§ 5405 — Participation

§ 5405. Participation. (a) Every member of the association shall\nparticipate in its writings, expenses, profits and losses in the\nproportion that the net direct premiums of the member (but excluding\nthat portion of premiums attributable to the operation of the\nassociation) written during the preceding calendar year bear to the\naggregate net direct premiums written in this state by all members of\nthe association. Each member's participation in the association shall be\ndetermined annually on the basis of such net direct premiums written\nduring the preceding calendar year as disclosed in the annual statements\nand other reports filed by the member with the superintendent.\n (b) No member shall be obligated in any year to reimburse the\nassociation on account of its proportionate share in the deficit from\noperations of the association in that year in excess of one percent of\nits surplus to policyholders. The aggregate amount not so reimbursed\nshall be reallocated among the remaining members in accordance with the\nmethod of determining participation prescribed in this section, after\nexcluding from the computation the total net direct premiums of all\nmembers not sharing in such excess deficit. In the event that the\ndeficit from operations allocated to all members in any calendar year\nshall exceed one percent of their respective surplus to policyholders,\nthe amount of such deficit shall be allocated to each member in\naccordance with the method of determining participation prescribed in\nthis section.\n (c) Annually, on a date set by the superintendent, the association\nshall estimate its deficit from operations, and after application of the\nfunds provided for in subsection (d) of this section, calculate a\nfactor, not to exceed one percent, by relating such deficit to net\ndirect premiums written for the latest calendar year, subject to the\napproval of the superintendent. Such factor may be reflected in the\ndetermination of rates filed by the principal rating organization in\nthis state and by members of the association for fire, extended\ncoverage, broad form coverage pursuant to subsection (g) of section five\nthousand four hundred two of this article, additional perils, homeowners\nand commercial multiple peril package policies which include the perils\nof fire and extended coverage. Notwithstanding the provisions of section\nfive thousand four hundred four of this article to the contrary, any\npart of such deficit which exceeds one percent as so calculated, shall\nbe defrayed by an increase in rates for the respective occupancy\nclasses, based upon the association's related loss and expense\nexperience together with other information the superintendent requires,\nin accordance with filings approved by the superintendent. Each member's\nshare of the estimated deficit shall be collected by the association in\naccordance with the plan of operation.\n (d) In accordance with regulations of the superintendent, the deficit\nfrom the operations of the association shall be credited with income\nearned from the New York property/casualty insurance security fund. The\ncredit shall be an amount determined by the superintendent, which in no\nyear shall exceed income earned or the sum of fifteen million dollars\nwhichever is less. The credit shall be estimated annually by the\nsuperintendent on a date set by the superintendent, and such estimated\namount shall be credited to the association and transferred from the\nincome as earned during the year by the New York property/casualty\ninsurance security fund. Any difference between the estimated amount of\nincome and the actual amount of income for the year shall be taken into\naccount in computing the estimate for the next period. Notwithstanding\nthe foregoing provisions of this section or any other law to the\ncontrary, if the assets of the association exceed its liabilities on the\nthirtieth day of November in any year commencing on or after April\nfirst, nineteen hundred eighty-two in accordance with regulations of the\nsuperintendent, the association shall pay to the New York\nproperty/casualty insurance security fund an amount equal to any amounts\npaid from such fund to the association in accordance with the provisions\nof article seventy-six of this chapter and this section which have not\nbeen repaid prior to such thirtieth day of November, together with any\ninvestment income attributable thereto, as determined by the\nsuperintendent, up to the amount of such excess. Any such payment shall\nbe made no later than February first of the following year.\n (e) Members shall not be relieved of their obligation to reimburse the\nassociation for their share of the deficit resulting from the operations\nof the association prior to August first, nineteen hundred seventy-nine.\n (f) (1) Any member that voluntarily writes, as of expiration date, a\npolicy or coverage currently written through the association, shall\nreceive credit against its participation in association writings. Such\ncredit shall be to the extent of twice the net direct premium, on an\nannual basis, of such policy or coverage voluntarily written and shall\napply for one year.\n (2) Subject to approval by the superintendent, the association shall\ndevelop and implement an incentive plan for members which voluntarily\nwrite policies that include windstorm coverage in coastal areas. Such\nplan shall also include incentives for members to voluntarily write\nwraparound policies, as defined by the association, in coastal areas,\nwhen such wraparound policies include coverage for windstorm on a\nreplacement cost basis in excess of the windstorm coverage contained in\nan association policy issued to the same policyholder. The purpose of\nthese incentives shall be to encourage the writing of voluntary\ninsurance policies in coastal areas by reducing the participation in the\nwritings of the association of those member companies which voluntarily\nwrite policies that include windstorm coverage in such areas. For the\npurposes of this section, coastal areas include: areas within one mile\nof a saltwater ocean, sound, inlet or bay on Long Island's south shore\nor along the shore of Brooklyn, Queens, Staten Island and Long Island's\nforks; areas within two thousand five hundred feet of a saltwater ocean,\nsound, inlet or bay on Long Island's north shore, the Bronx or\nWestchester.\n (3) The association shall offer a policy form which may be used only\nin conjunction with voluntary market wraparound policies that provide\nwindstorm coverage in excess of amounts insured by the association. The\npolicy form, which may include broad form coverage, shall provide\nreplacement cost coverage for dwellings and personal property for repair\nor replacement without deduction for depreciation on terms and\nconditions generally consistent with policies customarily in use in the\nvoluntary market as modified to make the association policy compatible\nwith voluntary market wraparound policies. Coverage offered by the\nassociation under such policy shall not exceed six hundred thousand\ndollars for dwelling coverage and two hundred fifty thousand dollars for\npersonal property, and shall be available to cover one to four family\nowner-occupied dwellings, apartment units or condominium units. The\nassociation may require applicants to provide evidence of the purchase\nof flood insurance as a condition of eligibility for coverage under this\npolicy. The association shall file the form for approval with the\nsuperintendent.\n