(a) (1) To the extent necessary to secure funds for the association for payment of administrative expenses of the association and covered claims of insolvent insurers and also for payment of reasonable costs of adjusting the claims, the association shall collect premium payments from its member insurers sufficient to discharge its obligations.
(2) The association shall allocate its claim payments and costs, incurred or estimated to be incurred, to one or more of the following categories:
(A) Workers’ compensation claims.
(B) Homeowners’ claims and automobile claims, including all of the following:
(i) Automobile material damage.
(ii) Automobile liability (both personal injury and death and property damage).
(iii) Medical payments.
(iv) Uninsured motorist claims.
(C) Claims other than workers’ compensation, homeowners, and automobile, as defined above.
(3) Separate premium payments shall be required for each category.
(4) The premium payments for each category shall be used to pay the claims and costs allocated to that category.
(b) (1) The rate of premium charged shall be a uniform percentage of net direct written premium in the preceding calendar year applicable to that category.
(2) The rate of premium charges to each member insurer in the appropriate categories shall initially be based on the written premium of each insurer as shown in the latest year’s annual financial statement on file with the commissioner.
(3) The initial premium shall be adjusted by applying the same rate of premium charge as initially used to each insurer’s written premium as shown on the annual statement for the second year following the year on which the initial premium charge was based.
(4) (A) The difference between the initial premium charge and the adjusted premium charge shall be charged or credited to each member insurer by the association as soon as practical after the filing of the annual statements of the member insurers with the commissioner for the year on which the adjusted premium is based.
(B) Any credit due in a specific category to a member insurer as a result of the adjusted premium calculation shall be refunded to the member insurer.
(c) (1) For purposes of this section, “net direct written premiums” means the amount of gross premiums, less return premiums, received in that calendar year upon business done in this state, other than premiums received for reinsurance.
(2) In cases of a dispute as to the amount of the net direct written premium between the association and one of its member insurers, the written decision of the commissioner shall be final.
(d) (1) The premium charged to any member insurer for any of the three categories or a category established by the association shall not be more than 2 percent of the net direct premium written in that category in this state by that member insurer per year, starting on January 1, 2003, until December 31, 2007, and thereafter shall be 1 percent per year, until January 1, 2015.
(2) Commencing January 1, 2015, the premium charged to any member insurer for any of the three categories or a category established by the association shall not be more than 2 percent of the net direct written premium unless there are bonds outstanding that were issued pursuant to Article 14.25 (commencing with Section 1063.50) or Article 14.26 (commencing with Section 1063.70).
(3) If bonds issued pursuant to either article are outstanding, the premium charged to a member insurer for the category for which the bond proceeds are being used to pay claims and expenses shall not be more than 1 percent of the net direct written premium for that category.
(e) (1) The association may exempt or defer, in whole or in part, the premium charge of any member insurer, if the premium charge would cause the member insurer’s financial statement to reflect an amount of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. However, during the period of deferment, no dividends shall be paid to shareholders or policyholders by the company whose premium charge was deferred.
(2) Deferred premium charges shall be paid when the payment will not reduce capital or surplus below required minimums.
(f) After all covered claims of the insolvent insurer and expenses of administration have been paid, any unused premiums and any reimbursements or claims dividends from the liquidator remaining in any category shall be retained by the association and applied to reduce future premium charges in the appropriate category.
(g) The commissioner may suspend or revoke the certificate of authority to transact business in this state of a member insurer that fails to pay a premium when due and after demand has been made.
(h) Interest at a rate equal to the current federal reserve discount rate plus 21/2 percent per annum shall be added to the premium of any member insurer that fails to submit the premium requested by the association within 30 days after the mailing request. However, in no event shall the interest rate exceed the legal maximum.
(i) This section shall apply only to premium charges paid prior to January 1, 2017.
(j) This section shall remain in effect only until January 1, 2020, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2020, deletes or extends that date.
(Added by renumbering Section 1063.5 by Stats. 2016, Ch. 137, Sec. 2. (AB 2710) Effective January 1, 2017. Repealed as of January 1, 2020, by its own provisions.)
Last modified: October 25, 2018