ALABAMA

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 contract.

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 NRRA definition.

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 definitions.

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 insurance consultant;

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:

"27-10-31.

"(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 Fund."

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.