Bulletins - Year 2004


DATE: April 6, 2004
RE: Credit for Reinsurance Law
Senate Bill 149, Alabama Act No. 2003-346
Alabama Insurance Regulation, Chapter 482-1-105


Please be advised that on June 20, 2003, Governor Riley signed into law House Bill 312, now Alabama Act No. 2003-346. This act became effective June 20, 2003, and applies to "all cessions after [June 20, 2003] that have an inception, anniversary, or renewal date not less than six months after [June 20, 2003]." The implementing regulation, Alabama Insurance Regulation, Chapter 482-1-105, was amended effective November 9, 2003.

Included in the changes to this law was the revision of subsection (f) so as to permit a reinsurer to pay a specific consumer’s claim directly in case of the insolvency of the direct insurer. These so-called "cut-through" agreements were not previously permitted in this state, as was indicated in a bulletin issued on July 12, 1990. Inasmuch as the 2003 change in law supercedes the directives in the bulletin issued in 1990, said bulletin is hereby rescinded.



DATE: February 17, 2004
RE: Compliance with Regulation 54


The Department has recently noticed a failure by companies and agents to comply with Alabama Departmental Regulation No. 54 (Reg. 54). Reg. 54 requires that the Commissioner of Insurance be notified within thirty (30) days regarding several events including but not limited to the filing of a civil lawsuit, the rendering of a verdict, or the finding of a court against a producer, where such a lawsuit, verdict, or finding of a court alleges or charges the producer with committing any of the following acts in the state of Alabama; intentional misrepresentation, fraud, dishonesty, misappropriation or conversion of funds, breach of fiduciary duty, or any other offense involving a breach of trust.

It also requires that the Department be notified of the arrest, indictment or conviction of a licensee for the commission of either of the following;

  • Any felony.
  • Any misdemeanor involving dishonesty or breach of trust.

This regulation has been in effect since October, 2000.

This is to alert licensees which includes any insurance company, insurer, general agent, agent, broker, service representative, solicitor, adjuster, surplus lines broker, and any other company, corporation, partnership, limited liability company, association or person licensed to transact the business of insurance in this state; that we will not tolerate the disregard of this or any of our regulations. As a licensee it is your responsibility to be familiar and knowledgeable about Alabama insurance laws and regulations. Be advised that administrative action will be taken against parties who fail to comply.



DATE: February 13, 2004
RE: National Association of Insurance Commissioners (NAIC) Forms
Life, Accident and Health, Annuity, Credit Transmittal Document
Uniform Life, Accident and Health Annuity and Credit Product Coding Matrix
Property and Casualty Transmittal Document
Property and Casualty Product Coding Matrix


Effective April 15, 2004, the Alabama Department of Insurance will adopt the captioned NAIC Forms. These forms will be required with all paper and electronic SERFF filings submitted by all licensed insurance companies, nonprofit health service corporations, fraternals and health maintenance organizations making life, accident and health, annuity and credit form and rate filings and all licensed insurance companies making property, casualty, inland marine and surety rate, rule and form filings.

Any filing received after April 15, 2004 without the appropriate transmittal form or product code will be held in abeyance prior to reviewing until we receive this information.

A link to the Transmittal Document and Product Coding Matrix is located on the Department’s Website at www.aldoi.gov or access is available at the NAIC Web site at http://www.naic.org/industry_rates_forms_trans_docs.htm .



DATE: January 16, 2004
RE: Surrender of Preneed Certificate of Authority (Informational Bulletin)
TO: Whom It May Concern


It is fair to say one of the primary purposes of the Alabama Preneed Funeral and Cemetery Act (the "Act") is to protect Alabama consumers purchasing funeral and cemetery services and merchandise prior to death (preneed). Generally speaking, the Act accomplishes this purpose in two ways. First, the Act requires preneed providers to set aside at least a portion of the funds paid by consumers for the goods and services purchased, thereby ensuring the money is available when the time comes for the provider to fulfill its obligations under the contract. Second, the Act gives the Commissioner of Insurance the authority to restrict the right to engage in preneed sales to entities and individuals who demonstrate their financial condition is such that they will be in business when their preneed contracts mature.

As a part of its effort to meet the aim of protecting Alabama consumers, the Act sets forth specific requirements that must be met by certificate holders who surrender their preneed certificate of authority. Section 27-17A-16 of the Alabama Code provides that surrender of a certificate of authority occurs when a certificate holder either fails to renew its certificate of authority or, after notice to the Commissioner, tenders its certificate to the Commissioner for surrender. Proper surrender of a certificate under this circumstance occurs only upon the Commissioner's acceptance of the surrender. ALA. CODE §27-17A-16 (a) (Cum. Supp. 2003). The Act also requires that, upon surrender of the certificate of authority, the preneed provider "collect and deposit into trust all of the funds paid toward preneed contracts sold prior to becoming inactive." ALA. CODE §27-17A-16 (b) (Cum. Supp. 2003) [emphasis added].

At least one situation clearly contemplated by the Act's surrender provision arises when a certificate holder, for whatever reason, determines it will no longer engage in the funeral or cemetery business, preneed or otherwise. In such a case, the consumers who have paid all or part of the funds called for by their existing preneed contracts will be forced to find other providers to furnish them with the services and merchandise for which they contracted. Because the Act does not ordinarily require any portion of the funds paid on account of a preneed contract to be trusted until all such funds have been paid in full, the surrender provision’s requirement of 100% trusting provides assurance to consumers that all of the funds paid will be available to purchase the services and merchandise from other providers.

While it is apparent a certificate holder's express announcement of its intent to surrender its certificate of authority or its failure to submit a renewal application upon expiration of its certificate of authority triggers the Act's requirement that all preneed funds collected be deposited into trust, the Department also considers other events to be equally clear triggers of this requirement. For example, where a preneed certificate holder enters into a transaction or series of transactions that would result in the transfer of virtually all of its assets, it is the Department's position that the certificate holder had, for purposes of the Act, stated its intent to surrender its certificate of authority. Technically speaking, a certificate holder that transfers all of its assets could no longer meet the definition of "funeral establishment" or "cemetery authority" and, consequently, could not qualify for the issuance or renewal of a certificate of authority. This conclusion is bolstered by the above stated purposes of the Act.

This informational bulletin is offered as guidance to those engaged in the preneed business who may be contemplating a course of action such as described above. Please be advised this Department will do all it can to protect consumers in these situations by requiring strict compliance with this statute.