Just as several other U.S. states are bragging about the growing number of captive insurers domiciled there – and are making changes to attract more captives – Alabama regulators have declared a temporary moratorium on those types of insurance companies.
“Effective this date, the Alabama Department of Insurance will not accept or process new filings for registration or licensing of captive insurance companies and risk retention groups,” state Insurance Commissioner Mark Fowler said in a bulletin posted March 3.
The department is asking captive managers not to submit applications or fee payments during the moratorium, which could last six months or more – or less, the bulletin noted.
The bulletin gave no explanation for the move, and a spokeswoman for DOI offered little information.
“We want to ensure we have the appropriate regulatory infrastructure in place to accommodate this growth responsibly,” Jennifer Bowen, public information officer for the department, said in an email to Insurance Journal.
The moratorium caught some in the industry and in Alabama by surprise. An official with the Captive Insurance Companies Association had not heard about the bulletin. Others speculated that a recent rise in captives and RRGs in Alabama has left ALDOI without enough staff to keep up with company filings. One captive manager said there has been little indication that the department is struggling to keep up and had usually been prompt in handling filings.
The number of captives in Alabama is well below the totals in a few other Southeastern states. Alabama now has 54 captive companies registered and 29 non-captive risk retention groups, Bowen said. She did not provide year-over-year data on the number of companies and groups.
Next door, Tennessee now has 182 captive companies and saw a 15% growth in the numbers in 2024, the Tennessee Department of Commerce and Insurance said in a news release last month. Premiums rose from $2.4 billion in 2023 to $2.9 billion last year. The department said a modernization of the state’s captive statutes in 2011 has helped fuel the growth.
“I commend our fantastic team of analysts who made customer service and connecting with prospective customers their focus in 2024 and beyond,” TDCI Captive Section Director Mark Wiedeman said in the statement. “I firmly believe that sustained year-over-year growth, good relationships, and connectivity with our customers will continue to incentivize other companies to use establishing a captive in Tennessee for their risk-financing needs.”
North Carolina, the third-largest domicile for captives, is home to more than 311 captive entities, just behind Utah, with 439 captives, and Vermont, with 659, the NCDOI announced last year. To help ensure that growth, North Carolina lawmakers last summer approved a bill that trimmed premium taxes on captives and risk retention groups that domicile or relocate to the state.
South Carolina reported 311 captives in 2023, and Texas had 79, the Insurance Information Institute noted.
Those states and others have generally welcomed more captives, in part because of the premium tax revenue they can produce for state and regulatory coffers and because of the options captives and RRGs can offer to some insureds facing higher costs in the primary insurance market.
The Alabama moratorium may be seen as somewhat ironic, given the fact that Alabama was one of the first states to adopt captive-friendly regulations. In recent years, the state saw a significant increase in RRGs and captives, according to industry sources and news reports.
The Alabama DOI did not indicate what it will need to lift the moratorium, or if state lawmakers have been asked to provide more resources for the department.
Topics
Alabama
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