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This entry was published on 2015-02-27
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Limitation of expenses; co-operative property/casualty insurance companies
Insurance (ISC) CHAPTER 28, ARTICLE 66
§ 6613. Limitation of expenses; co-operative property/casualty
insurance companies. (a) The expenses of management of any co-operative
property/casualty insurance company shall not exceed in any one calendar
year forty-two and one-half percent of its net premiums written for such
year. The term "net premiums written" means direct premiums written plus
reinsurance assumed less return premiums and reinsurance ceded. 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) Management expenses shall include all the expenses of such
company, except expenses incurred in the investigation, adjustment and
settlement of claims, taxes, fees, expenses of examination, and taxes,
repairs, and expenses on real estate.

(c) This section shall not apply to any assessment corporation which
is limited to the business permitted under subsection (a) of section six
thousand six hundred five of this article. Furthermore, the
superintendent may grant an annual exemption from compliance with the
provisions of subsection (a) of this section to any co-operative
property/casualty insurance company which, in the next preceding
calendar year, had net premiums written of less than three million
dollars. A written application for such an exemption must be submitted
by the first day of June in the year for which the exemption is
requested and shall contain such information as is deemed necessary by
the superintendent.