| (3) Disbursements from the respective §2203.301
fund or §2203.303 fund. Disbursements from the respective §2203.301
fund or §2203.303 fund may not be made for any purpose other
than to recoup a deficit from operations as defined in subsection
(d) of this section. Upon suspension of the association by the Commissioner,
any funds remaining in the §2203.301 fund must be added to the
special fund created by the Commissioner, acting as receiver, or a
special deputy receiver acting on behalf of the receiver. Any investment
income earned on the funds of the §2203.301 fund must be added
to that fund. Upon termination of the §2203.303 fund, all assets
of the fund must be transferred as provided in the Act.
(d) Participation by members and policyholders of the
association.
(1) Deficit and remedy of a deficit.
(A) The association must have sustained a deficit from
operations whenever the aggregate of the incurred losses (reported
and unreported), plus all loss adjustment expenses incurred, plus
commissions and plus other administrative expenses (including servicing
carrier fees) incurred by the association in a given calendar year,
exceed the aggregate of the net premiums earned and other net income
(including investment income earned) realized by the association in
the same calendar year.
(B) Any deficits sustained by the association in any
one calendar year with respect to any category of physicians or health
care providers subject to Insurance Code §2203.101 or for-profit
or not-for-profit nursing homes or assisted living facilities subject
to Insurance Code §2203.102 must be recouped, pursuant to this
subchapter and the rating plan in effect, by one or more of the following
procedures in this sequence:
(i) first, a contribution from the §2203.301 fund
or §2203.303 fund, as appropriate, until the respective fund
is exhausted;
(ii) second, an assessment upon the policyholders pursuant
to paragraph (3) of this subsection and Insurance Code §2203.252;
(iii) third, an assessment upon the members of the
association pursuant to paragraph (4) of this subsection and Insurance
Code §2203.053.
(2) Surplus and disposition of a surplus.
(A) The association must have sustained a surplus from
operations whenever the aggregate of the incurred losses (reported
and unreported), plus all loss adjustment expenses incurred, plus
commissions and plus other administrative expenses (including servicing
carrier fees) incurred by the association in a given calendar year,
do not exceed the aggregate of the net premiums earned and other net
income (including investment income earned) realized by the association
in the same calendar year.
(B) Upon approval by the board of directors, surplus
from operations must be ratably distributed as reimbursements to members
who have been assessed pursuant to paragraph (4) of this subsection
and have paid such assessments, but have not been previously reimbursed
and have not been allowed the premium tax credit (offset) pursuant
to subsection (e) of this section.
(C) Upon approval of the Commissioner, the association
must reimburse the state to the extent that the members have recouped
their assessments using premium tax credits pursuant to subsection
(e) of this section, with interest at a rate to be approved by the
Commissioner.
(D) Any balance remaining in the funds of the association
at the close of its fiscal year, meaning its then excess of revenue
over expenditures after approved reimbursement of members' contributions,
must be added to the reserves of the association.
(3) Participation by policyholders of the association.
(A) Assessment of policyholders; contingent liability.
Each policyholder within either the §2203.301 fund or §2203.303
fund must have contingent liability for a proportionate share of any
assessment of policyholders in the applicable §2203.301 fund
or §2203.303 fund made by the association pursuant to Insurance
Code §2203.252 and the provisions of the plan of operation set
forth in this subchapter.
(B) Procedure for assessment of policyholders. Assessment
of policyholders shall be made in accordance with the following:
(i) Notice of assessment must be sent by certified
mail, return receipt requested, to each policyholder being assessed
within 30 days of the board of directors meeting at which such assessment
was levied. Notice must be forwarded to the address of each policyholder
as it appears on the books of the association. The notice must state
the policyholder's allocated amount of assessment and must inform
each policyholder of the sanctions imposed by clause (ii) of this
subparagraph for the failure to pay such assessment within the time
prescribed by this section.
(ii) Each policyholder must remit to the association
payment in full of an assessment within 30 days of receipt of notice
of assessment. However, a policyholder that is not delinquent on any
prior assessments, stabilization reserve fund charge, or premium may
remit payment of an assessment levied for a deficit incurred in a
calendar year in two installments with at least one-half of the assessment
paid within 30 days after receipt of notice of assessment and the
remaining balance paid within 30 days thereafter. If the association
has not received payment of the policyholder's assessment or any installment
payment within 10 days after the payment is due, then the association
must promptly cancel any policy of insurance that the policyholder
at that time has in force with the association, and the association
may offset any unearned premium otherwise refundable on such policy
against the amount of that policyholder's unpaid assessment. Such
cancellation of current insurance coverage will in no way affect the
right of the association to proceed against the policyholder in any
court of law or equity in the United States for any remedy provided
by law or contract to the association, including, but not limited
to, the right to collect the policyholder's assessment.
(4) Participation by members of the association.
(A) Assessment of members. Insurance Code Chapter 2203
provides that in the event that sufficient funds are not available
for the sound financial operation of the association, in addition
to assessments paid pursuant to the plan of operation set forth in
this subchapter and contributions from the stabilization reserve funds,
all members must, on a basis authorized by the Commissioner, as long
as the Commissioner deems it necessary contribute to the financial
requirements of the association in the manner provided for in this
section and Insurance Code §2203.254. Any assessment or contribution
must be reimbursed to the members as provided in Insurance Code §2203.255.
(B) Procedure for assessment of members.
(i) All insurers that are members of the association
must participate in its writings, expenses, and losses in the proportion
that the net direct premiums of each member, excluding that portion
of premiums attributable to the operation of the association, written
in this state during the preceding calendar year bears to the aggregate
net direct premiums written in this state by all members of the association
during the same calendar year. Each insurer's participation in the
association must be determined annually on the basis of net direct
premiums written during the preceding calendar year as reported in
the annual statements and other reports filed by that insurer that
may be required by the department. No member may be obligated in any
one year to reimburse the association on account of its proportionate
share in the unrecouped deficit from operations of the association
in that year in excess of 1.0% of its surplus to policyholders. The
aggregate amount not reimbursed must be reallocated among the remaining
members in accordance with the method of determining participation
prescribed in this subsection, after excluding from the computation
the total net direct premiums of all members not sharing in such excess
deficit. In the event that the deficit from operations allocated to
all members of the association in any calendar year exceeds 1.0% of
their respective surplus to policyholders, the amount of the deficit
must be allocated to each member in accordance with the method of
determining participation prescribed in this subsection.
(ii) Notice of assessment must be sent by certified
mail, return receipt requested, to each member within 30 days of the
board of directors' meeting at which the assessment was levied. Notice
shall be forwarded to the office address of the member as it appears
on the books of the association. The notice must state the member's
allocated amount of assessment and must inform each member of the
sanctions imposed by clause (iii) of this subparagraph for the failure
to pay the assessment within the time prescribed by this section.
Cont'd... |
