§ 1107 — Trust - Coverage Grants - Payment of Claims

(1) No risk retention trust created under this Article may issue coverage grants until it has procured 100 bonafide applications for coverage with the first premium contribution in cash for each kind of coverage which the trust undertakes to write, and has a contingency reserve fund of at least $2,500,000. Every trust subject to this Article must have, and at all times maintain a pool retention fund at least equal to its unpaid liabilities and an unimpaired minimum contingency reserve fund of $1,500,000. The contingency reserve fund requirements shall be deemed satisfied if the required contribution into such fund by any participating member bank is obtained by a certificate of deposit redeemable by the trust in an amount not greater than the amount insured by the Federal Deposit Insurance Corporation. (2) Every coverage grant issued or delivered in this State by any trust subject to this Article shall provide for the liability of trust members to the extent that funds are needed to pay a member's share of the depleted contingency reserve fund needed to maintain the reserves required by this Section. (3) The Director may after notice and hearing suspend or revoke the license of any trust that fails to maintain the minimum reserves required by this Section. (4) All claims shall first be paid from the pool retention fund. If that fund becomes depleted, any additional claims shall be paid from the contingency reserve fund. (5) On the basis of an annual independent certified audit, the Director may require the risk retention trust to purchase insurance in amounts required to provide additional protection to member banks in excess of the contingency reserve fund.

Legislative History

(Source: P.A. 84-1431.)