Legislation: HB 76 NOTE: Effective
date: Section 6. This act shall become effective on the first day of the
third month following its passage and approval by the Governor (June 9,
2011), or its otherwise becoming law. Act is believed thus effective
September 1, 2011.
Bulletins/Regulations/Rules: None. Website notes
that due to the delay in SLIMPACT is operational, if Alabama is deemed
the home state of a multi-state policy, 100% of the premium is taxed at
the 6% Alabama surplus lines tax rate and 100% of the surplus lines tax
should be remitted to Alabama.
Compact, NIMA, other: SLIMPACT
Home State Definition: Alabama is the
Home State if the insured maintains its principal place of business or,
in the case of an individual, the individual’s principal residence here.
Alabama’s requirements regarding the placement of such business will
apply if Alabama is considered the Home State. However, if 100% of the
insured risk is located outside of Alabama, then the Home State is the
State to which the greatest percentage of the insured’s taxable premium
for that insurance contract is allocated. With respect to an affiliated
group, if more than one (1) insured from the affiliated group is a named
insured on a single nonadmitted insurance contract, the home state is
that of the member of the affiliated group that has the largest
percentage of premium attributed to the member under the insurance
HB 76 goes further to define "Principal Place of
Business" as where the insured maintains its headquarters and where the
insured’s high-level officers direct, control and coordinate the
business activities of the insured. This definition is not a standard
Exempt Commercial Purchaser: Surplus
lines brokers seeking to procure or place nonadmitted insurance on
behalf of an “exempt commercial purchaser” pursuant to the NRRA are not
required to perform a diligent search if: 1) the broker has disclosed to
the exempt commercial purchaser that insurance may or may not be
available from the admitted market that may provide greater protection
with more regulatory oversight; and 2) the exempt commercial purchaser
has subsequently requested in writing for the broker to procure or place
such insurance from a
nonadmitted insurer. “Exempt Commercial Purchaser” and “Qualified Risk
Manager” are not defined in HB 76, but follow the standard NRRA
NOTE: AL did not repeal 27-210-20(2 pertaining to industrial insurance:
Procuring of surplus lines from unauthorized insurers.
If certain insurance coverages cannot be procured on
terms acceptable to the insureds from authorized insurers, such
coverages, designated "surplus lines," may be procured from unauthorized
insurers subject to the terms and conditions of either subdivisions (1)
or (2) of this section:
(1)a. The insurance must be procured through a licensed surplus line broker;
b. The full amount of insurance required must not be
procurable, after diligent effort has been made to do so, from among the
insurers authorized to transact and actually transacting that kind and
class of insurance in this state or has been procured to the full extent
such insurers are willing to insure;
c. The insurance must not be procured for the purpose of
securing advantages as to a lower premium rate than would be accepted
by an authorized insurer; and
d. This section, and this surplus line law, does not apply as to life insurance or disability insurance.
(2) The contracts of insurance are issued to an industrial insured, defined as an insured:
a. Which procures the insurance of any risk by use of
services of a full-time employee acting as an insurance manager or buyer
or the services of a regularly and continuously retained, qualified
b. Whose aggregate annual premiums for insurance on all
risks other than workmen's compensation and group insurance total at
least $25,000.00; and
c. Which has at least 25 employees.
Eligibility: HB 76 allows the compact
to adopt uniform eligibility requirements. Until that time, under the
terms of the NRRA, brokers are permitted to place nonadmitted insurance
with U.S. domestic insurers that are eligible in Alabama provided they
are authorized to write such business in their State of Domicile and
maintain minimum capital and surplus of $15 million or the minimum
capital and surplus amount required in Alabama, whichever is greater.
NRRA allows brokers to place business with non-U.S. carriers that are
included on the NAIC’s
Quarterly Listing of Alien Insurers. It may be that the compact will
adopt uniform rules for insurer eligibility.
Tax Reporting Status: Note: new material in bold, deleted material in strikethru
HB 76: Section 4. Section 27-10-31, Code of Alabama 1975, is amended to read as follows:
"(a) On or before the first day of March each year,
the surplus line broker shall remit to the State Treasurer through the
commissioner, as a tax imposed for the privilege of transacting business
as a surplus line broker in this state, a tax of six percent on the
direct premiums, less return premiums and exclusive of sums collected to
cover state or federal taxes, on surplus line insurance subject to tax
transacted by the broker during the preceding calendar year as shown by
the annual statement filed with the commissioner.
"(b) If a surplus line policy covers risks or
exposures only partially in this state, the tax so payable shall be
computed on the proportion of the premium which is properly allocable to
the risks or exposures located in this state.
"(c)(b) The tax under the provisions
of this section shall be subject to deduction of the full amount of all
expenses of examination of the surplus line broker by the commissioner
in the same manner as that allowed for domestic insurers for examination
expenses under the provisions of subdivision (5) of subsection (c) of
Section 27-4A-3. All taxes collected under this section shall be
deposited in the State Treasury to the credit of the State General
Section 5. The provisions of Section 4 shall not be
effective if the Surplus Lines Insurance Multi-State Compliance Compact
is not enacted into law by two compacting states.
Tax Processing Fee: Pursuant to
SLIMPACT: The Commission shall collect a fee payable by the insured
directly or through a Surplus Lines Licensee on each transaction
processed through the Compact Clearinghouse, to cover the cost of the
operations and activities of the Commission and its staff in a total
amount sufficient to cover the Commission’s annual budget.
Policyholder notice: No change unless the compact adopts a uniform notice form.
Department Contact: Office of the Commissioner - Alabama Department of Insurance - 201 Monroe Street Suite 502 – Montgomery, AL 36104 - 334-269-3550
Alabama Enacts SLIMPACT-Lite Bill
June 9, 2011 - The Alabama governor signed into law on Thursday
a bill which would adopt the SLIMPACT-lite tax sharing agreement.