HB32 Alabama 2021 Session

Summary

Primary Sponsor

Kerry Rich

Republican

Co-Sponsor

Corley Ellis

Session

Regular Session 2021

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

HB32 creates Alabama’s reinsurance collateral framework to implement international covered agreements and align with the NAIC Credit for Reinsurance Model Law.

What This Bill Does

The bill sets when Alabama can credit reinsurance as an asset or liability reduction, and it authorizes the commissioner to adopt rules on asset valuation, security, and when credit may be reduced or eliminated. It creates a framework for accepting credit for reinsurers in reciprocal jurisdictions who meet capital, solvency, and oversight requirements, including obligations to post security and submit to Alabama jurisdiction. It also adds a process for trust arrangements if a reinsurer does not meet standards and specifies that the new rules apply to reinsurance contracts starting after a set effective date.

Who It Affects

• Domestic ceding insurers in Alabama, who may face stricter criteria and collateral requirements to obtain credit for reinsurance.
• Reinsurers/assuming insurers, especially those in reciprocal jurisdictions, who must meet capital, solvency, and regulatory oversight conditions and may need to post security and consent to Alabama legal processes.
• Regulators and the commissioner, who will administer eligibility lists, rules, and oversight of security, valuation, and enforcement.
• Policyholders and insured individuals indirectly, through changes in how reinsurance credit is supported and secured.

Key Provisions

• Amends sections 27-5B-3, 27-5B-9, 27-5B-11, 27-5B-14, and 27-5B-19 and adds 27-5B-8.1 and 27-5B-20 to implement reinsurance collateral provisions.
• Credit for reinsurance is allowed only if the reinsurer meets specified requirements; the commissioner may adopt rules on asset valuation, security forms, and when credit is reduced or eliminated.
• Credit may be allowed for certain reinsurers not meeting all standards if the risks are located in jurisdictions that require reinsurance credit by law or regulation.
• If the assuming insurer does not meet requirements, trust arrangements must include conditions allowing the commissioner to seize assets and distribute them under state law, with 100% security in some cases.
• The form of security may include cash, NAIC-listed securities, clean letters of credit, and other acceptable forms, with rules governing valuation and security standards.
• Section 19 authorizes the commissioner to adopt rules applying to life, universal life, variable annuities, long-term care, and NAIC-adopted credit-for-reinsurance models, including applicability to post-2015 policies and certain pre-2015 treaties.
• Adds Section 27-5B-8.1 establishing reciprocal jurisdictions, ongoing capital and solvency requirements, consent to Alabama jurisdiction, 100% security provisions, and annual supervisory confirmations.
• Section 27-5B-20 states the amendments apply to reinsurance agreements with inception, anniversary, or renewal dates six months after the act’s effective date.

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