New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IV - Financial Condition Of Insurer and Reports to Superintendent
Subchapter C - Fire, Marine, Casualty And Surety Insurers
Part 108 - Allocation To Lines Of Business
Section 108.3 - Allocation of expenses to primary lines of business

Universal Citation: 11 NY Comp Codes Rules and Regs ยง 108.3

Current through Register Vol. 46, No. 12, March 20, 2024

(a) The allocation of expenses to lines of business shall be by expense groups. Each classification of expense within each expense group shall be allocated separately to lines of business on the bases of allocation prescribed as follows. All bases employed in such allocations shall be applicable and appropriate to the expense group of which such expense is a part.

Example:

Expenses which are allocated to lines of business as an overhead on salaries shall be calculated in relation only to the salaries included in the same expense group.

Expenses included in the expense group, loss adjustment expenses

Bases of allocation to lines of business
Claim adjustment services:
Direct Actual
Reinsurance assumed Actual
Reinsurance ceded Actual
Commission and brokerage-direct See commission and allowances (section 107.3[c][2] of this Title)
Allowances to managers and agents See commission and allowances (section 107.3[c][2] of this Title)
Salaries See special instructions relating to the allocation of salaries and other expenses (Part 109 of this Title)
Employee relations and welfare Overhead on salaries
Pensions Overhead on salaries
Directors' fees Overhead on salaries
Travel and travel items Special studies
Rent and rent items Overhead on salaries
Equipment Overhead on salaries
Printing and stationery Overhead on salaries
Postage, telephone and telegraph, exchange and express Overhead on salaries
Legal and auditing Special studies
Income from special services Special studies
Miscellaneous Special studies

Expenses included in the expense group, acquisition, field supervision and collection expenses

Bases of allocation to lines of business
Commission and brokerage:
Direct Actual, but subject to instructions under commission and allowances (section 107.3[c][2] of this Title)
Reinsurance assumed Actual
Reinsurance ceded Actual
Contingent-net Special studies
Policy and membership Actual
Allowances to managers and agents Special studies, but subject to instructions under commission and allowances (section 107.3[c][2] of this Title)
Advertising Premiums
Salaries See special instructions relating to the allocation of salaries and other expenses (Part 109 of this Title)
Employee relations and welfare Overhead on salaries
Pensions Overhead on salaries
Directors' fees Overhead on salaries
Travel and travel items Special studies
Rent and rent items Overhead on salaries
Equipment Overhead on salaries
Printing and stationery Overhead on salaries
Postage, telephone and telegraph, exchange and express Overhead on salaries
Legal and auditing Special studies
Income from special services Special studies
Miscellaneous Special studies

Expenses included in the expense group, general expenses

Bases of allocation to lines of business
Commission and brokerage-direct See commission and allowances (section 107.3[c][2] of this Title)
Allowances to managers and agents See commission and allowances (section 107.3[c][2] of this Title)
Boards, bureaus an associations Special studies
Surveys and underwriting reports Special studies
Audit of assurance records Special studies
Salaries See special instructions relating to the allocation of salaries and other expenses (Part 109 of this Title)
Employee relations and welfare Overhead on salaries
Pensions Overhead on salaries
Directors' fees Overhead on salaries
Travel and travel items Special studies
Rent and rent items Overhead on salaries
Equipment Overhead on salaries
Printing and stationery Overhead on salaries
Postage, telephone and telegraph, exchange and express Overhead on salaries
Legal and auditing Special studies
Income from special services Special studies
Miscellaneous Special studies

Expenses included in the expense group, taxes

Bases of allocation to lines of business
Taxes, licenses and fees:
State and local insurance taxes Special studies
Insurance Dept. licenses and fees Special studies
Payroll taxes Overhead on salaries
All other (excluding federal income and real estate) Special studies

(b) Definitions.

(1) The term actual means that the expenses are susceptible of direct and accurate allocation, and companies shall allocate directly to lines of business and shall not employ any apportionments or estimations.

(2) For definitions of the terms special studies, premiums and overhead on salaries, see section 106.3, supra.

(c) Other bases permitted or prescribed.

For these expense classifications permitting the basis "overhead on salaries or premiums," any other basis of allocation may be adopted which yields more accurate results. The bases "overhead on salaries and premiums" shall not be used if clearly inappropriate.

(d) Other instructions applicable.

In making any allocations to lines of business, companies shall observe the general instructions regarding allocation bases (see section 109.3, infra.)

(e) Records required.

(1) The methods followed in allocating to lines of business shall be described, kept and supported as set forth under detail of allocation bases (see section 109.4[g], infra.)

(2) The effects of the application to each operating expense classification of all bases of allocation shall be shown on records kept in clear and legible form. Such records shall be readily available for examination.

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