Alabama Legislation Expected To Spur State's Captive Industry Growth

Legislation recently approved by Alabama lawmakers and on its way to Gov. Kay Ivey for her signature makes a wide range of changes affecting captive insurance companies.

Under SB 23, minimum capitalization requirements for pure captive insurance companies and protected cell captives would be reduced to $100,000 from $250,000.

In addition, the legislation makes clear that branch captives and risk retention groups (RRGs) that seek to be licensed in Alabama will not have to meet the same licensing requirements as commercial insurers. RRGs are a special type of captive authorized under legislation that the US Congress passed in the 1980s.

Under another provision, captives that are licensed in other domiciles and want to move to Alabama will not be required to have a new examination by Alabama regulators. Those captives, though, will have to, among other things, show they have been in compliance with regulations of their former domiciles and have an examination substantially similar in scope to Alabama examinations.

The Alabama Captive Insurance Association (ACIA) strongly supports the measure, noting that it should lead to more captive growth.

"The ability for Alabama to create captive solutions for the unique interests of captive owners opens the door for exceptional growth in the forthcoming years," the ACIA said in a news release.

In that same news release, Jim L. Ridling, commissioner of the Alabama Department of Insurance (ADI), noted that the state's captive insurance industry benefits from "great relationships" with government and elected officials, as well as the ADI.

"The partnership and cooperation with both entities allows Alabama to boast of one of the best environments for captives and the alternative risk industry," Mr. Ridling said.