Current through Register Vol. 50, No. 3, March 20, 2024
A. All funds shall
maintain specific excess insurance or reinsurance in the amount of at least
$2,000,000 per occurrence and aggregate excess insurance or reinsurance of at
least $2,000,000.
B. For the
purposes of §1109, no loss fund shall be less than 70 percent of earned normal
premium without the approval of the commissioner.
F. The commissioner shall deny the use of a
retention requested by a fund if he finds:
1.
that the higher retention will have a significant adverse effect on the
financial condition of the fund; or
2. that the fund is unable to establish
reserves using monies from:
a. premium earned
during the year the loss was incurred; or
b. investment earnings from the year in which
the loss was incurred; or
c. from
future investment earnings on the specific loss reserve.
G. Each fund shall provide
security for aggregate losses by selecting one of the following alternatives:
1. purchasing an acceptable aggregate excess
policy;
2. upon approval of the
commissioner, post a cash security deposit in the amount of $1,000,000 or 20
percent of annual standard premium, whichever is greater; or
3. if the fund has been in operation at least
60 months, upon approval of the commissioner, establish an actuarially sound
reserve for aggregate losses.
I. If the option in §1109. G.2 is selected, a
fund, upon approval of the commissioner, may self-insure part of its aggregate
limit by posting as a cash security deposit for the amount which is
self-insured.
J. If a fund receives
permission to provide security for its aggregate losses by establishing an
aggregate reserve, the fund shall comply with the following requirements.
1. At least 60 days prior to the beginning of
each policy year for which an aggregate reserve will be established, the fund
shall submit a plan for that year. Approval of the plan by the commissioner
shall be required before an aggregate reserve may be established for the next
policy year.
2. Within six months
after the end of each fund year, the fund shall submit an actuarial review, by
a qualified actuary, of its aggregate reserve for each fund year whose
aggregate losses are guaranteed by the reserve.
3. Along with the actuarial review, the fund
shall provide financial information which sets forth the financial position of
the aggregate reserve.
4. In
actuarially determining the amount of ultimate loss, the fund and its actuary
may take into account current or future recoveries from any aggregate or
specific excess contract, if such contract complies with this
regulation.
K. The
commissioner may:
1. reject an actuarial
review or financial report which does not comply with the requirements of
§1109. L. If this occurs, the commissioner may, at the expense of the fund,
conduct his own actuarial or financial review, or, upon request of the fund,
allow the fund to submit another actuarial or financial report, subject to the
commissioner's approval of the party preparing the report;
2. for good cause, order a fund to cease
using an aggregate reserve for securing its aggregate losses. Good cause shall
include a finding that the aggregate reserve is actuarially unsound, that the
fund is insolvent, that the fund will lack sufficient liquidity to run off its
claims without reliance on future premium income, or that the fund has failed
to comply with the provisions of this regulation;
3. in the event that the fund's aggregate
reserve, or reserves, is actuarially unsound, order the fund to take such
corrective action as necessary to make the reserve actuarially sound.
L. If a fund receives approval of
its plan to use an aggregate reserve to provide security for its aggregate
losses, then:
1. payment of dividends from
premium in a fund year shall not be requested or approved for that fund year as
long as any claims reserves, reserves for loss development, or reserves for
losses incurred but not reported (IBNR) are unfunded by actual cash
reserves;
2. no dividends shall be
requested or approved from investment earnings unless the aggregate reserves
for all years are actuarially sound, taking into account future contributions,
and aggregate excess insurance;
3.
advance premium discounts and all expenses unnecessary for the fund to meet its
obligations will be reduced or eliminated, if necessary, to provide funds to
make an aggregate reserve actuarially sound;
4. amounts actuarially determined to be
necessary for the reserves for loss development and IBNR shall be a part of the
fund's security deposit requirement;
5. no premium from a year prior to the year
for which the aggregate reserve is established may be allocated to fund an
aggregate reserve until 12 months after the close of the prior year.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
23:1200.1.
