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This entry was published on 2015-02-27
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Domestic mutual companies; expense limits
Insurance (ISC) CHAPTER 28, ARTICLE 41
§ 4110. Domestic mutual companies; expense limits. (a) No domestic
mutual property/casualty insurance company licensed to write a kind of
insurance specified in paragraph seven, eight, nine, ten, eleven,
thirteen, fourteen, fifteen, sixteen or seventeen of subsection (a) of
section one thousand one hundred thirteen of this chapter shall expend
in any one calendar year for management expenses a greater amount than
thirty percent of the sum of its net premium income and seventy-five
percent of its investment income for such year; provided that any
insurer whose principal line of business is medical malpractice
liability insurance or any insurer who is the subject of a proceeding
pursuant to article seventy-four of this chapter shall not expend in any
one calendar year for management expenses, a greater amount than thirty
percent of its net premium income for such year. Management expenses
shall be held to include all expenses of the company except expenses
incurred in the investigation, adjustment and settlement of claims,
taxes, fees and expenses of examination, and taxes, repairs and expenses
on real estate. In applying the provisions of this section the net
premium income of, and expenses of, boiler and machinery insurance or
elevator insurance shall not be included. In the event expenses incurred
in making a new system upgrade result in this subsection's management
expenses limit being exceeded, then the insurer shall inform the
superintendent sixty days in advance of the expense limit being
exceeded. Subject to approval by the superintendent, the limit shall be
temporarily raised to the amount necessary to encompass the aforestated
new system upgrade, provided that in no event shall the limit be raised
more than five percentage points and shall not be in effect for more
than three years, and provided further that an insurer may submit to the
superintendent, for the superintendent's prior approval, a written
request to temporarily raise the limit for up to an additional three
years, for a total of no more than six years. An insurer shall submit
such written request to the superintendent at least sixty days but not
more than one hundred twenty days before the expiration of the initial
period during which the limit was raised. The insurer shall not increase
premiums solely as a result of the management expenses cap limit being
exceeded. For purposes of this subsection, a new system upgrade is
defined as the acquisition of electronic data processing apparatus and
related equipment constituting a data processing, record keeping or
accounting system and operating and non-operating software.

(b) Subsection (a) hereof shall not apply to a mutual company
organized before the effective date of this chapter as a domestic mutual
fire or marine or marine protection and indemnity company.