§ 4110 — Domestic mutual companies; expense limits

§ 4110. Domestic mutual companies; expense limits. (a) No domestic\nmutual property/casualty insurance company licensed to write a kind of\ninsurance specified in paragraph seven, eight, nine, ten, eleven,\nthirteen, fourteen, fifteen, sixteen or seventeen of subsection (a) of\nsection one thousand one hundred thirteen of this chapter shall expend\nin any one calendar year for management expenses a greater amount than\nthirty percent of the sum of its net premium income and seventy-five\npercent of its investment income for such year; provided that any\ninsurer whose principal line of business is medical malpractice\nliability insurance or any insurer who is the subject of a proceeding\npursuant to article seventy-four of this chapter shall not expend in any\none calendar year for management expenses, a greater amount than thirty\npercent of its net premium income for such year. Management expenses\nshall be held to include all expenses of the company except expenses\nincurred in the investigation, adjustment and settlement of claims,\ntaxes, fees and expenses of examination, and taxes, repairs and expenses\non real estate. In applying the provisions of this section the net\npremium income of, and expenses of, boiler and machinery insurance or\nelevator insurance shall not be included. In the event expenses incurred\nin making a new system upgrade result in this subsection's management\nexpenses limit being exceeded, then the insurer shall inform the\nsuperintendent sixty days in advance of the expense limit being\nexceeded. Subject to approval by the superintendent, the limit shall be\ntemporarily raised to the amount necessary to encompass the aforestated\nnew system upgrade, provided that in no event shall the limit be raised\nmore than five percentage points and shall not be in effect for more\nthan three years, and provided further that an insurer may submit to the\nsuperintendent, for the superintendent's prior approval, a written\nrequest to temporarily raise the limit for up to an additional three\nyears, for a total of no more than six years. An insurer shall submit\nsuch written request to the superintendent at least sixty days but not\nmore than one hundred twenty days before the expiration of the initial\nperiod during which the limit was raised. The insurer shall not increase\npremiums solely as a result of the management expenses cap limit being\nexceeded. For purposes of this subsection, a new system upgrade is\ndefined as the acquisition of electronic data processing apparatus and\nrelated equipment constituting a data processing, record keeping or\naccounting system and operating and non-operating software.\n (b) Subsection (a) hereof shall not apply to a mutual company\norganized before the effective date of this chapter as a domestic mutual\nfire or marine or marine protection and indemnity company.\n