciles.

Senate Bill 1061 was introduced by Sen. Alan Sanborn, R-Richmond, to amend the insurance code and allow captive insurers. Also enacted was Senate Bill 1062, which exempts captives from a 1.25 percent business tax on gross direct premiums written on property or risk located within the state.

Diane Bissell, administrative law assistant with the State Department of Labor and Economic Growth, Office of Financial and Insurance Regulation., said the bill was put on a fast track because, "we're a state in a serious economic situation."

Captive legislation, she said, was requested by Jackson National Life Insurance Co., headquartered in Lansing, Mich.

John Brown, vice president, government relations for Jackson National Life, said, "We're gratified the governor signed the bill, and we're looking forward to its implementation here in Michigan."

He said Jackson's interest in the captive insurance company act is the formation of special purpose financial captives, used by life insurers. His company helped draft the legislation, basing it on existing laws for special purpose captives in South Carolina and Vermont.

The legislation provides for the use of special purpose captives. Separate cells also can be placed within the captive, he said. "This creates a more convenient situation for securitizing books of business, whether you're a life company or some other kind of insurance company," Mr. Brown said.

He explained that the law is a departure from other U.S. domiciles in that rather than a tax, captives pay a regulatory fee "so the revenues flow directly to the Office of Financial and Insurance Regulation."

In most other domiciles, he said, 80 percent of the funds would go to the Treasury and 20 percent to the department for operational purposes.

The way it's set up in Michigan, however, the department "will have ample revenues to administer the law," he said.

Michigan regulatory fees, on an annual basis, range from $5,000 to $100,000. "Those amounts are identical to South Carolina, but all of those monies are deemed a regulatory fee and they go to the department for operational purposes," he said.

Now that the state has captive regulations, it is "in need of a staff," Ms. Bissell said. Mr. Brown noted that while a captive administrator has yet to be assigned, "one would assume they will either identify someone internally with background for that purpose, or they might have to find somebody on the outside."

Jackson expects to form a special purpose financial captive in the "not too distant future," Mr. Brown said, adding that he also anticipates that some Michigan companies with captives domiciled in other states may redomicile them to Michigan.

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Michigan Gov. Granholm Signs Captive Law

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