(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 two hundred fifty thousand dollars ($250,000) or such other amount determined by the commissioner and actuarially supported by a feasibility study.

(2) In the case of an association captive insurance company or risk retention group, not less than five hundred thousand dollars ($500,000) or such other amount determined by the commissioner and actuarially supported by a feasibility study.

(3) In the case of an industrial insured captive insurance company, not less than five hundred thousand dollars ($500,000).

(4) In the case of a protected cell captive insurance company, not less than two hundred fifty thousand dollars ($250,000) or such other 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, 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 shall require that a trust fund, funded by an irrevocable letter of credit or other acceptable asset, be established and maintained in the United States for the benefit of United States policyholders and United States ceding insurers under insurance policies issued or reinsurance contracts issued or assumed, by the branch captive insurance company through its branch operations. The amount of the security may be no less than the capital and surplus required hereunder and the reserves on these insurance policies or reinsurance contracts, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses, and unearned premiums with regard to business written through the branch operations. Notwithstanding the foregoing, the commissioner may permit a branch captive insurance company that is required to post security for loss reserves on branch business by its reinsurer to reduce the funds in the trust account required by this section by the same amount so long as the security remains posted with the reinsurer. If the form of security selected is a letter of credit, the letter of credit must be established by, or issued or confirmed by, a bank chartered in this state or a member bank of the Federal Reserve System.