2022 Code of Alabama
Title 27 - Insurance.
Chapter 31B - Alabama Captive Insurers Act.
Section 27-31B-2 - Definitions.

Section 27-31B-2

Definitions.

As used in this chapter, the following terms shall have the following meanings, unless the context clearly indicates otherwise:

(1) AFFILIATED COMPANY. Any company in the same corporate system as a parent, an industrial insured, or a member organization by virtue of common ownership, control, operation, or management.

(2) AGENCY CAPTIVE INSURANCE COMPANY. A captive insurance company that satisfies both of the following:

a. Is owned or directly or indirectly controlled by one or more licensed insurance producers.

b. Only insures against risks covered by insurance policies sold, solicited, or negotiated through the insurance producers that own or control the captive insurance company.

(3) ALIEN CAPTIVE INSURANCE COMPANY. Any insurance company formed to write insurance business for its parents and affiliates and licensed pursuant to the laws of an alien jurisdiction which imposes statutory or regulatory standards in a form acceptable to the commissioner on companies transacting the business of insurance in that jurisdiction.

(4) ASSOCIATION. Any legal association of individuals, corporations, limited liability companies, partnerships, associations, or other entities whereby either of the following exists:

a. The member organizations of which, or the association itself, whether or not in conjunction with some or all of the member organizations, meet one of the following:

1. Own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer.

2. Have complete voting control over an association captive insurance company incorporated as a mutual insurer.

3. Have complete voting control over an association captive insurance company formed as a limited liability company.

b. The member organizations of which collectively constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer.

(5) ASSOCIATION CAPTIVE INSURANCE COMPANY. Any company that insures risks of the member organizations of the association, and that also may insure the risks of affiliated companies of the member organizations and the risks of the association itself and their affiliated companies.

(6) BRANCH BUSINESS. Any insurance business transacted by a branch captive insurance company in this state.

(7) BRANCH CAPTIVE INSURANCE COMPANY. Any alien captive insurance company licensed by the commissioner to transact the business of insurance in this state through a business unit with a principal place of business in this state. A branch captive insurance company is a pure captive insurance company with respect to operations in this state, unless otherwise permitted by the commissioner. A branch captive insurance company may pool insurance business done in this state with business done in alien jurisdictions subject to commissioner approval.

(8) BRANCH OPERATIONS. Any business operations of a branch captive insurance company in this state.

(9) CAPTIVE INSURANCE COMPANY. Any pure captive insurance company, agency captive insurance company, association captive insurance company, risk retention group, protected cell captive insurance company, incorporated cell captive insurance company, industrial insured captive insurance company, reinsurance captive insurance company, or special purpose captive insurance company formed or licensed under this chapter.

(10) CAPTIVE RISK RETENTION GROUP. A captive insurance company organized and licensed as a captive insurer under the laws of this state and operating pursuant to the Liability Risk Retention Act of 1986, as amended, 15 U.S.C. § 3901 et seq., as a stock or mutual corporation, a reciprocal, or other limited liability entity. Risk retention groups formed under this chapter are subject to Section 27-31B-28.

(11) COMMISSIONER. The Alabama Commissioner of Insurance or the commissioner's designee.

(12) CONTROLLED UNAFFILIATED BUSINESS. Any company that meets all of the following criteria:

a. Is not in the corporate system of a parent and affiliated companies in the case of a pure captive insurance company, or is not in the corporate system of an industrial insured and its affiliated companies in the case of an industrial insured captive insurance company.

b. Has an existing contractual relationship with a parent or one of its affiliated companies in the case of a pure captive insurance company or with an industrial insured or one of its affiliated companies in the case of an industrial insured captive insurance company.

c. Whose risks are managed by a captive insurance company or an industrial insured captive insurance company, as applicable, in accordance with Section 27-31B-20.

(13) EXCESS WORKERS' COMPENSATION INSURANCE. In the case of an employer or group of employers that has insured or self-insured its workers' compensation risks in accordance with applicable state or federal law, insurance in excess of a specified per-incident or aggregate limit established by the commissioner.

(14) GENERAL ACCOUNT. All assets and liabilities of a protected cell captive insurance company not attributable to a protected cell.

(15) INCORPORATED CELL. A protected cell of an incorporated cell captive insurance company that is organized as a corporation or other legal entity separate from the incorporated cell captive insurance company.

(16) INCORPORATED CELL CAPTIVE INSURANCE COMPANY. A protected cell captive insurance company that is established as a corporation or other legal entity separate from its incorporated cells that are also organized as separate legal entities.

(17) INDUSTRIAL INSURED. As defined in subdivision (2) of Section 27-10-20.

(18) INDUSTRIAL INSURED CAPTIVE INSURANCE COMPANY. Any company that insures risks of the industrial insureds that comprise the industrial insured group, and that may insure the risks of the affiliated companies of the industrial insureds and the risks of the controlled unaffiliated business of an industrial insured or its affiliated companies.

(19) INDUSTRIAL INSURED GROUP. Any group that meets either of the following criteria:

a. Any group of industrial insureds that collectively meet any of the following criteria:

1. Own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer.

2. Have complete voting control over an industrial insured captive insurance company incorporated as a mutual insurer.

3. Constitute all of the subscribers of an industrial insured captive insurance company formed as a reciprocal insurer.

4. Have complete voting control over an industrial insured captive insurance company formed as a limited liability company.

b. Any group which is created under the Product Liability Risk Retention Act of 1981, 15 U.S. Code § 3901 et seq., as amended, as a corporation or other limited liability association taxable as a stock insurance company or a mutual insurer under the law of the State of Alabama.

(20) MEMBER ORGANIZATION. Any individual, corporation, limited liability company, partnership, association, or other entity that belongs to an association.

(21) MUTUAL CORPORATION. A corporation or other legal entity organized without stockholders. The term includes a nonprofit corporation with members.

(22) MUTUAL INSURER. An incorporated captive insurer without capital stock and the governing body of which is elected from policyholders at the mutual members' annual meeting.

(23) ORGANIZATIONAL DOCUMENTS. The documents that must be submitted pursuant to state law in order to legally form a business in this state, or to obtain a certificate of authority to transact business in the state.

(24) PARENT. An individual, corporation, limited liability company, partnership, association, or other entity that directly or indirectly owns, controls, or holds with power to vote more than 50 percent of the outstanding of any of the following:

(1) Voting securities of a pure captive insurance company organized as a stock corporation.

(2) Membership interests of a pure captive insurance company organized as a nonprofit corporation.

(3) Membership interests of a pure captive insurance company organized as a limited liability company.

(25) PARTICIPANT. An entity as defined in Section 27-31B-24, and any affiliates thereof, that are insured by a protected cell captive insurance company, where the losses of the participant are limited through a participant contract.

(26) PARTICIPANT CONTRACT. A contract by which a protected cell captive insurance company insures the risks of a participant and limits the losses of each participant to its pro rata share of the assets of one or more protected cells identified in the participant contract.

(27) PROTECTED CELL. A separate account established by a protected cell captive insurance company formed or licensed under this chapter, in which an identified pool of assets and liabilities is segregated and insulated by means of this chapter from the remainder of the protected cell captive insurance company's assets and liabilities in accordance with the terms of one or more participant contracts to fund the liability of the protected cell captive insurance company, with respect to the participants as set forth in the participant contracts.

(28) PROTECTED CELL ASSETS. All assets, contract rights, and general intangibles identified with and attributable to a specific protected cell of a protected cell captive insurance company.

(29) PROTECTED CELL CAPTIVE INSURANCE COMPANY. Any captive insurance company meeting all of the following:

a. The minimum capital and surplus required by this chapter are provided by one or more sponsors.

b. The company is formed and licensed under this chapter.

c. The company insures the risks of separate participants through participant contracts.

d. The company funds its liability to each participant through one or more protected cells and segregates the assets of each protected cell from the assets of other protected cells and from the assets of the protected cell captive insurance company's general account.

(30) PROTECTED CELL LIABILITIES. All liabilities and other obligations identified with and attributed to a specific protected cell of a protected cell captive insurance company.

(31) PURE CAPTIVE INSURANCE COMPANY. Any company that insures risks of its parent and affiliated companies or controlled unaffiliated business or businesses.

(32) REINSURANCE CAPTIVE INSURANCE COMPANY. For the purpose of this section a "reinsurance captive insurance company" is a company which only assumes risks from:

a. An insurer or reinsurer approved or licensed under the laws of this state or any foreign or alien jurisdiction upon approval of the commissioner.

b. Which assumes those risks on a funds withheld basis or other basis deemed acceptable by the commissioner.

(33) SPECIAL PURPOSE FINANCIAL CAPTIVE COMPANIES or SPFC. A captive insurance company that has received a certificate of authority from the commissioner for the limited purposes provided for within this chapter.

(34) SPONSOR. Any person or entity that is approved by the commissioner to organize and operate a protected cell captive insurance company.

(35) SURPLUS NOTE. An unsecured subordinated debt obligation deemed to be a surplus certificate under terms acceptable to the commissioner.

(Act 2006-509, p. 1153, §1; Act 2016-191, p. 446, §1; Act 2021-162, §1.)