News Release

New Jersey Department of
Banking and Insurance

Commissioner Tom Considine

For Immediate Release:
April 1, 2011

For Further Information:
Ed Rogan or Marshall McKnight (609) 292-5064

TRENTON –New Jersey Department of Banking and Insurance Commissioner Tom Considine today cited the Reinsurance and Surplus Lines Stimulus Act, which Governor Chris Christie signed last week, as a growth engine for the economy that will create jobs and expand the insurance market. Considine said that this law, together with the recently enacted Captives law, provides a powerful insurance economic development package.

The law provides incentives to financially sound reinsurers and surplus lines insurance companies to do more business in New Jersey. The law removes a restriction on New Jersey domesticated surplus lines insurers that prevented these companies from writing business in the State. It also modernizes New Jersey’s reinsurance guidelines by permitting more financially healthy reinsurers to provide more coverage in the State.

“New Jersey already has a significant surplus lines insurance market and the Act will grow the industry,” said Commissioner Considine. “This expansion, coupled with the ability to approve healthy new reinsurers, will bring jobs and economic opportunities to the State. The law will stimulate financial markets and advance Governor Christie’s pro-business growth agenda.”

The reinsurance portion of the law affords reinsurers more flexibility in how they deploy their capital, which should put downward pressure on the rates charged by reinsurers to New Jersey domestic insurers. Reinsurance is basically "insurance for insurance companies," a way for a primary insurer to protect against unforeseen or extraordinary losses. Sometimes an insurance company will purchase reinsurance as a “backstop” to guard against potential catastrophic losses.

The new law also broadens the New Jersey insurance market by amending current law which prohibits surplus lines insurers domiciled, or based, in New Jersey from writing in the State’s surplus lines market. Surplus lines are products which provide insurance coverage for certain risks not typically written in the admitted market. This law should attract surplus lines companies to re-domesticate in New Jersey. It makes the State one of only a few in the U.S. to allow its surplus lines domestic companies to write in the same surplus lines market. Senators Thomas Kean and Nia Gill and Assemblyman Gary Schaer and Assemblywoman Denise Coyle introduced the bill which enabled the law. The bill had bipartisan support.

Earlier this year, Governor Christie signed another widely endorsed bipartisan law that permitted captive insurance companies to form in New Jersey. The captive law was also sponsored by Senators Kean and Gill and Assemblyman Schaer and Assemblywoman Coyle. Experts say the new laws will promote investment in the New Jersey insurance market including job producing capital investments in New Jersey.

Captive insurance companies are insurance companies established with the specific objective of financing risks emanating from their parent group or groups. Previously, the law did not allow captive insurance companies in the State, causing major New Jersey employers to secure coverage from captive insurers established in other locations.

“Governor Christie and the Legislature have now completed a pro-growth insurance package of laws that make a captive insurance industry, a more robust reinsurance climate and an even larger surplus lines market,” said Considine. “We are making great strides in opening New Jersey for business. We look forward to seeing more insurance choices for our businesses and other consumers, and greater investment and hiring in the financial services industries.”

For additional information on insurance matters go to: www.njdobi.org.