Alabama sets financial and filing rules for captive insurers

Captive insurers must submit a revised application item for the commissioner's approval when that information changes materially. This applies when information submitted with a captive insurer's application changes materially. The insurer may not offer additional kinds of insurance until the commissioner approves the revision.

The commissioner considers the manager's competence, legal counsel's insurance experience, and the company's business plan when deciding whether certain captive insurers serve the state's general good. These factors apply to proposed reciprocal captive insurers and branch captive insurers. The commissioner considers these factors when deciding whether to issue a certificate finding that the proposed company or branch would promote the state's general good.

Captive insurers must maintain minimum capital and surplus, which vary by type of insurer. The minimum depends on the captive insurer's type. Pure and protected-cell captives generally need at least $250,000; the commissioner may set another amount supported by a feasibility study. Reinsurance captives need at least $1 million, and risk retention groups need at least $1 million or another amount set by the commissioner and supported by a feasibility study. Agency, association, and industrial-insured captives generally need at least $500,000; branch captives need at least $250,000. Reciprocal insurers also need $1 million in free surplus.

Each captive insurer must file an audited financial statement and an actuarial certification of its loss reserves and loss expense reserves each year. These filing duties apply to captive insurance companies. The audited statement covers the preceding calendar year and includes an independent accountant's report and core financial statements. A qualified actuary approved by the commissioner must certify the reserves and state whether they are adequate. The audited statement is due by June 30. The actuarial certification is filed with the annual financial report required by subsection (b).