Alabama Captive Insurance Association
A leading force in the captives industry
With its strategic location, low cost of living, and diverse economy, it is easy to see why Alabama is open for business, says Ben Richardson of the Alabama Captive Insurance Association.
“The captive insurance industry within Alabama benefits from great relationships with government and elected officials.”
Ben Richardson, Alabama Captive Insurance Association
Alabama has been recognised as having one of the best business climates in the US. The state boasts world-class research institutions, one of the most advanced medical communities, and the ninth largest deepwater port in the US, and is home to numerous military installations and auxiliary providers. It is also the future headquarters of the US Space Command.
Alabama is also proud to support a captive insurance industry that is continually on the cutting-edge. Alabama’s captives industry has been at the forefront of developing legislation and regulations that promote the sector’s unique approach to tailoring captive insurance 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 captives industry is poised for significant growth over the next few years as we continue to attract new business to the state.
New partnerships
At the turn of the millennium, Alabama found itself seeking ways to gain a foothold in attracting new business. Specifically, its labour force and abundance of land gave it the opportunity to recruit manufacturing giants such as Toyota-Mazda, Hyundai, Austal, and Airbus.
The state government consulted with these companies, and other large manufacturers, to determine what was needed to create the best pro-business environment in the country. Tax incentives and alternative risk measures consistently came up in response. In 2006, the Alabama Captive Insurers Act was introduced and passed, which marked the formal beginning of the industry within the state.
Alabama officials recognised that self-insurance was a pertinent component of their recruiting pitches to companies. Not only did the largest companies benefit from the captives industry, but small and mid-sized companies identified the advantages of self-insurance too. Many of Alabama’s older companies had captives, but they had domiciled either offshore or in other states.
For the captives industry to expand in Alabama, industry professionals, political figures, and the Department of Insurance all acknowledged that the state would need to find and maintain a competitive advantage over other potential domiciles.
The captive insurance industry within Alabama benefits from great relationships with government and elected officials, as well as the Alabama Department of Insurance. The partnership and cooperation with both entities allows Alabama to boast one of the best environments for captives and the alternative risk industry.
Since the introduction of captive insurance legislation in 2006, no legislative measure has received a single “No” vote in either chamber or in committee hearings. The state government understands that the alternative risk industry is vital to the growth and development of Alabama’s economy.
All business, great and small
In recent years, Alabama has been successful in recruiting and persuading new businesses of all sizes to relocate. The captives 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 Department of Insurance, none of this would be possible.
In 2020, the ACIA worked tirelessly to advocate for smart, modern legislation that would improve the state’s domicile and the capabilities of the risk management industry. It worked together with Alabama’s Department of Insurance to write updates to the statute that would expand risk management vessels including branch captives and a new dormancy statute.
Following the COVID-19 pandemic, the Alabama Legislature’s regular session was cut prematurely. However, the proposed changes from 2020 were included in our latest iteration of the captive insurance legislation. Recently, our legislature passed a comprehensive update to Alabama’s statute. In addition to lowering the minimum capitalisation requirements for pure and protected cell captives to $100,000, it outlines and simplifies the redomestication process and dormancy status for captives.
This legislation propels Alabama to the vanguard in terms of the capabilities of our service providers to create innovative captive insurance solutions for their clients.
Captives managers now have numerous new captive formations at their disposal including:
- Agency captives
- Reinsurance captive insurance companies
- Special purpose financial captives
Alabama captives managers can now create custom risk management solutions for their clients, which opens the door for exceptional growth in the coming years. No longer will captives managers be handcuffed to a limited number of structures.
Alabama’s captive insurance industry and domicile has rapidly improved the capabilities of risk vessels and captives managers alike. This has been achieved through aggressive legislative advocacy, a strong focus on building and maintaining positive relationships with our regulatory branch, and continually taking opportunities to better our environment and state.
Continued support
The ACIA has created and continued to grow the state-of-the-art Risky Business internship programme. This is the ACIA’s solution to the talent crisis that our industry faces. It 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, etc.
Within the past year, the internship has experienced tremendous success as it has increased the number of industry partners (including higher education institutions) and the overall volume of applications. The industry benefits greatly from bringing in young professionals to drive us forward.
The Alabama Department of Insurance, under the leadership of Commissioner Jim Ridling, has worked very hard to assist captives managers and their service providers by supplying prompt feedback and support whenever questions arise. Its demonstrated commitment to the captives industry’s success has been central in the growth and expansion of Alabama as a domicile.
The department solicits the input of professionals to better provide service and education to captives managers and owners alike. Its partnership with the ACIA has been the catalyst for the drafting, passage, and implementation of good legislation and regulation.
The increasing number of large and small companies moving their operations to Alabama, partnered with the state’s innovative and unmatched legislation, means that the possibilities for captives professionals are endless. The regulatory environment is one that seeks to eliminate the most burdensome of obstacles, while promoting accountability.
The Department of Insurance has been supportive of listening to industry professionals and implementing their feedback to propel Alabama’s captives sector forward. Alternative risk companies in Alabama have demonstrated a firm commitment to the future generation of professionals by investing their time and money in the internship programme.
Our captives community has found that the sustainability of our industry hinges on strong, forward-thinking legislation and attracting and cultivating the leaders of the future now. The industry has a very bright future ahead as it continues to flourish.
Ben Richardson is director of external affairs at the Alabama Captive Insurance Association. He can be contacted at: brichardson@alcaptives.org
