Section 27-31B-3 Licensing.
Section 27-31B-3
Licensing.
(a) Any captive insurance company, when permitted by its articles of association, charter, or other organizational document, may apply to the commissioner for a license to do any and all insurance defined in Sections 27-5-2, 27-5-4, and 27-5-5, in subdivisions (1), (2), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13), and (14) of subsection (a) of Section 27-5-6, in Sections 27-5-7, 27-5-8, 27-5-9, and 27-5-10, and to grant annuity contracts as defined in Section 27-5-3, subject, however, to all of the following:
(1) No pure captive insurance company may insure any risks other than those of its parent and affiliated companies or controlled unaffiliated business.
(2) No association captive insurance company may insure any risks other than those of the member organizations of its association, and their affiliated companies.
(3) No industrial insured captive insurance company may insure any risks other than those of the industrial insureds that comprise the industrial insured group, and their affiliated companies.
(4) No captive insurance company may provide personal motor vehicle coverage or any component thereof. Homeowner's insurance coverage may be written by an Alabama Coastal Captive Insurance Company as defined in Chapter 31C, but only in the gulf front, beach, and seacoast areas as designated by the Insurance Services Office, Inc.
(5) No captive insurance company may accept or cede reinsurance except as provided in Section 27-31B-13.
(6) Any captive insurance company may provide excess workers' compensation insurance to its parent and affiliated companies, unless prohibited by the laws of the state having jurisdiction over the transaction. Any captive insurance company may reinsure workers' compensation of a qualified self-insured plan of its parent and affiliated companies.
(7) Any captive insurance company which insures risks described in Sections 27-5-2 and 27-5-4 shall comply with all applicable state and federal laws.
(8) No branch captive insurance company may write any business in this state except insurance or reinsurance of the employee benefit business of its parent and affiliated companies which is subject to the Employee Retirement Income Security Act of 1974, as amended.
(9) No sponsored captive insurance company may insure any risks other than those of its participants.
(b) To conduct insurance business in this state, a captive insurance company shall comply with all of the following:
(1) It must obtain from the commissioner a license authorizing it to do insurance business in this state.
(2) Its board of directors, or in the case of a reciprocal insurer, its subscribers' advisory committee, must hold at least one meeting each year in this state.
(3) It must maintain its principal place of business in this state, or in the case of a branch captive insurance company, maintain the principal place of business for its branch operations in this state.
(4) It must appoint a registered agent to accept service of process and to otherwise act on its behalf in this state; subject further to the following:
a. If formed as a corporation, whenever the registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the Secretary of State shall be an agent of the captive insurance company upon whom any process, notice, or demand may be served.
b. If formed as a reciprocal insurer, whenever the registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the commissioner shall be an agent of the captive insurance company upon whom any process, notice, or demand may be served.
(c)(1) Before receiving a license, a captive insurance company shall comply with one of the following:
a. If formed as a corporation, it shall file with the commissioner a certified copy of its charter and bylaws, a statement under oath of its president and secretary showing its financial condition, and any other statements or documents required by the commissioner.
b. If formed as a reciprocal insurer, it shall comply with both of the following:
1. File with the commissioner a certified copy of the power of attorney of its attorney-in-fact, a certified copy of its subscribers' agreement, a statement under oath of its attorney-in-fact showing its financial condition, and any other statements or documents required by the commissioner.
2. Submit to the commissioner for approval a description of the coverages, deductibles, coverage limits, and rates, together with any additional information as the commissioner may reasonably require. In the event of any subsequent material change in any item in the description, the reciprocal captive insurance company shall submit to the commissioner for approval an appropriate revision and shall not offer any additional kinds of insurance until a revision of the description is approved by the commissioner. The reciprocal captive insurance company shall inform the commissioner of any material change in rates within 30 days of the adoption of the change.
(2) In addition to the information required by subdivision (1), each applicant captive insurance company shall file with the commissioner evidence of all of the following:
a. The amount and liquidity of its assets relative to the risks to be assumed.
b. The adequacy of the expertise, experience, and character of the person or persons who will manage it.
c. The overall soundness of its plan of operation.
d. The adequacy of the loss prevention programs of its parent, member organizations, or industrial insureds as applicable.
e. Any other factors deemed relevant by the commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations.
(3) In addition to the information required by subdivisions (1) and (2), each applicant sponsored captive insurance company shall file with the commissioner all of the following:
a. A business plan demonstrating how the applicant will account for the loss and expense experience of each protected cell at a level of detail found to be sufficient by the commissioner and how it will report the experience to the commissioner.
b. A statement acknowledging that all financial records of the sponsored captive insurance company, including records pertaining to any protected cells, shall be made available for inspection or examination by the commissioner or the commissioner's designated agent.
c. All contracts or sample contracts between the sponsored captive insurance company and any participants.
d. Evidence that expenses shall be allocated to each protected cell in a fair and equitable manner.
(4) Information submitted pursuant to this subsection shall be and remain confidential, and may not be made public by the commissioner or by an employee or agent of the commissioner without the written consent of the company, except as provided in the following:
a. The information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted the information is a party, upon a showing by the party seeking to discover the information that (i) the information sought is relevant to and necessary for the furtherance of the action or case, (ii) the information sought is unavailable from other nonconfidential sources, and (iii) a subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner. Notwithstanding the foregoing, this subdivision shall not apply to any industrial insured captive insurance company insuring the risks of an industrial insured group as defined in paragraph b. of subdivision (14) of Section 27-31B-2.
b. The commissioner may disclose the information to a public officer having jurisdiction over the regulation of insurance in another state, provided that (i) the public official shall agree in writing to maintain the confidentiality of the information, and (ii) the laws of the state in which the public official serves require the information to be and to remain confidential.
(d) Each captive insurance company shall pay to the commissioner a nonrefundable fee as set forth in Section 27-31B-4 for examining, investigating, and processing its application for license, and the commissioner is authorized to retain legal, financial, and examination services from outside the department, the reasonable cost of which may be charged against the applicant in accordance with Section 27-2-25. In addition, each captive insurance company shall pay a license fee for the year of registration and a renewal fee for each year thereafter as set forth in Section 27-31B-4.
(e) If the commissioner is satisfied that the documents and statements filed by a captive insurance company comply with this chapter, the commissioner may grant a license authorizing the company to do insurance business in this state until April 1 thereafter, which license may be renewed.
(Act 2006-509, p. 1153, §1; Act 2008-391, p. 742, §1.)