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SB207 INTRODUCED
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SB207
JP9X9YF-1
By Senator Shelnutt
RFD: Banking and Insurance
First Read: 27-Jan-26
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JP9X9YF-1 01/26/2026 KMS (L)cr 2025-3736
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First Read: 27-Jan-26
SYNOPSIS:
Under existing law, the Alabama Captive Insurers
Act establishes certain requirements for forming
captive insurers in this state.
This bill would specifically require captive
insurers to arrange with a bank located in this state
to transfer money, to contract with a person or
business organization approved by the commissioner to
manage its affairs and to place certain requirements on
the captive manager, to employ or contract with a
certified public accountant approved by the
commissioner, to employ or contract with an actuary
approved by the commissioner, to submit biographical
background information for each director and officer
and for each person controlling 10 percent or more of
the captive insurer, to submit a detailed plan of
operation and feasibility study, to submit a statement
disclosing the identity and percentage of ownership of
all persons controlling 10 percent or more of the
captive insurer, to submit evidence of its beneficial
ownership, sponsorship, or membership, to submit any
other factors or information deemed relevant by the
commissioner, and to require notice of any subsequent
material change in any of the items required to be
submitted.
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submitted.
Under existing law, there are minimum capital
requirements for captive insurance companies and a
minimum amount for premium taxes.
This bill would increase the minimum capital
requirements for certain captive insurers and would
increase the minimum amount to be paid by captive
insurers for premium taxes.
Under existing law, before approving an
application of a captive insurer for license, the
commissioner must find that the proposed captive
insurer will promote the general good of the state.
This bill would require the commissioner to take
into consideration the competence of the captive
manager and legal counsel of the captive insurer and to
consider the company's business plan when determining
whether the company will promote the general good of
the state.
This bill would also require licensed captive
insurers to annually file an audited financial
statement and an actuarial certification of loss
reserves and loss expense reserves.
A BILL
TO BE ENTITLED
AN ACT
Relating to insurance, to amend Sections 27-31B-3,
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Relating to insurance, to amend Sections 27-31B-3,
27-31B-6, 27-31B-8, 27-31B-9, and 27-31B-16, Code of Alabama
1975; to impose additional requirements on captive insurers;
to require notice of any subsequent material change in any of
the items required to be submitted; to increase the minimum
paid in capital certain captive insurers are required to
maintain; to require the commissioner to take into
consideration the competence of the captive manager and legal
counsel of the captive insurer and to consider the company’s
business plan when determining whether the company will
promote the general good of the state; to require licensed
captive insurers to annually file an audited financial
statement and an actuarial certification of loss reserves and
loss expense reserves; and to increase the minimum amount of
premium tax to be paid by captive insurers.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 27-31B-3, 27-31B-6, 27-31B-8, and
27-31B-9, Code of Alabama 1975, are amended as follows:
"§27-31B-3
(a) Any captive insurance company, when permitted by
its articles of association, charter, or other organizational
document, may apply to the commissioner for a license to do
any and all insurance defined in Sections 27-5-2, 27-5-4, and
27-5-5, in subdivisions (1), (2), (4), (5), (6), (7), (8),
(9), (10), (11), (12), (13), and (14) of subsection (a) of
Section 27-5-6, in Sections 27-5-7, 27-5-8, 27-5-9, and
27-5-10, and to grant annuity contracts as defined in Section
27-5-3, subject, however, to all of the following:
(1) No pure captive insurance company may insure any
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(1) No pure captive insurance company may insure any
risks other than those of its parent and affiliated companies
or controlled unaffiliated business.
(2) No agency captive insurance company may insure
risks other than those affiliated with the controlling
insurance producer.
(3) No association captive insurance company may insure
any risks other than those of the member organizations of its
association, and their affiliated companies.
(4) No industrial insured captive insurance company may
insure any risks other than those of the industrial insureds
that comprise the industrial insured group, and their
affiliated companies.
(5) No risk retention group may insure any risks other
than those of its members and owners.
(6) No captive insurance company may provide personal
motor vehicle coverage or any component thereof. Homeowner's
insurance coverage may be written by an Alabama Coastal
Captive Insurance Company as defined in Chapter 31C, but only
in the gulf front, beach, and seacoast areas as designated by
the Insurance Services Office, Inc.
(7) No captive insurance company may accept or cede
reinsurance except as provided in Section 27-31B-13.
(8) Any captive insurance company may provide excess
workers' compensation insurance to its parent and affiliated
companies and member organizations unless prohibited by the
laws of the state having jurisdiction over the transaction.
Any captive insurance company may reinsure workers'
compensation.
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compensation.
(9) Any captive insurance company which insures risks
described in Sections 27-5-2 and 27-5-4 shall comply with all
applicable state and federal laws.
(10) Insurance may be placed on risks in alien and
foreign jurisdictions if the underlying business in the
jurisdiction is legal in the jurisdiction, subject to
commissioner approval.
(11) No protected cell captive insurance company may
insure any risks other than those of its participants.
(b) To conduct insurance business in this state, a
captive insurance company shall comply with all of the
following:
(1) It must obtain from the commissioner a license
authorizing it to do insurance business in this state.
(2) Its board of directors or managers, or in the case
of a reciprocal insurer, its subscribers' advisory committee,
must hold at least one meeting each year in this state.
(3) It must maintain its principal place of business in
this state, or in the case of a branch captive insurance
company, maintain a place of business for its branch
operations in this state.
(4) It must appoint a registered agent to accept
service of process and to otherwise act on its behalf in this
state; subject further to the following:
a. If formed as a corporation or other legal entity,
whenever the registered agent cannot with reasonable diligence
be found at the registered office of the captive insurance
company, the Secretary of State shall be an agent of the
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company, the Secretary of State shall be an agent of the
captive insurance company upon whom any process, notice, or
demand may be served.
b. If formed as a reciprocal insurer, whenever the
registered agent cannot with reasonable diligence be found at
the registered office of the captive insurance company, the
commissioner shall be an agent of the captive insurance
company upon whom any process, notice, or demand may be
served.
(5) It must make adequate arrangements with a bank
located in this state that is authorized pursuant to state or
federal law to transfer money.
(6)a. It must employ or enter into a contract with a
natural person or business organization to manage the affairs
of the captive insurer that meets the standards of competence
and experience satisfactory to the commissioner.
b. The captive insurer shall promptly notify the
commissioner of any failure of the captive insurer to comply
with this chapter.
c. The commissioner may require a captive insurer to
discharge a captive manager for failure to substantively
fulfill the captive manager's duties under this chapter.
d. The captive manager, if a natural person, or the
officers and directors of the captive manager, if a business
organization, shall not serve as the president of a captive
insurer.
(7) It must employ or enter into a contract with a
qualified and experienced certified public accountant that is
approved by the commissioner or a firm of certified public
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approved by the commissioner or a firm of certified public
accountants that is nationally recognized.
(8) It must employ or enter into a contract with
qualified, experienced actuaries who are approved by the
commissioner to perform reviews and evaluations of the
operations of the captive insurer.
(9) It must submit biographical background information,
on a form prescribed by the commissioner, for each director
and officer of the captive insurer and for each person who
controls, directly or indirectly, 10 percent or more of the
captive insurer.
(10) It must submit a plan of operation that clearly
indicates the method of operation of the captive insurer
including all of the following items:
a. The types and limits of insurance that will be
provided.
b. Pro forma financial statements for a period covering
three years, which shall include a balance sheet, income
statement, and cash flow statement.
c. The amount and liquidity of its assets relative to
the risks to be assumed by the captive insurer.
d. The expertise, experience, and character of the
persons who will manage the captive insurer.
e. A description of the captive insurer's reinsurance
program.
f. A description of the captive insurer's underwriting
policy, including who will perform those functions.
g. A description of the captive insurer's claims
handling procedures, including who will perform those
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handling procedures, including who will perform those
functions.
h. A description of the captive insurer's investment
policy.
i. A statement regarding the overall soundness of the
plan of operation of the captive insurer.
j. A description of the captive insurer's rate making
policies and procedures.
k. A statement indicating the adequacy of its programs
providing for loss prevention by its parent or member
organizations.
(11) It must submit a feasibility study, or other
analysis, prepared by a qualified actuary.
(12) It must submit a statement disclosing the identity
and percentage of ownership of the captive insurer for all
persons who control, directly or indirectly, 10 percent or
more of the captive insurer.
(13) It must submit evidence of its beneficial
ownership, sponsorship, or membership.
(14) It must submit any other factors or information
deemed relevant by the commissioner in ascertaining whether
the proposed captive insurance company will be able to meet
its policy obligations.
(c) If there is a subsequent material change in any
item or information submitted pursuant to subsection (b)
including, but not limited to, the plan of operation, the
captive insurer shall submit an appropriate revision not later
than 30 days after the adoption of the change for approval by
the commissioner. The captive insurer may not offer any
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the commissioner. The captive insurer may not offer any
additional kinds of insurance until a revision of the
description is approved by the commissioner.
(c)(d)(1) Before receiving a license, a captive
insurance company shall comply with one of the following:
a. If formed as a corporation or other legal entity, it
shall file with the commissioner a certified copy of its
organizational documents and bylaws, a statement under oath of
its president and secretary or other authorized official
showing its financial condition, and any other statements or
documents required by the commissioner.
b. If formed as a reciprocal insurer, it shall comply
with both of the following:
1. File with the commissioner a certified copy of the
power of attorney of its attorney-in-fact, a certified copy of
its subscribers' agreement, a statement under oath of its
attorney-in-fact showing its financial condition, and any
other statements or documents required by the commissioner.
2. Submit to the commissioner for approval a
description of the coverages, deductibles, coverage limits,
and rates, together with any additional information as the
commissioner may reasonably require. In the event of any
subsequent material change in any item in the description, the
reciprocal captive insurance company shall submit to the
commissioner for approval an appropriate revision and shall
not offer any additional kinds of insurance until a revision
of the description is approved by the commissioner. The
reciprocal captive insurance company shall inform the
commissioner of any material change in rates within 30 days of
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commissioner of any material change in rates within 30 days of
the adoption of the change.
(2) In addition to the information required by
subdivision (1), each applicant captive insurance company
shall file with the commissioner evidence of all of the
following:
a. The amount and liquidity of its assets relative to
the risks to be assumed.
b. The adequacy of the expertise, experience, and
character of the person or persons who will manage it.
c. The overall soundness of its plan of operation.
d. The adequacy of the loss prevention programs of its
parent, member organizations, industrial insureds, or other
insureds as applicable.
e. Any other factors deemed relevant by the
commissioner in ascertaining whether the proposed captive
insurance company will be able to meet its policy obligations.
(3) In addition to the information required by
subdivisions (1) and (2), each applicant protected cell
captive insurance company shall file with the commissioner all
of the following:
a. A business plan demonstrating how the applicant will
account for the loss and expense experience of each protected
cell at a level of detail found to be sufficient by the
commissioner and how it will report the experience to the
commissioner.
b. A statement acknowledging that all financial records
of the protected cell captive insurance company, including
records pertaining to any protected cells, shall be made
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records pertaining to any protected cells, shall be made
available for inspection or examination by the commissioner or
the commissioner's designated agent.
c. All contracts or sample contracts between the
protected cell captive insurance company and any participants.
d. Evidence that expenses shall be allocated to each
protected cell in a fair and equitable manner.
(4) Information submitted pursuant to this subsection
shall be and remain confidential, and may not be made public
by the commissioner or by an employee or agent of the
commissioner without the written consent of the company,
except as provided in the following:
a. The information may be discoverable by a party in a
civil action or contested case to which the captive insurance
company that submitted the information is a party, upon a
showing by the party seeking to discover the information that:
(i) the information sought is relevant to and necessary for
the furtherance of the action or case ,; (ii) the information
sought is unavailable from other nonconfidential sources ,; and
(iii) a subpoena issued by a judicial or administrative
officer of competent jurisdiction has been submitted to the
commissioner. Notwithstanding the foregoing, this subdivision
shall not apply to any industrial insured captive insurance
company insuring the risks of an industrial insured group as
defined in paragraph b. of subdivision (19) of Section
27-31B-2 (19)b. or to a captive risk retention group.
b. The commissioner may disclose the information to a
public officer having jurisdiction over the regulation of
insurance in another state, provided that : (i) the public
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insurance in another state, provided that : (i) the public
official shall agree agrees in writing to maintain the
confidentiality of the information ,; and (ii) the laws of the
state in which the public official serves require the
information to be and to remain confidential.
(d)(e) Each captive insurance company shall pay to the
commissioner a nonrefundable fee as set forth in Section
27-31B-4 for examining, investigating, and processing its
application for license, and the commissioner is authorized to
may retain legal, financial, and examination services from
outside the department, the reasonable cost of which may be
charged against the applicant in accordance with Section
27-2-25. In addition, each captive insurance company shall pay
a license fee for the year of registration and a renewal fee
for each year thereafter as set forth in Section 27-31B-4.
(e)(f) If the commissioner is satisfied that the
documents and statements filed by a captive insurance company
comply with this chapter, the commissioner may grant a license
authorizing the company to do conduct insurance business in
this state until April 1 thereafter, which license may be
renewed.
(f)(g)(1) Notwithstanding any other provision of this
chapter, the commissioner may issue a provisional license to
any applicant captive insurance company for a period not to
exceed 60 days if the commissioner deems that the public
interest will be served by the issuance of the provisional
license.
(2) As a condition precedent to the issuance of a
provisional license under this subsection, the applicant shall
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provisional license under this subsection, the applicant shall
have filed a complete application containing all information
required by this section, paid all fees required for
licensure, and the commissioner shall have made a preliminary
finding that the expertise, experience, and character of the
person or persons who will control and manage the captive
insurer are acceptable.
(3) The commissioner, by order, may limit the authority
of any provisional licensee in any way deemed necessary to
protect insureds and the public. The commissioner, by order,
may revoke a provisional license if the interests of insureds
or the public are endangered. If the applicant fails to
complete the regular licensure application process within the
60-day provisional period, the provisional license shall
terminate automatically at the end of the 60-day period, and
any policy issued during the provisional period shall be
cancelled as of the termination date and any premium unearned
shall be refunded to the policyholder within 10 days."
"§27-31B-6
(a) No captive insurance company shall be issued a
license unless it shall possess the captive insurance company
possesses and thereafter maintain maintains unimpaired paid-in
capital and surplus as follows:
(1) In the case of a pure captive insurance company,
not less than one hundred thousand dollars ($100,000) two
hundred fifty thousand dollars ($250,000) or another amount
determined by the commissioner and actuarially supported by a
feasibility study.
(2) In the case of an agency captive insurance company,
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(2) In the case of an agency captive insurance company,
not less than five hundred thousand dollars ($500,000) or
another amount determined by the commissioner and actuarially
supported by a feasibility study.
(3) In the case of an association captive insurance
company or risk retention group , not less than five hundred
thousand dollars ($500,000) or another amount determined by
the commissioner and actuarially supported by a feasibility
study.
(4) In the case of an industrial insured captive
insurance company, not less than five hundred thousand dollars
($500,000).
(5) In the case of a reinsurance captive insurance
company, not less than ten thousand dollars ($10,000) or
another amount determined by the commissioner and actuarially
supported by a feasibility study two hundred fifty thousand
dollars ($250,000) .
(6) In the case of a protected cell captive insurance
company, not less than one hundred thousand dollars ($100,000)
or another amount determined by the commissioner and
actuarially supported by a feasibility study.
(7) In the case of a branch captive insurance company,
not less than two hundred fifty thousand dollars ($250,000).
(8) In the case of a risk retention group, not less
than one million dollars ($1,000,000) or another amount
determined by the commissioner and actuarially supported by a
feasibility study.
(b) Notwithstanding the requirements of subsection (a),
no captive insurance company organized as a reciprocal insurer
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no captive insurance company organized as a reciprocal insurer
under this chapter shall be issued a license unless it has the
captive insurance company organized as a reciprocal insurer
possesses and thereafter maintains free surplus of one million
dollars ($1,000,000).
(c) The commissioner may prescribe additional capital
and surplus based upon the type, volume, and nature of
insurance business transacted.
(d) Capital and surplus may be in the form of cash,
cash equivalents, surplus note, securities meeting the
eligibility requirements of Section 27-6-3, or, if approved by
the commissioner, a clean, irrevocable, and unconditional
letter of credit issued by a bank chartered by the State of
Alabama or a member bank of the Federal Reserve System and
approved by the commissioner. No assets of the captive insurer
shall be pledged or encumbered for the payment of the letter
of credit.
(e) In the case of a branch captive insurance company,
as security for the payment of liabilities attributable to the
branch operations, the commissioner may require collateral
equal to the amount of net loss reserves on branch business
plus other insurance liabilities as determined by the
commissioner to be maintained by the branch captive insurance
company in a manner acceptable to the commissioner.
(f) Any captive insurance company formed under this
chapter may be capitalized with a surplus note. Any captive
insurance company issuing a surplus note pursuant to this
section must execute a written agreement with the creditor
providing the following:
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providing the following:
a. The creditor may only be paid out of the portion of
the captive insurance company's surplus that which exceeds the
minimum stated in the agreement.
b. The minimum surplus or floor shall exceed the sum
of: (i) 10 percent of the face amount of the surplus note; and
(ii) the greater of the statutory minimum capital or surplus
required by statute or the approved feasibility study or such
other amount approved by the commissioner.
c. Payments may only be made if the payment does not
affect the financial condition of the company.
d. Any payment of principal or interest requires the
prior approval of the commissioner."
"§27-31B-8
(a) A pure captive insurance company, an agency captive
insurance company, a reinsurance captive insurance company, a
special purpose financial captive insurance company, or a
protected cell captive insurance company shall be formed as a
stock or mutual insurer, or as a nonprofit or limited
liability company with its capital divided into units and held
by the stockholders, members, or other equivalent as allowed
by law.
(b) An association captive insurance company, an
industrial insured captive insurance company, or a risk
retention group may be formed in any of the following ways:
(1) Organized as a stock insurer with its capital
divided into share units and held by the stockholders,
members, or other equivalent as allowed by law.
(2) Organized as a mutual insurer without capital
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(2) Organized as a mutual insurer without capital
stock, the governing body of which is elected by the member
organizations of its association.
(3) Organized as a reciprocal insurer in accordance
with Chapter 31 of this title.
(4) Organized as a manager-managed limited liability
company.
(c) A captive insurance company incorporated or
organized in this state shall have one or more incorporators
or one or more organizers, at least one of which shall be a
resident of this state.
(d)(1) In the case of a captive insurance company
formed as a corporation, before the articles of incorporation
are transmitted to the Secretary of State, the incorporators
shall petition the commissioner to issue a certificate setting
forth the commissioner's finding that the establishment and
maintenance of the proposed corporation will promote the
general good of the state. In arriving at this finding the
commissioner shall consider all of the following:
a. The character, reputation, financial standing, and
purposes of the incorporators.
b.a. The character, reputation, financial
responsibility, insurance experience, and business
qualifications of the officers and directors.
b. The competence of any person who, pursuant to a
contract with the captive insurance company, will manage the
affairs of the company.
c. The competence, reputation, and experience of the
company's legal counsel relating to the regulation of
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company's legal counsel relating to the regulation of
insurance.
d. The company's business plan.
c.e. Any other aspects as the commissioner shall deem
advisable.
(2) The articles of incorporation, the certificate, and
the organization fee shall be transmitted to the Secretary of
State, who shall thereupon record both the articles of
incorporation and the certificate.
(e) In the case of a captive insurance company formed
as a reciprocal insurer, the organizers shall petition the
commissioner to issue a certificate setting forth the
commissioner's finding that the establishment and maintenance
of the proposed association will promote the general good of
the state. In arriving at this finding the commissioner shall
consider all of the following:
(1) The character, reputation, financial standing, and
purposes of the organizers.
(2)(1) The character, reputation, financial
responsibility, insurance experience, and business
qualifications of the attorney-in-fact.
(2) The competence of any person who, pursuant to a
contract with the captive insurance company, will manage the
affairs of the company.
(3) The competence, reputation, and experience of the
company's legal counsel relating to the regulation of
insurance.
(4) The company's business plan.
(3)(5) Any other aspects as the commissioner shall deem
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(3)(5) Any other aspects as the commissioner shall deem
advisable.
(f) In the case of a captive insurance company licensed
as a branch captive insurance company, the alien captive
insurance company shall petition the commissioner to issue a
certificate setting forth the commissioner's finding that,
after considering the character, reputation, financial
responsibility, insurance experience, and business
qualifications of the officers and directors of the alien
captive insurance company, the competence of any person who,
pursuant to a contract with the captive insurance company,
will manage the affairs of the company, the competence,
reputation, and experience of the company's legal counsel
relating to the regulation of insurance, and the company's
business plan, the licensing and maintenance of the branch
operations will promote the general good of the state. The
alien captive insurance company may register to do business in
this state after the commissioner's certificate is issued.
(g) The capital stock of a captive insurance company
incorporated as a stock insurer may be authorized with no par
value.
(h) In the case of a captive insurance company, at
least one of the members of the board of directors, managing
members, or equivalents as allowed by law, shall be a resident
of this state.
(i) In the case of a captive insurance company formed
as a reciprocal insurer, at least one of the members of the
subscribers' advisory committee shall be a resident of this
state.
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state.
(j) Captive insurance companies formed as corporations
under this chapter shall have the privileges and be subject to
the general corporation law as well as the applicable
provisions of this chapter. In the event of conflict between
the general corporation law and this chapter, the latter shall
control. The provisions of this title pertaining to mergers,
consolidations, and conversions shall apply in determining the
procedures to be followed by captive insurance companies in
carrying out any of the transactions described therein, except
that the commissioner may waive or modify the requirements for
public notice and hearing in accordance with rules which the
commissioner may adopt addressing categories of transactions.
If a notice of public hearing is required, but no one requests
a hearing, then the commissioner may cancel the hearing.
(k)(1) Captive insurance companies formed as reciprocal
insurers under this chapter shall have the privileges and be
subject to Chapter 31 in addition to the applicable provisions
of this chapter. In the event of a conflict between Chapter 31
and this chapter, the latter shall control. To the extent a
reciprocal insurer is made subject to other provisions of this
title pursuant to Chapter 31, the provisions shall not be
applicable to a reciprocal insurer formed under this chapter
unless the provisions are expressly made applicable to captive
insurance companies under this chapter.
(2) In addition to subdivision (1), captive insurance
companies organized as reciprocal insurers that are industrial
insured groups as defined in paragraph b. of subdivision (19)
of Section 27-31B-2 (19)b. shall have the privileges and be
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of Section 27-31B-2 (19)b. shall have the privileges and be
subject to the provisions of Chapter 31A in addition to the
applicable provisions of this chapter.
(l) The articles of incorporation, organization, or
equivalent allowed by law, or bylaws of a captive insurance
company may authorize a quorum of a board of directors to
consist of no fewer than one-third of the fixed or prescribed
number of directors determined under Title 10 10A.
(m) The subscribers' agreement or other organizing
document of a captive insurance company formed as a reciprocal
insurer may authorize a quorum of a subscribers' advisory
committee to consist of no fewer than one-third of its
members."
"§27-31B-9
(a) Captive insurance companies shall not be required
to make any annual report except as provided in this chapter.
(b) Prior to March 1 of each year, each captive
insurance company shall submit to the commissioner a report of
its financial condition, verified by oath of two of its
executive officers. Except as provided in Section 27-31B-6,
each captive insurance company shall report using statutory
accounting principles, unless the commissioner approves the
use of generally accepted accounting principles, with any
useful or necessary modifications or adaptations thereof
required or approved or accepted by the commissioner for the
type of insurance and kinds of insurers to be reported upon,
and as supplemented by additional information required by the
commissioner. Except as otherwise provided, each association
captive insurance company and each industrial insured captive
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captive insurance company and each industrial insured captive
insurance company insuring the risks of an industrial insured
group defined in paragraph b. of subdivision (18) of Section
27-31B-2 (19)b. shall file its report in the form required by
Section 27-3-26. Each risk retention group shall file its
report in the form required by Section 27-3-26 and shall
comply with all filing requirements set forth in this title as
well as rules and bulletins of the Alabama Department of
Insurance applicable to casualty insurers domiciled in the
state. The commissioner shall by rule propose the forms in
which pure captive insurance companies and industrial insured
captive insurance companies insuring the risks of an
industrial insured group defined in paragraph a. of
subdivision (18) of Section 27-31B-2 (19)a. shall report.
Subdivision (4) of subsection (c) of Section 27-31B-3 (d)(4)
shall apply to each report filed pursuant to this section,
except the subdivision shall not apply to reports filed by
industrial insured captive insurance companies insuring the
risks of industrial insured groups as defined in paragraph b.
of subdivision (18) of Section 27-31B-2 (19)b. .
(c) Any pure captive insurance company or an industrial
insured captive insurance company insuring the risks of
industrial insured groups as defined in paragraph a. of
subdivision (18) of Section 27-31B-2 (19)a. may make written
application for filing the required report on a fiscal
year-end. If an alternative reporting date is granted, the
annual report shall be due 60 days after the end of the fiscal
year and, in order to provide sufficient detail to support the
premium tax return, the pure captive insurance company or
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premium tax return, the pure captive insurance company or
industrial insured captive insurance company insuring the
risks of industrial insureds as defined in paragraph b. of
subdivision (18) of Section 27-31B-2 (17) shall file prior to
March 1 of each year for each calendar year-end, pages 1, 2,
3, and 5 of the "Captive Annual Statement; Pure or Industrial
Insured," verified by oath of two of its executive officers.
(d) Sixty days after the fiscal year-end, a branch
captive insurance company shall file with the commissioner a
copy of all reports and statements required to be filed under
the laws of the jurisdiction in which the alien captive
insurance company is formed, verified by oath of two of its
executive officers. If the commissioner is satisfied that the
annual report filed by the alien captive insurance company in
its domiciliary jurisdiction provides adequate information
concerning the financial condition of the alien captive
insurance company, the commissioner may waive the requirement
for completion of the captive annual statement for business
written in the alien jurisdiction.
(e)(1) Annually on or before June 1, an audited
statement of the captive insurer's financial condition
prepared in accordance with generally accepted accounting
principles in the United States for the preceding calendar
year ending December 31, which shall include all of the
following:
a. The report of an independent certified public
accountant.
b. A balance sheet.
c. An income statement.
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c. An income statement.
d. A statement of cash flows.
e. A statement of changes in capital and surplus.
f. Notes to financial statements.
g. The report of an evaluation of internal controls.
h. An accountant's letter.
(2) The commissioner may adopt rules providing
exceptions or exemptions from this requirement.
(f) An annual actuarial certification of loss reserves
and loss expense reserves which includes an opinion of the
adequacy of the loss reserves and loss expense reserves of the
captive insurer, in a format acceptable to the commissioner,
shall be filed with the report required in subsection (b). The
person that certifies the reserves shall be approved by the
commissioner and shall be a qualified actuary as defined in
the National Association of Insurance Commissioners Quarterly
and Annual Statement Instructions-Property/Casualty. "
Section 2. Section 27-31B-16 of the Code of Alabama
1975, is amended to read as follows:
"§27-31B-16
(a) Each captive insurance company shall pay to the
commissioner, by March 1 of each year, a tax at the rate of
four-tenths of one percent on the first 20 twenty million
dollars ($20,000,000) , three-tenths of one percent on the next
20 twenty million dollars ($20,000,000) , two-tenths of one
percent on the next 20 twenty million dollars ($20,000,000) ,
seventy-five thousandths of one percent on each dollar ($1)
thereafter on the direct premiums collected or contracted for
on policies or contracts of insurance written by the captive
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on policies or contracts of insurance written by the captive
insurance company during the year ending December 31 next
preceding, after deducting from the direct premiums subject to
the tax the amounts paid to policyholders as return premiums
which shall include dividends on unabsorbed premiums or
premium deposits returned or credited to policyholders.
Notwithstanding the foregoing, no tax shall be due or payable
as to considerations received for annuity contracts.
(b) Each captive insurance company shall pay to the
commissioner by March 1 of each year a tax at the rate of two
hundred and twenty-five thousandths of one percent on the
first 20 twenty million dollars ($20,000,000) of assumed
reinsurance premium, one hundred fifty thousandths of one
percent on the next 20 twenty million dollars ($20,000,000) ,
fifty thousandths of one percent on the next 20 twenty million
dollars ($20,000,000) , twenty-five thousandths of one percent
of each dollar ($1) thereafter. However, no reinsurance tax
applies to premiums for risks or portions of risks which are
subject to taxation on a direct basis pursuant to subsection
(a). No reinsurance premium tax shall be payable in connection
with the receipt of assets in exchange for the assumption of
loss reserves and other liabilities of another insurer under
common ownership and control if the transaction is part of a
plan to discontinue the operations of the other insurer, and
if the intent of the parties to the transaction is to renew or
maintain business with the captive insurance company.
(c) If the aggregate taxes to be paid by a captive
insurance company calculated under subsections (a) and (b)
amount to less than five thousand dollars ($5,000) in any
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amount to less than five thousand dollars ($5,000) in any
year, the captive insurance company shall pay a tax of five
thousand dollars ($5,000) for that year. The aggregate taxes
paid by a captive insurance company may not exceed one hundred
thousand dollars ($100,000) in any year.
(d) The minimum tax for a protected cell captive
insurance company may not be less than five thousand dollars
($5,000) and shall apply to the protected cell captive
insurance company as a whole and not to each protected cell.
The maximum tax to be paid by a protected cell captive
insurance company shall be the aggregate of the tax
liabilities of each protected cell. The maximum tax liability
attributed to any one protected cell captive insurance company
shall be one hundred thousand dollars ($100,000).
(e) Examination expenses paid in accordance with
Section 27-31B-10 and business privilege taxes paid in
accordance with Section 40-14A-22 by a captive insurance
company shall be allowed as credits to the tax provided for in
this section for the calendar year in which they were paid. In
the event application of the credit results in a negative tax
due, the tax due shall be zero and any unused portion of the
credit may not be carried forward for use in subsequent years.
(f) A captive insurance company failing to make returns
as required by Chapter 14A of Title 40 or failing to pay
within the time required all taxes assessed by this section,
shall be subject to Section 27-4A-4.
(g) Two or more captive insurance companies under
common ownership and control shall be taxed as though they
were a single captive insurance company.
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were a single captive insurance company.
(h) For the purposes of this section, "common ownership
and control" shall have the following meaning, as applicable:
(1) In the case of stock corporations, the direct or
indirect ownership of 80 percent or more of the outstanding
voting stock of two or more corporations by the same
shareholder or shareholders.
(2) In the case of mutual corporations, the direct or
indirect ownership of 80 percent or more of the surplus and
the voting power of two or more corporations by the same
member or members.
(i) In the case of a branch captive insurance company,
the tax provided for in this section shall apply only to the
branch business of the company.
(j) If a captive insurance company has been licensed
for less than a full calendar year and has written premiums
the tax for which is less than the minimum set forth in this
section, the tax due shall be prorated as follows:
(1) If licensed on or before March 31, 100 percent.
(2) If licensed April 1 to June 30, 75 percent.
(3) If licensed July 1 to September 30, 50 percent.
(4) If licensed October 1 to December 31, 25 percent.
(k) If a captive insurance company surrenders its
license and the calculated tax on premiums written during the
calendar year is less than the minimum set forth in this
section, the tax due shall be prorated as follows:
(1) If surrendered on or before March 31, 25 percent.
(2) If surrendered April 1 to June 30, 50 percent.
(3) If surrendered July 1 to September 30, 75 percent.
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(3) If surrendered July 1 to September 30, 75 percent.
(4) If surrendered October 1 to December 31, 100
percent.
(l) The tax provided for in this section shall
constitute all taxes collectible under the laws of this state
from any captive insurance company, and no other occupation
tax or other taxes shall be levied or collected from any
captive insurance company by the state or any county, city, or
municipality within this state, except business privilege
taxes and ad valorem taxes on real and personal property used
in the production of income.
(m) The tax provided for in this section shall not be
applicable if the captive insurance company writes no premiums
during the calendar year."
Section 3. Section 1 of this act shall become effective
June 1, 2026, and Section 2 of this act shall become effective
on January 1, 2027.
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