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in 1990, said bulletin is hereby rescinded.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
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.
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
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.