Ala. Admin. Code r. 480-5-1-.04

Current through Register Vol. 43, No. 1, October 31, 2024

Section 480-5-1-.04 - Contracts For Excess Insurance

(1) No contract or policy of excess insurance shall be recognized by the Director in considering the ability of an applicant to fulfill its financial obligations under the Law unless such contract or policy:

(a) Is issued by an admitted insurance company.

(b) Contains a sixty (60) day written notice of cancellation and a sixty (60) day written notice of non-renewal to the covered entity and the Director by registered or certified mail.

(c) If it contains any type of commutation clause, it must provide (1) that any commutation effected thereunder shall not relieve the underwriter or underwrites of further liability in respect to claims and expenses unknown at the time of such payment or in regard to claims apparently closed but which may be subsequently revived by or through a competent authority, and (2) that in the event the underwriter proposes to redeem any further payments payable as compensation for accidents occurring during the term of the policy by the payment of a lump sum to be fixed a provided in the commutation clause of the policy, not less than thirty (30) days prior to, notice of such commutation shall be given to the service agent and the director by registered or certified mail by the underwriter or its agent.

(2) Funds that become members of any Alabama reinsurance trust fund, as allowed by 25-5-9(b), Code of Ala. 1975, as last amended, shall not be required to provide other excess insurance during the period of time in which they are members of the reinsurance trust fund.

(3) Any reinsurance trust fund shall adhere to the following regulations:

(a) A reinsurance trust fund may assess its member funds. The assessment against each member for any fund year is limited to an amount equal to the premium paid by the member fund in the fund year for which the assessment is being levied.

(b) Specific and Aggregate Reinsurance is permitted for a reinsurance trust fund, but it not required.

(c) No Self-Insurance bonds or other types of collateral are required of a reinsurance trust fund.

(d) Participants in member funds are not assessable by a reinsurance trust fund.

(e) Quarterly funds status reports will be provided to the Department.

Author: Wilbon S. Spates, Chief, Workers' Compensation Division

Ala. Admin. Code r. 480-5-1-.04

Effective February 16, 1993. Amended: Filed October 9, 1997; effective November 13, 1997.

Statutory Authority:Code of Ala. 1975, § 25-2-2(6).