Code of Alabama
Chapter 31B - Alabama Captive Insurers Act.
Section 27-31B-6 - Minimum Capital and Surplus.

(a) No captive insurance company shall be issued a license unless it shall possess and thereafter maintain unimpaired paid-in capital and surplus as follows:
(1) In the case of a pure captive insurance company, not less than one hundred thousand dollars ($100,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(2) In the case of an agency captive insurance company, not less than five hundred thousand dollars ($500,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(3) In the case of an association captive insurance company or risk retention group, not less than five hundred thousand dollars ($500,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(4) In the case of an industrial insured captive insurance company, not less than five hundred thousand dollars ($500,000).
(5) In the case of a reinsurance captive insurance company, not less than ten thousand dollars ($10,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(6) In the case of a protected cell captive insurance company, not less than one hundred thousand dollars ($100,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(b) Notwithstanding the requirements of subsection (a), no captive insurance company organized as a reciprocal insurer under this chapter shall be issued a license unless it has and thereafter maintains free surplus of one million dollars ($1,000,000).
(c) The commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business transacted.
(d) Capital and surplus may be in the form of cash, cash equivalents, surplus note, securities meeting the eligibility requirements of Section 27-6-3, or, if approved by the commissioner, a clean, irrevocable, and unconditional letter of credit issued by a bank chartered by the State of Alabama or a member bank of the Federal Reserve System and approved by the commissioner. No assets of the captive insurer shall be pledged or encumbered for the payment of the letter of credit.
(e) In the case of a branch captive insurance company, as security for the payment of liabilities attributable to the branch operations, the commissioner may require collateral equal to the amount of net loss reserves on branch business plus other insurance liabilities as determined by the commissioner to be maintained by the branch captive insurance company in a manner acceptable to the commissioner.
(f) Any captive insurance company formed under this chapter may be capitalized with a surplus note. Any captive insurance company issuing a surplus note pursuant to this section must execute a written agreement with the creditor providing the following:
a. The creditor may only be paid out of the portion of the captive insurance company's surplus that exceeds the minimum stated in the agreement.
b. The minimum surplus or floor shall exceed the sum of: (i) 10 percent of the face amount of the surplus note; and (ii) the greater of the statutory minimum capital or surplus required by statute or the approved feasibility study or such other amount approved by the commissioner.
c. Payments may only be made if the payment does not affect the financial condition of the company.
d. Any payment of principal or interest requires the prior approval of the commissioner.