Why Alabama Objective WHY Alabama Will provide attendees
Why Alabama! Objective: WHY Alabama! Will provide attendees with a high-level overview of the advantages of Alabama as a captive domicile, significant changes to the Alabama Captive Insurance Act, and Alabama’s captive statistics. Norman Chandler President, ACIA Sean Duke Insurance Examinations Supervisor, AL DOI
Why Alabama? Alabama's central location in the Southeast and its modern captive law help make Alabama one of the most progressive, flexible, and low-cost domiciles in the US. Advantages for Alabama captives include: 9/17/20 3
1. Alabama has a favorable business environment that includes a modern Series LLC law. 2. Alabama has reasonable capital requirements that are based on actuarial risk assessment rather than a "one capital fits all approach". 3. Small captives with premiums of $2. 2 million or less in annual premiums may request annual audit and actuarial opinion exemptions. 9/17/20 4
4. Investment funds generally have few restrictions as long as the investments support normal captive operations. 5. Favorable premium taxes: • Cap on premium taxes of $100, 000 • No premium tax on dormant captives • Premium tax prorated in first year of operation • Credits are allowed to offset premium tax: • Examination fees paid • Business Privilege Taxes paid 6. Protected cell captives have modern features including incorporated cells and reasonable sponsor requirements. 9/17/20 5
7. Alabama captives may be formed as any "for-profit" entity and may also be formed as mutuals and not-for-profits. 8. Alabama allows for a 60 -day provisional captive license. 9. Alabama provides easy access to Regulators. 10. Alabama provides a seamless online application process with quick turnaround. 9/17/20 6
2020 Summary of Significant Changes 9/17/20 7
a. Expansion of branch captives the changes will allow for much easier creation of branch captives thereby allowing multi-state and multi-national organizations to better manage their Alabama risks without having to move their entire captive operations to Alabama. 9/17/20 8
b. Creation of a formal dormancy statute this change formalizes the current Department of Insurance practice. Captives that may cease writing business for up to five years may become dormant and become subject to fewer regulatory requirements. Currently, some of these captives shutdown. This change would allow these captives to stay in existence. c. Various technical corrections 9/17/20 9
2020 Alabama Captive Statistics 9/17/20 10
Captive Structures by the Numbers • Presently Alabama has 70 captive structures. • 1 Association Captive • 29 Pure Captives • 7 Protected Cell Core Captives • 28 Cell Structures • 5 Captive RRGs 9/17/20 Association Pure Protected Cell Core 11 Cell RRGs
Formations Captive Formations • Since the last meeting a total of 6 captive structures have been formed or redomesticated to Alabama. • 5 Cell Structures • 1 RRGs Cell Structures 9/17/20 12 RRGs
Dissolutions • In the past year there have been 7 captive dissolutions. • 7 No longer desired by owner * • 1 Receivership • * 6 Pure and 1 Cell Structure Owner Request 9/17/20 13 Receivership
Aggregate Industry Financial Condition • As of December 31, 2019, the industry’s aggregate financial position continues to be stable. ASSETS $255, 19 0, 431 (13%) CAPITAL & SURPLUS $122, 52 7, 804 16% • The industry as a whole has the surplus to write more than 10 x the amount of gross premium being written. DIRECT PREMIUMS $76, 628, 625 39% ASSUMED PREMIUMS $31, 882, 164 31% 89% 24% • 2019 saw the first receivership (liquidation in 2020) action in the Act’s history. 9/17/20 LEVERAGE RATIO (Gross) 14
Service Provider Statistics Service Providers • Currently there are 115 approved service providers. • 53 Actuaries • 64 CPAs • 34 Managers Actuary 9/17/20 CPA 15 Manager
Any Questions? 9/17/20 16
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