N.Y. Insurance Law § 4110: Domestic mutual companies; expense limits

§ 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.