Alabama: Beach Pool Codification, Captives for Coastal Homeowners, Minimum Auto Limits Bills on Way to Governor

On Thursday, the Alabama Legislature passed bills to codify the Alabama Insurance Underwriting Association, allow captive insurance companies to write homeowner’s insurance on the coast, and raise the minimum auto liability limits. All three bills are now on their way to the governor’s desk.

In addition to SB 296’s original purpose of codifying the state’s existing beach pool, the bill was amended on the House floor to direct AIUA to carry over surplus from year to year and explicitly states that monies cannot be redistributed or placed in the General Fund or any other state fund. Also, the amendment grants AIUA the power and authority to issue bonds, surplus notes, or other debentures and solicit and accept goods, notes, and grants.

In her letter to Gov. Bob Riley urging him to sign SB 296 and SB 3, Liz Reynolds, NAMIC's Southeast state affairs manager, pointed out that the bill “was improved during the legislative process and will accomplish the important objective of financially strengthening the existing beach pool, an already time- and catastrophe-tested mechanism for providing coverage and paying claims in the residual homeowners market on the coast.”

Reynolds also made sure the governor is aware of consumer protection concerns expressed by the insurance industry regarding SB 3 in its original form. “Our members,” she wrote, “while not opposed to the concept of allowing captive insurance companies to sell homeowners insurance on the Alabama coast, were initially concerned that SB 3 lacked important consumer safeguards. The amendment passed by the House, modeled after similar legislation passed last year in South Carolina, has helped to allay some of those concerns.”

SB 4 increases minimum auto limits from 20/40/10 to 25/50/25. A similar bill passed in 2007, but the governor vetoed it at the request of NAMIC, other insurance trade organizations, and companies. The original legislation did not include adequate time for programming changes and notifying policyholders, but the language in SB 4 provides 90 days for new business and 180 days for renewal business implementation.

“An appropriate implementation schedule made all the difference in the world,” says Reynolds. “Now companies and consumers will have plenty of time to prepare for the increase in minimum auto limits in Alabama.”

Direct questions to NAMIC State Affairs Manager Liz Reynolds.

Posted: Tuesday, May 13, 2008 12:00:00 AM. Modified: Tuesday, May 13, 2008 11:24:22 AM.

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