§ 6102 — Organization of domestic reciprocal insurers

* § 6102. Organization of domestic reciprocal insurers. (a)\nTwenty-five or more persons, firms and corporations, each having the\nqualifications of subscribers as prescribed in this article, may\norganize a reciprocal insurer to do any one or more of the basic kinds\nof insurance set forth in subsection (a) of section four thousand one\nhundred one of this chapter or, in the alternative, twenty-five or more\nNew York counties, towns, cities, villages, district corporations (as\ndefined in paragraph three of section 2.00 of the local finance law), or\nschool districts and boards of cooperative educational services, each\nhaving the qualifications of subscribers as prescribed in this article,\nmay organize statewide municipal reciprocal insurers to provide any one\nor more of the basic kinds of insurance set forth in subsection (a) of\nsection four thousand one hundred one of this chapter, except workers'\ncompensation and employers' liability, fidelity and surety other than\nofficial undertakings conditioned for the faithful performance of\nofficial duties as referenced in section eleven of the public officers\nlaw and required by related provisions of the county, town, and village\nlaws, credit and marine and inland marine (except as authorized by the\nprovisions of paragraph two of subsection (b) of section four thousand\none hundred two of this chapter) insurance. Such an insurer shall be\ncalled, for purposes of this chapter, a "municipal reciprocal insurer"\nand shall be subject to all the provisions of this chapter applicable to\na reciprocal insurer, except where the context otherwise requires.\nHowever, any reciprocal insurer authorized to do the business of\nworkers' compensation insurance shall be deemed to be a mutual carrier\nwithin the meaning of the definition of that term in section one hundred\nsix of the workers' compensation law and shall be subject to the\nprovisions of article six-A of such law.\n (b) The original subscribers and the attorney-in-fact shall execute a\ndeclaration setting forth the following:\n (1) the name of such reciprocal insurer, which shall conform to the\nprovisions of subsection (g) of section one thousand one hundred two of\nthis chapter;\n (2) the location of the principal office of such reciprocal insurer,\nwhich shall be the same as the principal office of the attorney-in-fact\nand shall at all times be located in this state;\n (3) the kind or kinds of insurance business intended to be done,\nspecified in terms of subsection (a) of section one thousand one hundred\nthirteen of this chapter;\n (4) the names and addresses of the subscribers so proposing to engage\nin such business;\n (5) the designation and appointment of an attorney-in-fact, which may\nbe a person, other than an individual, organized under the laws of this\nstate authorized by the superintendent to act as such for one or more\nreciprocal insurers; and having its principal office in this state;\n (6) the names and addresses of the officers and directors of the\nattorney-in-fact, if a corporation, or of its members, if a firm, of\nwhom a majority shall be residents of this state or of contiguous\nstates;\n (7) the designation of an advisory committee, all of whose members\nshall be subscribers or officers or directors of subscriber corporations\nor members of subscriber firms, to act on behalf of the subscribers,\nwith power to supervise and control the attorney-in-fact and to control\nthe investments of the assets of the reciprocal insurer, and such other\npowers as may be conferred by the articles of association and the\nsubscriber's agreement;\n (8) a declaration (i) that all of the invested assets of such\nreciprocal insurer, except deposits held by state officials as required\nby law, shall be held by and in the name of such reciprocal insurer,\nsubject to the control of the advisory committee and to the provisions\nof this chapter, and (ii) that all monies paid to such reciprocal\ninsurer shall, after deducting any sums payable to the attorney-in-fact,\nbe held by such attorney-in-fact in the name of the reciprocal insurer\nfor the uses specified in the subscriber's agreement;\n (9) an exact and complete copy of the articles of association, if any,\nand the subscriber's agreement;\n (10) the amount and kind of insurance for which each subscriber\nproposes to become a policyholder, and the premium specified therefor;\nand\n (11) such other information as the superintendent may require.\n (12) in the case of a municipal reciprocal insurer, a statement\nelecting whether or not the insurer and the contracts of insurance it\nissues will be subject to the provisions of article seventy-six of this\nchapter. In the event that the municipal reciprocal insurer elects that\nit and its contracts of insurance will not be subject to such article,\nthen every such contract and every subscriber's agreement shall disclose\nthe lack of coverage by the property/casualty insurance security fund,\nthe inapplicability of such article, and provide for an unlimited\ncontingent several liability for assessment of the subscriber. The\nelection whether or not to be subject to the provisions of article\nseventy-six of this chapter shall be irrevocable.\n (c) Such declaration shall be subscribed and affirmed as true under\nthe penalties of perjury by each subscriber and by each member of the\nadvisory committee, in the manner required for the acknowledgment of\nconveyances of real property to be recorded in this state, and shall be\nfiled in the office of the superintendent. Such articles of association\nand subscriber's agreement shall in all respects conform with the\nrequirements of this article.\n (d) If the superintendent finds that such declaration, articles of\nassociation and subscriber's agreement are in conformity with law, that\nthe subscribers, the attorney-in-fact and the advisory committee are\nlegally qualified, that each individual is a person of good repute and\nthat each subscriber has a bona fide intention of effecting the amount\nand kind of insurance therein specified, he may approve such declaration\nand notify the advisory committee to that effect; but neither the\nreciprocal insurer nor its attorney-in-fact shall be authorized to do an\ninsurance business until such reciprocal insurer has obtained a license\nas hereinafter provided.\n (e) If within one year thereafter the superintendent finds, after such\ninvestigation and examination as he may see fit to make, that each\nsubscriber has deposited in cash with the attorney-in-fact an amount at\nleast equal to the premium specified in such declaration, and that a\nfund, at least equal to the amount of surplus to policyholders required\nby paragraph one of subsection (a) of section four thousand one hundred\nthree of this chapter for a newly organized domestic stock\nproperty/casualty insurance company doing the same kind or kinds of\ninsurance business, has been advanced by the subscribers as an initial\nsurplus to policyholders, and is in the possession of the\nattorney-in-fact or invested subject to the control of the advisory\ncommittee, and that other requirements of this chapter applicable to\nsuch reciprocal insurer have been complied with, he may issue to such\nreciprocal insurer a license to do business. Thereafter, every such\nreciprocal insurer shall maintain a surplus to policyholders at least\nequal to the amount of surplus to policyholders required to be\nmaintained by such paragraph.\n (f) The original subscribers and the attorney-in-fact shall be jointly\nand severally liable for the expenses of organization in the event that\nsuch reciprocal insurer does not comply with all the requirements for a\nlicense, and obtain a license, to do an insurance business within one\nyear after the filing of the declaration as specified in subsection (b)\nhereof. In such event the superintendent may maintain a proceeding under\narticle seventy-four of this chapter to liquidate and dissolve such\nreciprocal insurer.\n (g) (1) A licensed reciprocal insurer may be licensed to do non-basic\nkinds of insurance as set forth in subsection (b) of section four\nthousand one hundred one of this chapter, subject to the requirements of\nsubsection (b) of section four thousand one hundred two of this chapter,\nexcept that a municipal reciprocal insurer may not be licensed to do\naccident and health, non-cancellable disability, marine protection and\nindemnity, and residual value insurance.\n (2) It shall also have an initial surplus to policyholders at least\nequal to the amount required by paragraph one of subsection (a) of\nsection four thousand one hundred three of this chapter for the\norganization of a stock property/casualty insurance company doing the\nsame kinds of insurance and shall thereafter maintain a surplus to\npolicyholders at least equal to the amount required to be maintained by\nsuch paragraph for a similarly licensed stock property/casualty\ninsurance company.\n (h) A licensed reciprocal insurer may be licensed (except with respect\nto the kinds of insurance defined respectively in the following\nparagraphs of subsection (a) of section one thousand one hundred\nthirteen of this chapter: life insurance (1), annuities (2) and title\ninsurance (18)) to (i) reinsure risks of every kind or description, and\n(ii) insure property or risks of every kind or description located or\nresident outside of the United States, its territories and possessions,\nprovided such insurer maintains a surplus to policyholders of at least\nthirty-five million dollars. The provisions of this subsection shall not\napply to a municipal reciprocal insurer.\n (i) The financial requirements of subsections (e) and (g) hereof shall\nbe reduced by fifty percent for a reciprocal insurer initially licensed\nto do business in this state prior to July first, nineteen hundred\neighty-two. Such reduction shall not apply to the specified financial\nrequirements in order to write paragraph twenty-two, twenty-four or\ntwenty-six of subsection (a) of section one thousand one hundred\nthirteen of this chapter.\n (j) A municipal reciprocal insurer shall:\n (1) comply with all applicable provisions of this chapter;\n (2) comply with such additional standards as the superintendent may by\nregulation prescribe;\n (3) not refuse to issue, renew or cancel a policy for any eligible,\ninsurable risk based solely on geographical location;\n (4) not refuse to write coverages afforded by such insurer for any\neligible risk in accordance with standards of insurability filed with\nand approved by the superintendent; and\n (5) establish and promote a risk management program among subscribers\nto identify and reduce risks by implementation of loss control, safety\nprograms and other methods of risk management.\n (k) With respect to a municipal reciprocal insurer, the amount of the\ninitial surplus to policyholders required by the provisions of\nsubsection (e) of this section, in order for such an insurer to obtain a\nlicense to do business, may be collected from the subscribers as\nfollows: within one year from the date a license to do business was\ngranted twenty percent shall be so collected, within two years from such\ndate forty percent shall be so collected, within three years from such\ndate sixty percent shall be so collected, within four years from such\ndate eighty percent shall be so collected, and within five years from\nsuch date one hundred percent shall be so collected. The amount of\nsurplus to policyholders to be maintained by such an insurer during such\nfive year period shall be the amount collected from subscribers pursuant\nto the schedule contained in this subsection.\n * SPECIAL NOTE.--Notwithstanding that Chapter 585 of the Laws of 1984:\n Bill sections 2, 3, 5, 6, 7, and 9 of such chapter amend provisions of\nthe former Insurance Law that are not possible to juxtapose at this time\ndue to the highly technical nature of such changes and will need future\ncorrective legislation to implement such provisions into the new\nInsurance Law as enacted by such Chapter 367 of the Laws of 1984.\n