Relates to authorizing the thruway authority to form a captive insurance company

2 Co-sponsors

• Pedro Espada Jr.
• William J. Larkin Jr.

Title of bill

An act to amend the insurance law, the public authorities law and the tax law, in relation to authorizing the New York state thruway authority to form a captive insurance company

PURPOSE OF THE BILL

This bill would permit the Thruway Authority to form a pure captive insurance company in New York State and provide the Thruway Authority with a related tax exemption.

Summary of provisions

Section 1 of the bill would amend Insurance Law ("IL") § 7002(e) to authorize the Thruway Authority and its statutory subsidiary to have the same authority that the Metropolitan Transportation Authority (MTA) has to form a pure captive insurance company upon submission of written notice to the Governor, the Temporary President of the Senate and the Speaker of the Assembly. IL § 7002(g) is amended to exclude the Thruway Authority from becoming a member of an industrial insured group.

Section 2 of the bill would amend Public Authority Law ("PAL") § 354 to add a new subdivision 15 which would authorize the Thruway Authority to form a captive insurance company.

Sections 3 and 4 of the bill would amend Tax Law ("TL") §§ 1500 and 1500-b to exempt a captive formed by the Thruway Authority from payment of certain fees, taxes or assessments. This expands the current exemption that applies now only to the MTA and the City of New York.

Section 5 provides for an immediate effective date.

Existing law

IL Article 70 currently authorizes the formation, operation and regulation of captive insurance companies. TL §§ 1500 (a) and 1502-b (a) contain provisions regarding computation of tax for captive insurance companies, but provides an exemption for the MT A and the City of New York. The Thruway Authority does not have explicit authority to form a captive.

Prior legislative history

This is a new bill.

Statement in support

This bill would provide the Thruway Authority with the same authorization as the MTA and the City of New York to form captives as provided in IL Article 70. Captive insurance companies ("captives") are insurers owned by the entities that they insure. Captives are organized to reduce costs for the owner.

The Thruway Authority is self insured for property damage to substantially all of its buildings and vehicles as well as third party liability, including automobile liability. There are two funded reserves for these exposures that total approximately $15.8 million. The Thruway Authority obtains limited insurance coverage related to loss of revenues, bridges, and workers' compensation benefits that total approximately $3.2 million. Over the past few years, the Thruway Authority has faced increases in its insurance premium costs and reduced underwriting capacity by insurers, despite a very favorable loss experience.

The MTA has successfully operated a captive program since 1997, which has resulted in an estimated savings of more than $248 million to the MTA from 1997 through 2006. The ability to form a captive program would provide an alternative to the Thruway Authority self insuring itself to cover its risks and reduce related insurance costs.

Budget implications

None to the State. It is anticipated that this legislation would result in reduced costs to the Thruway Authority.

Effective date

This act shall take effect immediately.