HB31 Alabama 2021 Session

Summary

Primary Sponsor

Kerry Rich

Republican

Co-Sponsor

Corley Ellis

Session

Regular Session 2021

Title

Captive Insurance Companies, insurance in alien jurisdictions auth., requirements for an Alabama Coastal Captive Insurance Company revised, certificate of dormancy provided for, Secs. 27-31B-26, 27-31C-3.1 added; Sec. 27-31C-4 repealed; Secs. 27-31B-2, 27-31B-3, 37-31B-6, 27-31C-3 am'd.

Summary

HB31 updates Alabama's captive insurance laws to expand alien risk placement, strengthen branch liability security, create a formal dormancy process for captives, and overhaul the Alabama Coastal Captive framework (including homeowners coverage) with new licensing, reporting, and capital rules.

What This Bill Does

It revises definitions for captive insurance companies, including terms like alien captive, branch captive, protected cell, and coastal captive. It allows insurance for risks in alien jurisdictions under conditions approved by the commissioner, and tightens security requirements for liabilities from branch operations. It updates rules for the Alabama Coastal Captive Insurance Company, including options for homeowners coverage in limited coastal areas, sponsorship and protected cell arrangements, and direct policy issuance, with specific limits on risk exposure and required reporting. It creates a new certificate of dormancy for dormant captives, with minimum capital, annual reporting, five-year renewal, and a process to surrender and resume operations, and it repeals some existing coastal provisions while applying certain rules to coastal captives.

Who It Affects

• Captive insurance companies operating in Alabama or seeking to operate, due to new definitions, licensing conditions, and allowed activities (including alien risk placement and branch operations).
• Policyholders and insureds of captive insurers, because of changes to risk placement, security requirements for branch liabilities, and new financial and reporting standards.
• Alabama Coastal Captive Insurance Company and its potential insureds, since homeowners coverage is expanded to coastal areas with new structure for sponsorship, protected cells, direct issuance, and risk limits.
• Dormant captive insurance companies, because a formal certificate of dormancy with reporting and capital requirements is created, plus surrender and reactivation provisions.
• The Alabama Department of Insurance/Commissioner, which gains new rules to adopt and enforce, and new cross-referenced requirements for coastal captives.

Key Provisions

• 27-31B-2 amendments define terms such as Alien Captive Insurance Company, Branch Captive Insurance Company, Association Captive Insurance Company, Protected Cell, and related concepts to broaden or clarify how captives operate in Alabama and abroad.
• 27-31B-3 changes authorize Alabama captives to insure certain risks and allow branch captives to transact insurance in this state for branch operations, including permission to place insurance on risks in alien and foreign jurisdictions with commission approval.
• 27-31B-6 updates capital, surplus, and security requirements for different captive types (pure, association, industrial insured, protected cell, branch), including potential use of letters of credit and trust arrangements for branch liabilities.
• 27-31C-3.1 adds that the Alabama Coastal Captive Insurance Company must follow applicable provisions (Sections 27-31B-6 and 27-31B-7), applying coastal rules to these captives.
• 27-31C-4 is repealed, removing prior coastal captive provisions and replacing them with the new framework described in this act.
• 27-31B-26 creates a new Certificate of Dormancy for dormant captives, with renewal every five years, minimum capital of $25,000, annual/annual-like financial reports, and a process to surrender the certificate before resuming business.
• The act specifies that a dormant captive is not subject to state taxes and outlines conditions for surrender and revocation of the dormancy certificate, plus a provision for the commissioner to adopt implementing rules.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Insurance