Babauta bill aims to create captive insurance industry

As part of efforts to diversify and improve the CNMI’s economic condition, Sen. Celina R. Babauta (D-Saipan) has introduced a bill that seeks to create a new industry in the CNMI called captive insurance companies.

Captive insurance refers to a subsidiary corporation that us created to provide insurance solely to the parent company and its affiliates. In its simplest form, a captive insurance company is an insurance company that is a wholly owned subsidiary whose primary function is to insure all or part of the risks of its parent company.

Babauta said a captive insurance company represents an option for many organizations, from Fortune 500 companies to nonprofits, that want to take financial control and manage risks by underwriting their own insurance rather than paying premiums to third party insurers.

The senator said her legislation, Senate Bill 23-43, permits a novel captive insurance industry and captive insurance company to be licensed and domiciled in the CNMI and to attract insurance business as enumerated in the Commonwealth.

In her statement issued over the weekend, Babauta said this new industry has proven successful in the continental United States and in the neighboring islands of Micronesia.

“This novel industry will expand and diversify the economy of the CNMI,” she said.

While captive insurance firms have been around for 40-plus years, risk financing concept is relatively new in Asia, the senator said.

“This legislation, if marketed aggressively and properly, will help attract reputable multi-million-dollar investors to the CNMI and benefit the communities of Saipan, Tinian, and Rota,” Babauta said.

She said for so long, the sole act of bringing in investors, while significant, has been a band aid to temporarily mask the CNMI’s economic problems.

What she envisions is to establish “meaningful solutions to end the perpetual and vicious cycle” of yearly deficits of the CNMI government, provide for industry value and grow the economy, she said.

As part of her meetings with industry experts, she has captured the interest of domestic and international companies that intend to leverage their companies to infuse millions into the CNMI’s economy by establishing captive insurance companies, Babauta said.

Commonwealth Economic Development Authority executive director Manuel A. Sablan stated that by attracting captive insurance companies to set up operations in the CNMI, it will expand the Commonwealth’s financial services sector beyond tourism and create additional job opportunities.

Insurance

Celina R. Babauta