Senate Bill 207 Alabama 2026 Session

Summary

Primary Sponsor

Shay ShelnuttSenator

Republican

Session

2026 Regular Session

Title

Captive insurers, additional requirements, certain minimum paid in capital amounts increased

Summary

SB207 would tighten Alabama's captive insurer laws by raising capital and tax requirements, expanding in-state controls, and adding extensive licensing, disclosure, and audit duties for captives and their managers.

What This Bill Does

If enacted, the bill would require captive insurers to use an Alabama-based bank for transfers and to hire or contract with commissioner-approved managers, CPAs, and actuaries, plus submit detailed background and ownership information. It would raise minimum capital and premium tax obligations for various captive types and expand how direct and reinsurance premiums are taxed. The commissioner would explicitly consider the competence of the captive manager and legal counsel and the company’s business plan when deciding if the captive will promote the general good of Alabama, and captives would face annual audited financial statements and actuarial certifications for loss reserves. It would also impose extensive ongoing reporting and disclosure requirements, including plan-of-operation details and regular in-state board activities.

Who It Affects

• Captive insurers (including pure, agency, association, industrial insured, risk retention group, protected cell, and branch captives) and their directors, officers, controlling owners (10%+), and service providers (managers, banks, CPAs, actuaries) who would face heightened licensing, governance, and reporting duties.
• Alabama residents and the state's regulatory environment (and indirectly policyholders) who could see changes in tax revenue, oversight, and insurer solvency protections due to new capital, tax, and reporting requirements.

Key Provisions

• Captive insurers must arrange with an Alabama bank for money transfers.
• Require contracts with commissioner-approved captive managers, CPAs, and actuaries; require biographical information for directors/officers and for every 10%+ owner; require ownership, beneficial ownership, sponsorship, and other relevant disclosures; require notice of material changes.
• Increase minimum capital and surplus requirements by captive type (e.g., pure, agency, association, industrial insured, reinsurance, protected cell, branch, risk retention group) with actuarially supported amounts; in some cases, reciprocal captives must maintain higher surplus levels.
• Increase premium tax and reinsurance premium taxes with tiered rates and minimums; caps on total taxes; allow credits for certain examinations and business taxes; taxes may be prorated for partial-year licensing or surrender of license.
• Commissioner must consider the competence of the captive manager and legal counsel and the company’s business plan when determining whether the captive will promote the general good of the state.
• Licensed captives must annually file audited financial statements and actuarial certification of loss reserves and loss expense reserves.
• Board of directors (or equivalent) must meet at least once a year in Alabama; captive must maintain principal place of business in Alabama and appoint a registered agent in the state.
• Require detailed plans of operation, including risk types, pro forma financials, liquidity, reinsurance, underwriting, claims handling, investment policy, and loss-prevention programs; require a feasibility study and ongoing updates for material changes.
• Tighten risk and product limitations for certain captive forms (e.g., bans on personal motor vehicle coverage for most captives; restricted homeowners coverage for Alabama Coastal Captive; limits on ceding/reinsurance).
• Clarify formation and governance rules for different captive forms (stock, mutual, reciprocal, manager-managed LLC) and require Alabama resident involvement for certain governance positions.
• Effective dates: Section 1 takes effect June 1, 2026; Section 2 takes effect January 1, 2027.

AI-generated summary using openai/gpt-5-nano on Feb 12, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Insurance