California Code of Regulations
Title 10 - Investment
Chapter 5 - Insurance Commissioner
Subchapter 3 - Insurers
Article 10 - Mortgage Guaranty Insurers
Section 2510.18 - Premium

Universal Citation: 10 CA Code of Regs 2510.18

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

A mortgage guaranty insurer is entitled to receive the full premium agreed upon under the pool insurance policy. Upon achieving the aggregate ceiling of loss under the policy, the insurance coverage terminates automatically. The mortgage guaranty insurer is then entitled to accelerate and call for the balance of the premium if the aggregate ceiling of loss is reached prior to the twelfth (12th) contract year of such insurance policy. Assuming that the premium for the policy has been prepaid for a twelve (12) year period, the premium is then adjusted by the premium actually paid under the policy. The resulting balance then must be reduced to the present value by applying a reasonable rate of interest. The following steps are used in the additional premium calculation:

(a) Average monthly premium collected to date multiplied by 144 months = Total expected premium for 12 year period.

(b) Multiply "total expected premium" from subsection (a) of this Section by the appropriate cumulative earned factor from the following table (as specified in the California Administrative Code, Title 10, Chapter 5, Subchapter 3, Article 10, Section 2513). The result will equal the total premium to be earned between inception and termination as follows:

Termination at End of Contract Year

Cumulative Earned Factor
1 .044
2 .195
3 .360
4 .506
5 .630
6 .735
7 .823
8 .890
9 .938
10 .970
11 .989
12 1.000
(Total premium earned (Total expected (Cumulative
between inception and termination)=premium from subsection (a) of this Section)xearned factor)

If this step results in a negative figure, this subsection is to be disregarded.

(c)Initial additional premium =(Earned premium under subsection (b) of this Section less premium already paid)
(d)Additional premium due(Total premium from x1
(1 + i)n
mortgage guaranty insurer =subsection (c) of this Section)
whereby:
i = annual rate of interest.
n = years from termination to end of assumed 12 year period.

1. New section filed 8-23-78; effective thirtieth day thereafter (Register 78, No. 34).

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