Michigan Gov. Jennifer M. Granholm signed captive legislationinto 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 a1.25 percent business tax on gross direct premiums written onproperty or risk located within the state.

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

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

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

He said Jackson's interest in the captive insurance company actis the formation of special purpose financial captives, used bylife insurers. His company helped draft the legislation, basing iton existing laws for special purpose captives in South Carolina andVermont.

The legislation provides for the use of special purposecaptives. Separate cells also can be placed within the captive, hesaid. "This creates a more convenient situation for securitizingbooks of business, whether you're a life company or some other kindof 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 andInsurance Regulation."

In most other domiciles, he said, 80 percent of the funds wouldgo to the Treasury and 20 percent to the department for operationalpurposes.

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

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

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

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