Alabama: open for business

Alabama sits at the heart of the fastest-growing region within the US. With its strategic location, low cost of living, and diverse economy, it is easy to see why the state is open for business.

In fact, Alabama has continually been recognised as one of the best business climates in the US. It boasts world-class research institutions, one of the most advanced medical communities, the ninth largest deepwater port in the US, and is home to numerous military installations, and the future headquarters of US Space Command.

Moreover, Alabama is proud to buttress a captive insurance industry that is continually on the cutting edge.

Alabama’s captive insurance industry has been at the forefront of developing legislation and regulations that promote the industry’s unique approach to tailoring captive solutions specific to the needs of clients, while maintaining a strong regulatory environment.

The Alabama Captive Insurance Association (ACIA) has been aggressive in its advocacy of the industry while also creating programmes that provide unique benefits. Alabama’s captive industry is poised for significant growth over the next few years as we continue to attract new business.

At the turn of the millennium, Alabama found itself seeking ways to attract new business into the state. Specifically, it had the opportunity to recruit manufacturing giants such as Mazda Toyota, Hyundai, Austal, and Airbus—thanks to its labour force and abundance of land.

As the state consulted with these companies and other large manufacturers to determine what was needed to create the best pro-business environment in the US, it was told that tax incentives and alternative risk measures were needed.

Thus, in 2006, the Alabama Captive Insurers Act was introduced, marking the formal beginning of the industry within the state.

Alabama officials recognised that self-insurance was a pertinent component of their recruiting pitch. Not only did the largest companies benefit from the captive industry, but small and mid-size operations also recognised the advantages of self-insurance.

Many of Alabama’s older companies had captives, but they had domiciled offshore or in other states. For the captive industry to expand in Alabama, industry professionals, political figures, and the Department of Insurance (DoI) acknowledged that the state would need to find and maintain a competitive advantage over other potential domiciles.

Alabama’s captive industry benefits from great relationships with government and elected officials as well as the DoI. As a result, Alabama boasts one of the best environments for captives and the alternative risk industry.

Since the introduction of captive legislation in 2006, no legislative measure has received a single “No” vote in either chamber or in committee hearings. There is an understanding that that the alternative risk industry is critical to the growth and development of Alabama’s economy.

In recent years, Alabama has been successful in recruiting new businesses of all sizes. The captive industry is no different. Measures are being undertaken to recruit those seeking to start new captives and those who want to enjoy the many benefits that the domicile has to offer.

Without the support of our government and the DoI, none of this would be possible. In 2020, the ACIA worked tirelessly to advocate smart, modern legislation that would improve the state’s domicile and capabilities of the risk management industry. It collaborated with the DoI to write updates to the statute that would expand risk management vessels.

With the unforeseen consequences of COVID-19, the Alabama Legislature’s regular session was cut prematurely. However, the proposed changes from 2020 were included in its most recent iteration of the captive legislation. Recently, our legislature passed the comprehensive update to Alabama’s statute. In addition to lowering the minimum capitalisation requirements for pure and protected cell captives to $100,000, the measure also outlines and simplifies the process for captives looking to redomicile in Alabama.

Furthermore, the inclusion of the “legal there, insure it here” doctrine permits more opportunities to provide captive solutions to a multitude of industries. This legislation puts Alabama in the vanguard in terms of the capabilities of our service providers to create innovative captive solutions for their clients.

Captive managers now have numerous new captive formations at their disposal including:

• Agency captives
• Reinsurance captives
• Special purpose financial captives (SPFCs)
• Pure captives
• Group captives
• Branch captives
• Association captives
• Risk retention groups (RRGs)

The ability of Alabama’s captive managers to create custom risk management solutions for their clients opens the door for exceptional growth.

Alabama’s captive industry and domicile has rapidly improved the capabilities of risk vessels and captive managers alike, through aggressive legislative advocacy, a strong focus on building and maintaining positive relationships with our regulatory branch, and taking opportunities to better our environment.

The ACIA has also created the state-of-the-art “Risky Business” internship programme. This award-winning initiative is the ACIA’s solution to the talent crisis in our industry.

The programme allows students to experience the many different elements of the industry by placing them with partner entities and rotating them through a cycle. Interns will have the opportunity to work with captive managers, regulators, actuaries, investment companies, and more.

Of late, the internship has experienced tremendous success as it has increased the number of industry partners, higher education partners, and the overall volume of applications. The industry benefits from bringing in young professionals to drive us forward.

Under the leadership of Commissioner Jim Ridling, the Alabama DoI has worked tirelessly to assist captive managers and their service providers by offering prompt feedback and support whenever questions arise.

Their demonstrated commitment to the captive industry’s success has been critical in the growth and expansion of Alabama as a domicile. The DoI solicits the input of professionals to better provide service and education to captive managers and owners alike. Their partnership with the ACIA has been the catalyst for the drafting, passage, and implementation of good legislation and regulation.

The increasing number of companies moving their operations to Alabama, combined with innovative and unmatched legislation, means that the possibilities for captive professionals are endless.

The regulatory environment is one that seeks to eliminate burdensome obstacles while promoting accountability. The DoI has been supportive when it comes to listening to industry professionals and implementing their feedback to propel Alabama’s captive sector forward.

Alternative risk companies have demonstrated a firm commitment to the future generation of professionals by investing their time and money in the Risky Business programme.

Our captive community has found that the sustainability of our industry hinges on strong, forward-thinking legislation and cultivating the leaders of the future. The industry has a very bright future ahead.

Ben Richardson is the director of external affairs for the Alabama Captive Insurance Association. He can be contacted at: brichardson@alcaptives.org