SB54 Alabama 2020 Session

Summary

Primary Sponsor

Shay ShelnuttSenator

Republican

Session

Regular Session 2020

Title

Insurance, reinsurance, regulation and credit against reserves, adoption of similar to Credit for Reinsurance Model Law by Nat. Assoc. of Insurance Commissioners, Secs. 27-5B-8.1, 27-5B-20 added; Secs. 27-5B-3, 27-5B-9, 27-5B-11, 27-5B-14, 27-5B-19 am'd.

Summary

Alabama would update its reinsurance rules to align with the NAIC model and U.S.–EU/UK agreements, adding collateral requirements and a reciprocal-jurisdiction framework for reinsurers.

What This Bill Does

The bill allows insurers to take credit for reinsurance against reserves under standards similar to the NAIC Credit for Reinsurance Model Law. It adds rules for valuing assets, securing credit, and when credit can be reduced or eliminated. It creates a framework for reinsurers to qualify for credit based on domicile, capital, solvency, and regulatory commitments, especially for reinsurers in reciprocal jurisdictions. It also authorizes the Insurance Commissioner to adopt detailed rules and sets when the new rules apply to reinsurance contracts.

Who It Affects

• Domestic ceding insurers in Alabama: could take credit for reinsurance against reserves if the reinsurer meets specified requirements, subject to new valuation and security rules; credit may be reduced or eliminated if conditions are not met.
• Reinsurers/assuming insurers (especially those in reciprocal jurisdictions): must meet minimum capital, solvency, and regulatory obligations; may be required to provide security (often 100% of liabilities), consent to jurisdiction and service of process, and annual compliance confirmations; noncompliance can affect their eligibility for credit.

Key Provisions

• Adds sections 27-5B-8.1 and 27-5B-20 and amends sections 27-5B-3, 27-5B-9, 27-5B-11, 27-5B-14, and 27-5B-19 to align Alabama law with the NAIC Credit for Reinsurance Model Law and to implement covered agreements.
• Credit for reinsurance may be allowed as an asset or a reduction from liability only if the reinsurer meets specified requirements; the commissioner may adopt rules on valuation and security.
• Credit may be allowed for reinsurers not meeting certain requirements if the reinsurance is for risks located in jurisdictions where such credit is required by law or regulation.
• If the reinsurer does not meet key requirements, trust agreements must include conditions requiring asset transfer to the commissioner if the trust is inadequate or the grantor is insolvent, with asset distribution governed by domicile laws and potential return of excess assets to the grantor; grantor waives conflicting rights.
• Credit for non-qualifying reinsurers is limited to the ceding insurer’s liabilities, and the commissioner may require specific forms of security (cash, NAIC-listed securities, irrevocable letters of credit, etc.).
• The commissioner may adopt rules on valuation, security, and when credit should be reduced or eliminated, including use of the NAIC valuation manual where applicable.
• A reciprocal-jurisdiction framework requires reinsurers to have head office or domicile in a reciprocal jurisdiction, meet minimum capital/surplus and solvency requirements, provide assurances to the commissioner, and maintain security and ongoing compliance; the commissioner will publish and may remove jurisdictions from the reciprocal list.
• The act applies to reinsurance agreements with inception, anniversary, or renewal dates not less than six months after the act’s effective date; cessions entered after the act become subject to these provisions; the act becomes law on January 1 following its passage unless otherwise provided.

AI-generated summary using openai/gpt-5-nano on Feb 23, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Insurance