On April 28, 2016, the Governor signed into law the Alabama Captive Association sponsored update to the Alabama Captive Act, HB 270. The update went into effect July 1, 2016.
The text of the bill may be downloaded here. A summary of the changes may be downloaded here.
The update provided the following significant changes:
- Modernization of the language and capital requirements for Protected Cell captives
- Captives may form as any entity allowed under law, including Series LLCs, mutuals, and not-for-profits
- Initial capital requirements are updated
- Initial capital may now be in a wide array of assets (including cash, cash equivalents, CDs, bonds, stocks, letters of credit)
- Pure captives: $250,000 or other amount as determined by the Commissioner and supported by an actuarial study
- Protected cell captives: $250,000 or other amount as determined by the Commissioner and supported by an actuarial study
- Risk retention groups: $500,000 or other amount as determined by the Commissioner and supported by an actuarial study
- Industrial insureds: $500,000
- Reciprocals: $1,000,000
- Captives may obtain a 60-day provisional license
- Clarification and codification of premium tax requirements
- New cap on premium taxes of $100,000
- No premium tax on dormant captives
- Premium tax prorated in first year of operation
- Credits are now allowed to offset premium tax
- Examination fees paid
- Business Privilege Taxes paid
The Alabama Captive Act was originally passed in 2006 by the Alabama Legislature and signed into law. In 2008, the law was amended to allow captives to write homeowners insurance in gulf front, beach, and seacoast areas. The law allows for the following captive types:
- Pure Captives
- Association Captives
- Risk Retention Groups
- Protected Cell Captives
- Branch Captives
- Industrial Insured Captives
The law allows captives to write all lines of insurance except personal auto, homeowners insurance (allowed in gulf front, beach, and seacoast areas only), and may only reinsure workers compensation.
All other lines of insurance are allowed.