Alabama Senate Banking and Insurance Committee Chairman Slade Blackwell Reviews Successful Insurance Legislation

May 31, 2013


Alabama Senate Banking and Insurance Committee Chairman Slade Blackwell advised today, May 31, 2013, that a number of insurance-related bills were passed during the 2013 Alabama Legislative Session, which adjourned May 20.

Some of the bills, which Senator Blackwell summarized below, were recommended by the National Conference of Insurance Legislators (“NCOIL”).


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    Risk-Based Capital Trend Test – Act No. 2013-194

      HB 113 by Representative Mike Hill
      (companion to SB 126 by Senator Slade Blackwell)

      A bill to amend the Alabama Risk-Based Capital (“RBC”) for Insurers Act to conform to the current model developed by the National Association of Insurance Commissioners (“NAIC”).  This amendment is required for the Alabama Department of Insurance to remain accredited by the NAIC.  The original RBC law was enacted in 1996 based on the NAIC model law as it then existed.  At that time, life and health insurers were subjected to a trend test triggered at 2.5 times the authorized control level RBC amount.  This amendment changes the trigger level for life and health insurers to 3.0 and subjects property and casualty insurers to the same requirements.


        Technical corrections to definition of Insurance Fraud and Domestic Investments

          HB 142 by Representative Mike Hill
          (companion to SB 124 by Senator Slade Blackwell)

          In Alabama’s 2012 Regular Session, Act 2012-370 was adopted relating to investments by domestic insurers.  Act 2012-429 was adopted relating to insurance fraud.  This bill makes technical amendments to clarify, correct drafting errors and delete duplicative language contained in the 2012 acts.


            Cash Equivalents for Diversity of Investments – Act No. 2013-197

              HB 225 by Representative David Sessions
              (companion to SB 189 by Senator Trip Pittman)

                  This bill is expected to help encourage the licensing of new insurers interested in marketing coastal property coverage.  Alabama-domiciled insurers are subject to the Alabama investments law, which, among other provisions, includes governance of the quality and diversity of investments.  Under current Alabama law, foreign and alien insurers are also required to substantially meet the quality and diversity of investments requirements.

                    This bill would create an exception to the quality and diversity of investments requirements for “cash equivalents,” which are defined in the bill to be “investments with a maturity of ninety (90) days or less, highly rated by a nationally recognized statistical rating organization recognized by the Commissioner and highly liquid investments or securities readily convertible to known amounts of cash without penalty and so near maturity that they present insignificant risk of change in value.”


                      Credit for Reinsurance – Act No. 2013-209

                        Alabama-domiciled insurers are subject to the Alabama Credit for Reinsurance Law, currently found at Section 27-5-12, Code of Alabama 1975.  When an insurance company enters into a contract to insure a risk, the insurance company may reinsure the risk with another insurance company.  Further, when an Alabama insurance company enters into a reinsurance contract for all or a part of its insurance risk, the reinsurer must meet the requirements of this law for the Alabama insurer to take credit for the reinsurance on its balance sheet.

                        Under the current Alabama law, the reinsurer must meet at least one of four categories of requirements:  (1) licensed in Alabama; (2) domiciled in a state with laws substantially similar to Alabama; (3) maintain a U.S. trust fund; or (4) or the reinsurance is required by the jurisdiction.  In addition to the categories already in Alabama law, this new model law includes procedures whereby reinsurers can become accredited or certified; a process whereby unauthorized reinsurers can post reduced collateral to satisfy the requirements; and, additional safeguards concerning concentration of risk in order to ensure that exposure is safely managed.


                          Travel Insurance, Limited Line Definition & Producer Responsibilities – Act No. 2013-213

                            HB 489 by Representative Greg Wren

                            This bill preserves, but expands Alabama law as to the definition of travel insurance, giving consumers greater flexibility in purchasing travel-related coverage.  It provides more clarity by defining terms previously not defined within this particular section of the law.  It specifies what features travel insurance includes and what it does not include, and what travel retailers can and cannot do in offering the product.  The bill also offers more disclosure for consumers purchasing the insurance coverage, thus affording them more protection.  It establishes a clear oversight of the process and travel retailers by fully licensed producers who are responsible for the retailer’s actions.  It also clarifies and proffers the responsibilities of the insurance carrier that underwrites the product, as well as the Alabama Insurance Commissioner’s authority to regulate these carriers.


                              Insurers Match to Death Master File; Unclaimed Property – Act No. 2013-195

                                HB 192 by Representative Greg Wren

                                HB 192 is based on the national “Death Master File” model law from the NCOIL passed in Alabama in 2012.  This bill would require recognition of the escheat (no beneficiary so the benefit goes to the state) or unclaimed property statutes of Alabama as they relate to the method of payment for life insurance death benefits regulated by the Alabama Department of Insurance.  Current law requires the Death Master File, maintained by the U.S. Social Security Administration, to be checked every three years.  This bill would make the law prospective only to ensure its constitutionality.  It also clarifies the definition of “commercially reasonable effort.”  It also amends the 2012 Act’s implementation date to allow insurers to make changes to computer systems, record retention guidelines and policy language.



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