Alabama Amends Captive Insurance Law with Updated Capital Requirements

Alabama has enacted legislation amending its captive insurance statute, with House Bill 415 signed into law on April 15, 2026. The measure includes changes to capital requirements, reporting obligations, and regulatory review standards for captive insurers, with provisions taking effect June 1, 2026.

The legislation amends multiple sections of Alabama's captive insurance statute and imposes requirements on captive insurers, including minimum capital and surplus thresholds.

Under the bill, pure captive insurance companies and protected cell captive insurance companies are required to maintain at least $250,000 in unimpaired paid-in capital and surplus, or another amount determined by the commissioner based on actuarial support. The legislation also establishes higher minimum capital thresholds for certain captive types, including $1,000,000 for reinsurance captive insurance companies and a $1,000,000 baseline for risk retention groups, subject to commissioner discretion supported by actuarial analysis.  

The legislation also expands the factors considered by the commissioner in determining whether a proposed captive insurer will promote the general good of the state. For captive insurance companies formed as reciprocal insurers and for branch captive insurance companies, the commissioner is required to evaluate the competence of the captive manager, the competence, reputation, and experience of the company's legal counsel relating to insurance regulation, and the adequacy of the company's business plan.

HB 415 also includes reporting requirements for licensed captive insurers. Each captive insurer is required to file an annual audited financial statement on or before June 30, prepared in accordance with generally accepted accounting principles and including a report from an independent certified public accountant, a balance sheet, income statement, statement of cash flows, statement of changes in capital and surplus, and accompanying notes.

In addition, captive insurers are required to submit an annual actuarial certification of loss reserves and loss expense reserves, including an opinion on their adequacy from a qualified actuary approved by the commissioner and meeting applicable standards.

The legislation also requires captive insurers to notify the commissioner of any subsequent material change in information submitted during the licensing process, including revisions to the plan of operation, ownership disclosures, or key personnel. A captive insurer may not offer additional types of insurance until such revisions are approved by the commissioner.

The legislative changes come as Alabama regulators evaluate next steps for the state's captive insurance market. Following the enactment of HB 415, Alabama Insurance Commissioner Mark Fowler has indicated that the department is considering the appropriate timing for lifting a temporary moratorium on the formation of new captive insurance companies and risk retention groups, which was implemented in 2025.