SB24 Alabama 2021 Session

Summary

Primary Sponsor

Shay ShelnuttSenator

Republican

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

Alabama updates its reinsurance credit rules to align with the NAIC model and add collateral and reciprocal-jurisdiction provisions for cross-border reinsurance.

What This Bill Does

It changes when a domestic insurer can take credit for reinsurance against reserves, tying credit to whether the reinsurer meets specified requirements or to new rules related to the Credit for Reinsurance Model Law and covered agreements. The bill sets out rules for valuing assets backing credit, the forms of security allowed, and when credit can be reduced or eliminated. It creates a framework for reciprocal jurisdictions and eligible assuming insurers, requiring minimum capital and solvency, notices to the state regulator, consent to service of process, and the posting of security to cover liabilities; it also provides for potential loss of credit eligibility if standards are not met. The Insurance Commissioner is empowered to adopt implementing rules, publish lists of reciprocal jurisdictions and eligible insurers, and apply these provisions to reinsurance agreements with an effective-date-based scope.

Who It Affects

• Domestic ceding insurers in Alabama, who would face new or tightened rules for taking credit for reinsurance against reserves and may need to adjust reserve calculations and required security.
• Reinsurers (assumed insurers) and their regulators, including foreign or reciprocal-jurisdiction reinsurers, who must meet capital, solvency, and security requirements, may be subject to trust arrangements and potential loss of credited status; their eligibility can be listed, added, or revoked by the state and NAIC processes.

Key Provisions

• 27-5B-3 amendments: credit for reinsurance is allowed only if the reinsurer meets specified requirements (or as altered by commissioner rules), and the commissioner may set standards for asset valuation, security forms, and when credit can be reduced or eliminated.
• 27-5B-9: credit may be permitted for reinsurers not meeting certain requirements, but only for risks located in jurisdictions where such reinsurance credits are required by law or regulation.
• 27-5B-11: if the assuming insurer does not meet requirements, trust provisions require assets to be transferred to the commissioner, with distribution guided by applicable state liquidation laws and the grantor waiving conflicting rights.
• 27-5B-14: credit not to exceed the ceding insurer’s liabilities for non-conforming reinsurance; authorizes specified forms of security (cash, NAIC-listed securities, irrevocable letters of credit, etc.) and rules for valuing and accepting security.
• 27-5B-19: commissioner authority to adopt implementing rules, potentially applying NAIC valuation manuals and setting rules for life, health, and certain annuity products; rules may limit applicability to certain ceded business and require compliance with covered agreements.
• 27-5B-8.1: creates criteria for reinsurers domiciled in reciprocal jurisdictions, including minimum capital and surplus, solvency ratios, ongoing compliance, and requirements to provide notices, consent to service of process, and 100% security for liabilities; establishes process for evaluating and listing reciprocal jurisdictions and eligible insurers.
• 27-5B-20: states that these amendments apply to cessions after the act’s effective date for agreements with inception, anniversary, or renewal dates six months after that date.

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