SB23 Alabama 2021 Session

Summary

Primary Sponsor

Shay ShelnuttSenator

Republican

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Insurance Company revised, certificate of dormancy provided for, Secs. 27-31B-26, 27-31C-3.1 added; Sec. 27-31C-4 repealed; Secs. 27-31B-2, 27-31B-3, 37-31B-6, 27-31C-3 am'd.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

SB23 updates Alabama's captive insurance laws to expand how and where captives can operate, strengthen financial and governance requirements, and create new options like dormancy, Alabama Coastal Captives, mutualization, and redomestication.

What This Bill Does

It revises definitions for different captive types and allows insurance on risks in alien jurisdictions with approval from the commissioner. It tightens security for branch operations, updates capital and surplus requirements, and clarifies formation and licensing processes. It creates new mechanisms for dormancy certificates, mutualization of stock captives, and redomestication of foreign or alien captives to Alabama, and it introduces rules for Alabama Coastal Captive Insurance Company homeowners coverage in designated Gulf coast areas. It also aligns risk retention groups with NAIC standards and expands permissible arrangements for reinsurance and investments under updated rules.

Who It Affects

• Captive insurance companies operating in Alabama (pure, agency, association, industrial insured, risk retention groups, protected cell, branch, reinsurance, and SPFC) and their sponsors/owners, who will face updated definitions, capitalization requirements, licensing terms, governance rules, and potential new options like mutualization or redomestication.
• Policyholders, insureds, and the broader Alabama insurance market, who may see changes in how captives fund liabilities, how risk is transferred or shared (including possible use of Alabama Coastal Captive homeowners coverage in designated Gulf areas), and how dormancy or mutualization could affect policyholder interests and market stability.

Key Provisions

• Defines and revises captive types (pure, agency, association, industrial insured, risk retention group, protected cell, etc.) and authorizes alien jurisdiction risk placements under commissioner-approved standards.
• Allows homeowners coverage to be written by an Alabama Coastal Captive Insurance Company only in Gulf front, beach, and seacoast areas designated by ISO.
• Establishes security requirements for branch operations, including a trust fund or irrevocable letter of credit to secure branch liabilities.
• Creates certificates of dormancy for captive insurers meeting certain conditions and requires dormant captives to take specified actions.
• Adds new sections (27-31B-26, -27, -28) enabling stock captives to become mutual captives (mutualization) with prescribed governance and buyout protections for nonconsenting stockholders.
• Provides for redomestication of foreign or alien captives to Alabama, including regulatory consent, recognition of examinations, and continued liability of the company under Alabama law.
• Requires NAIC accreditation considerations for risk retention groups and aligns certain investment, disclosure, and regulatory requirements with updated Title 27 provisions and Chapter 37 rules, including alternative valuation methods where appropriate.

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