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 agency captive insurance company may insure risks other than those affiliated with the controlling insurance producer. (3) No association captive insurance company may insure any risks other than those of the member organizations of its association and their affiliated companies. (4) 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. (5) No risk retention group may insure any risks other than those of its members and owners. (6) 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. (7) No captive insurance company may accept or cede reinsurance except as provided in Section 27-31B-13. (8) Any captive insurance company may provide excess workers’ compensation insurance to its parent and affiliated companies and member organizations unless prohibited by the laws of the state having jurisdiction over the transaction. Any captive insurance company may reinsure workers’ compensation. (9) Any captive insurance company that insures risks described in Sections 27-5-2 and 27-5-4 shall comply with all applicable state and federal laws. (10) Insurance may be placed on risks in alien and foreign jurisdictions if the underlying business in the jurisdiction is legal in the jurisdiction, subject to commissioner approval. (11) No protected cell 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 managers, 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 a 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 or other legal entity, 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. (5) It must own a financial account with a bank or credit union with a brick and mortar location in Alabama approved by the commissioner or a veteran-related financial institution approved by the commissioner. (6)a. It must employ or enter into a contract with a natural person or business organization to manage the affairs of the captive insurer which meets the standards of competence and experience satisfactory to the commissioner. b. The captive insurer shall promptly notify the commissioner of any failure of the captive insurer to comply with this chapter. c. The commissioner may require a captive insurer to discharge a captive manager for failure to substantively fulfill the captive manager’s duties under this chapter. d. The captive manager, if a natural person, or the officers and directors of the captive manager, if a business organization, shall not serve as the president of a captive insurer, except in the case where a captive insurer has contracted with its parent or its affiliated companies or a controlled unaffiliated business for captive management services. (7) It must employ or enter into a contract with a qualified and experienced independent certified public accountant that is approved by the commissioner. (8) It must employ or enter into a contract with a qualified and experienced actuary who is approved by the commissioner. (9) It must submit biographical background information, on a form prescribed by the commissioner, for each director and officer of the captive insurer and for each person who controls, directly or indirectly, 10 percent or more of the captive insurer. (10) It must submit a plan of operation which clearly indicates the method of operation of the captive insurer including all of the following items: a. The types and limits of insurance that will be provided. b. Pro forma financial statements for a period covering three years, which shall include a balance sheet, income statement, and cash flow statement. c. A description of the captive insurer’s reinsurance program. d. A description of the captive insurer’s underwriting policy, including who will perform those functions. e. A description of the captive insurer’s claims handling procedures, including who will perform those functions. f. A description of the captive insurer’s investment policy. g. A description of the captive insurer’s ratemaking policies and procedures. (11) It must submit a feasibility study, or other analysis, prepared by a qualified actuary. (12) It must submit a statement disclosing the identity and percentage of ownership of the captive insurer for all persons who control, directly or indirectly, 10 percent or more of the captive insurer. (13) It must submit evidence of its beneficial ownership, sponsorship, or membership. (14) It must submit any other factors or information deemed relevant by the commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations. (c) If there is a subsequent material change in any item or information submitted pursuant to subsection (b) including, but not limited to, the plan of operation, the captive insurer shall submit an appropriate revision for approval by the commissioner. The captive insurer may not offer any additional kinds of insurance until a revision of the description is approved by the commissioner. (d)(1) Before receiving a license, a captive insurance company shall comply with one of the following: a. If formed as a corporation or other legal entity, it shall file with the commissioner a certified copy of its organizational documents and bylaws, a statement under oath of its president and secretary or other authorized official 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, industrial insureds, or other 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 protected cell 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 protected cell 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 protected cell 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 Section 27-31B-2(19)b. or to a captive risk retention group. 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 agrees 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. (e) 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 may 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. (f) 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 conduct insurance business in this state until April 1 thereafter, which license may be renewed. (g)(1) Notwithstanding any other provision of this chapter, the commissioner may issue a provisional license to any applicant captive insurance company for a period not to exceed 60 days if the commissioner deems that the public interest will be served by the issuance of the provisional license. (2) As a condition precedent to the issuance of a provisional license under this subsection, the applicant shall have filed a complete application containing all information required by this section, paid all fees required for licensure, and the commissioner shall have made a preliminary finding that the expertise, experience, and character of the person or persons who will control and manage the captive insurer are acceptable. (3) The commissioner, by order, may limit the authority of any provisional licensee in any way deemed necessary to protect insureds and the public. The commissioner, by order, may revoke a provisional license if the interests of insureds or the public are endangered. If the applicant fails to complete the regular licensure application process within the 60-day provisional period, the provisional license shall terminate automatically at the end of the 60-day period, and any policy issued during the provisional period shall be cancelled as of the termination date and any premium unearned shall be refunded to the policyholder within 10 days.