N.Y. Insurance Law § 5405: Participation

§ 5405. Participation. (a) Every member of the association shall

participate in its writings, expenses, profits and losses in the

proportion that the net direct premiums of the member (but excluding

that portion of premiums attributable to the operation of the

association) written during the preceding calendar year bear to the

aggregate net direct premiums written in this state by all members of

the association. Each member's participation in the association shall be

determined annually on the basis of such net direct premiums written

during the preceding calendar year as disclosed in the annual statements

and other reports filed by the member with the superintendent.

(b) No member shall be obligated in any year to reimburse the

association on account of its proportionate share in the deficit from

operations of the association in that year in excess of one percent of

its surplus to policyholders. The aggregate amount not so reimbursed

shall be reallocated among the remaining members in accordance with the

method of determining participation prescribed in this section, after

excluding from the computation the total net direct premiums of all

members not sharing in such excess deficit. In the event that the

deficit from operations allocated to all members in any calendar year

shall exceed one percent of their respective surplus to policyholders,

the amount of such deficit shall be allocated to each member in

accordance with the method of determining participation prescribed in

this section.

(c) Annually, on a date set by the superintendent, the association

shall estimate its deficit from operations, and after application of the

funds provided for in subsection (d) of this section, calculate a

factor, not to exceed one percent, by relating such deficit to net

direct premiums written for the latest calendar year, subject to the

approval of the superintendent. Such factor may be reflected in the

determination of rates filed by the principal rating organization in

this state and by members of the association for fire, extended

coverage, broad form coverage pursuant to subsection (g) of section five

thousand four hundred two of this article, additional perils, homeowners

and commercial multiple peril package policies which include the perils

of fire and extended coverage. Notwithstanding the provisions of section

five thousand four hundred four of this article to the contrary, any

part of such deficit which exceeds one percent as so calculated, shall

be defrayed by an increase in rates for the respective occupancy

classes, based upon the association's related loss and expense

experience together with other information the superintendent requires,

in accordance with filings approved by the superintendent. Each member's

share of the estimated deficit shall be collected by the association in

accordance with the plan of operation.

(d) In accordance with regulations of the superintendent, the deficit

from the operations of the association shall be credited with income

earned from the New York property/casualty insurance security fund. The

credit shall be an amount determined by the superintendent, which in no

year shall exceed income earned or the sum of fifteen million dollars

whichever is less. The credit shall be estimated annually by the

superintendent on a date set by the superintendent, and such estimated

amount shall be credited to the association and transferred from the

income as earned during the year by the New York property/casualty

insurance security fund. Any difference between the estimated amount of

income and the actual amount of income for the year shall be taken into

account in computing the estimate for the next period. Notwithstanding

the foregoing provisions of this section or any other law to the

contrary, if the assets of the association exceed its liabilities on the

thirtieth day of November in any year commencing on or after April

first, nineteen hundred eighty-two in accordance with regulations of the

superintendent, the association shall pay to the New York

property/casualty insurance security fund an amount equal to any amounts

paid from such fund to the association in accordance with the provisions

of article seventy-six of this chapter and this section which have not

been repaid prior to such thirtieth day of November, together with any

investment income attributable thereto, as determined by the

superintendent, up to the amount of such excess. Any such payment shall

be made no later than February first of the following year.

(e) Members shall not be relieved of their obligation to reimburse the

association for their share of the deficit resulting from the operations

of the association prior to August first, nineteen hundred seventy-nine.

(f) (1) Any member that voluntarily writes, as of expiration date, a

policy or coverage currently written through the association, shall

receive credit against its participation in association writings. Such

credit shall be to the extent of twice the net direct premium, on an

annual basis, of such policy or coverage voluntarily written and shall

apply for one year.

(2) Subject to approval by the superintendent, the association shall

develop and implement an incentive plan for members which voluntarily

write policies that include windstorm coverage in coastal areas. Such

plan shall also include incentives for members to voluntarily write

wraparound policies, as defined by the association, in coastal areas,

when such wraparound policies include coverage for windstorm on a

replacement cost basis in excess of the windstorm coverage contained in

an association policy issued to the same policyholder. The purpose of

these incentives shall be to encourage the writing of voluntary

insurance policies in coastal areas by reducing the participation in the

writings of the association of those member companies which voluntarily

write policies that include windstorm coverage in such areas. For the

purposes of this section, coastal areas include: areas within one mile

of a saltwater ocean, sound, inlet or bay on Long Island's south shore

or along the shore of Brooklyn, Queens, Staten Island and Long Island's

forks; areas within two thousand five hundred feet of a saltwater ocean,

sound, inlet or bay on Long Island's north shore, the Bronx or

Westchester.

(3) The association shall offer a policy form which may be used only

in conjunction with voluntary market wraparound policies that provide

windstorm coverage in excess of amounts insured by the association. The

policy form, which may include broad form coverage, shall provide

replacement cost coverage for dwellings and personal property for repair

or replacement without deduction for depreciation on terms and

conditions generally consistent with policies customarily in use in the

voluntary market as modified to make the association policy compatible

with voluntary market wraparound policies. Coverage offered by the

association under such policy shall not exceed six hundred thousand

dollars for dwelling coverage and two hundred fifty thousand dollars for

personal property, and shall be available to cover one to four family

owner-occupied dwellings, apartment units or condominium units. The

association may require applicants to provide evidence of the purchase

of flood insurance as a condition of eligibility for coverage under this

policy. The association shall file the form for approval with the

superintendent.