Alabama has put a temporary hold on new captive insurance companies and risk retention groups. This decision was announced by Insurance Commissioner Mark Fowler on March 3. The Alabama Department of Insurance will not accept new applications or process registrations during this moratorium, which could last six months or more.
The department has asked captive managers not to submit any applications or fees while this pause is in effect. The bulletin did not provide a specific reason for this action, leaving many in the industry puzzled. Jennifer Bowen, a spokesperson for the department, mentioned that they want to ensure they have the right regulatory framework to manage the growth of captives responsibly.
This unexpected moratorium comes as a surprise to many. Some industry officials were not aware of the announcement, and speculation suggests that the rapid increase in captive insurance companies in Alabama may have overwhelmed the department’s staffing and resources. Currently, Alabama has 54 registered captive companies and 29 non-captive risk retention groups, which is significantly lower than neighboring states like Tennessee, which boasts 182 captives and has seen substantial growth.
Tennessee’s success can be attributed to a modernization of their captive insurance laws in 2011, which has encouraged more companies to establish captives there. North Carolina, another state with a strong captive presence, has over 311 entities and has also taken steps to attract more captives by reducing premium taxes.
The moratorium in Alabama is particularly notable because the state was one of the pioneers in adopting regulations favorable to captive insurance. The recent increase in captives and risk retention groups indicates a growing interest in this type of insurance, yet the state’s regulators now find themselves needing to pause to catch up.
As of now, the Alabama Department of Insurance has not indicated what steps will be taken to lift the moratorium or whether additional resources will be requested from state lawmakers. This situation raises questions about how Alabama will manage its captive insurance landscape moving forward.