Section 6101. Definitions. 6102. Organization of domestic reciprocal insurers. 6103. Deposits. 6104. Qualifications of subscribers. 6105. Licensing. 6106. Subscriber`s agreement. 6107. Changes and amendments. 6108. Contingent liability; non-assessable policies. 6109. Subscriber`s operating reserve. 6110. Limitation of risk. 6111. Assets, liabilities and surplus. 6112. Subscribers` accounts. 6113. Foreign or alien reciprocal insurers. 6114. Application of other sections. 6115. Merger. 6116. Lloyds underwriters. S 6101. Definitions. In this article: (a) "Advisory committee" means any official body, by whatever name called, which is chosen by the subscribers of a reciprocal insurer and which has, subject to the articles of association and subscribers agreement, ultimate power and responsibility in the management and control of the affairs of a reciprocal insurer. (b) "Attorney-in-fact" means a person designated and appointed by subscribers to a reciprocal insurer to act for and bind the subscribers in all transactions relating to or arising out of the operations of a reciprocal insurer, subject to limitations as may be lawfully provided. (c) "Books, accounts and records" means all working papers, ledgers, and other relevant documents which demonstrate, disclose and support transactions of the reciprocal and each individual subscriber, as distinguished from the attorney-in-fact, and which relate to the operations and activities of the reciprocal. The phrase "books, accounts and records" shall not mean or include working papers, ledgers, or other relevant documents which relate exclusively to the operation and activities of the attorney-in-fact as a separate entity. (d) "Financial interest" means that a person owns, directly or indirectly, more than one percent of the outstanding stock in the attorney-in-fact, has any outstanding loans from the attorney-in-fact, or earns a commission or other compensation as a producer for the reciprocal. (e) "Material transaction" means a transaction, other than claim payments, that involves more than one-half of one percent of the reciprocal`s admitted assets as of the thirty-first day of December of the prior year. (f) "Person" means an individual, partnership, firm, association, corporation, not-for-profit corporation, joint-stock company, trust, any similar entity, or any combination of the foregoing acting in concert. (g) "Subscriber" means a person who has become a member of a reciprocal through the execution of a subscriber`s agreement. (h) "Subscriber`s agreement" means a document executed by the subscriber which designates and appoints, through a power of attorney, the attorney-in-fact and, either within the agreement or via a management agreement or an appended set of bylaws, that sets forth the duties of the attorney-in-fact. * S 6102. Organization of domestic reciprocal insurers. (a) Twenty-five or more persons, firms and corporations, each having the qualifications of subscribers as prescribed in this article, may organize a reciprocal insurer to do any one or more of the basic kinds of insurance set forth in subsection (a) of section four thousand one hundred one of this chapter or, in the alternative, twenty-five or more New York counties, towns, cities, villages, district corporations (as defined in paragraph three of section 2.00 of the local finance law), or school districts and boards of cooperative educational services, each having the qualifications of subscribers as prescribed in this article, may organize statewide municipal reciprocal insurers to provide any one or more of the basic kinds of insurance set forth in subsection (a) of section four thousand one hundred one of this chapter, except workers` compensation and employers` liability, fidelity and surety, credit and marine and inland marine (except as authorized by the provisions of paragraph two of subsection (b) of section four thousand one hundred two of this chapter) insurance. Such an insurer shall be called, for purposes of this chapter, a "municipal reciprocal insurer" and shall be subject to all the provisions of this chapter applicable to a reciprocal insurer, except where the context otherwise requires. However, any reciprocal insurer authorized to do the business of workers` compensation insurance shall be deemed to be a mutual carrier within the meaning of the definition of that term in section one hundred six of the workers` compensation law and shall be subject to the provisions of article six-A of such law. (b) The original subscribers and the attorney-in-fact shall execute a declaration setting forth the following: (1) the name of such reciprocal insurer, which shall conform to the provisions of subsection (g) of section one thousand one hundred two of this chapter; (2) the location of the principal office of such reciprocal insurer, which shall be the same as the principal office of the attorney-in-fact and shall at all times be located in this state; (3) the kind or kinds of insurance business intended to be done, specified in terms of subsection (a) of section one thousand one hundred thirteen of this chapter; (4) the names and addresses of the subscribers so proposing to engage in such business; (5) the designation and appointment of an attorney-in-fact, which may be a person, other than an individual, organized under the laws of this state authorized by the superintendent to act as such for one or more reciprocal insurers; and having its principal office in this state; (6) the names and addresses of the officers and directors of the attorney-in-fact, if a corporation, or of its members, if a firm, of whom a majority shall be residents of this state or of contiguous states; (7) the designation of an advisory committee, all of whose members shall be subscribers or officers or directors of subscriber corporations or members of subscriber firms, to act on behalf of the subscribers, with power to supervise and control the attorney-in-fact and to control the investments of the assets of the reciprocal insurer, and such other powers as may be conferred by the articles of association and the subscriber`s agreement; (8) a declaration (i) that all of the invested assets of such reciprocal insurer, except deposits held by state officials as required by law, shall be held by and in the name of such reciprocal insurer, subject to the control of the advisory committee and to the provisions of this chapter, and (ii) that all monies paid to such reciprocal insurer shall, after deducting any sums payable to the attorney-in-fact, be held by such attorney-in-fact in the name of the reciprocal insurer for the uses specified in the subscriber`s agreement; (9) an exact and complete copy of the articles of association, if any, and the subscriber`s agreement; (10) the amount and kind of insurance for which each subscriber proposes to become a policyholder, and the premium specified therefor; and (11) such other information as the superintendent may require. (12) in the case of a municipal reciprocal insurer, a statement electing whether or not the insurer and the contracts of insurance it issues will be subject to the provisions of article seventy-six of this chapter. In the event that the municipal reciprocal insurer elects that it and its contracts of insurance will not be subject to such article, then every such contract and every subscriber`s agreement shall disclose the lack of coverage by the property/casualty insurance security fund, the inapplicability of such article, and provide for an unlimited contingent several liability for assessment of the subscriber. The election whether or not to be subject to the provisions of article seventy-six of this chapter shall be irrevocable. (c) Such declaration shall be subscribed and affirmed as true under the penalties of perjury by each subscriber and by each member of the advisory committee, in the manner required for the acknowledgment of conveyances of real property to be recorded in this state, and shall be filed in the office of the superintendent. Such articles of association and subscriber`s agreement shall in all respects conform with the requirements of this article. (d) If the superintendent finds that such declaration, articles of association and subscriber`s agreement are in conformity with law, that the subscribers, the attorney-in-fact and the advisory committee are legally qualified, that each individual is a person of good repute and that each subscriber has a bona fide intention of effecting the amount and kind of insurance therein specified, he may approve such declaration and notify the advisory committee to that effect; but neither the reciprocal insurer nor its attorney-in-fact shall be authorized to do an insurance business until such reciprocal insurer has obtained a license as hereinafter provided. (e) If within one year thereafter the superintendent finds, after such investigation and examination as he may see fit to make, that each subscriber has deposited in cash with the attorney-in-fact an amount at least equal to the premium specified in such declaration, and that a fund, at least equal to the amount of surplus to policyholders required by paragraph one of subsection (a) of section four thousand one hundred three of this chapter for a newly organized domestic stock property/casualty insurance company doing the same kind or kinds of insurance business, has been advanced by the subscribers as an initial surplus to policyholders, and is in the possession of the attorney-in-fact or invested subject to the control of the advisory committee, and that other requirements of this chapter applicable to such reciprocal insurer have been complied with, he may issue to such reciprocal insurer a license to do business. Thereafter, every such reciprocal insurer shall maintain a surplus to policyholders at least equal to the amount of surplus to policyholders required to be maintained by such paragraph. (f) The original subscribers and the attorney-in-fact shall be jointly and severally liable for the expenses of organization in the event that such reciprocal insurer does not comply with all the requirements for a license, and obtain a license, to do an insurance business within one year after the filing of the declaration as specified in subsection (b) hereof. In such event the superintendent may maintain a proceeding under article seventy-four of this chapter to liquidate and dissolve such reciprocal insurer. (g) (1) A licensed reciprocal insurer may be licensed to do non-basic kinds of insurance as set forth in subsection (b) of section four thousand one hundred one of this chapter, subject to the requirements of subsection (b) of section four thousand one hundred two of this chapter, except that a municipal reciprocal insurer may not be licensed to do accident and health, non-cancellable disability, marine protection and indemnity, and residual value insurance. (2) It shall also have an initial surplus to policyholders at least equal to the amount required by paragraph one of subsection (a) of section four thousand one hundred three of this chapter for the organization of a stock property/casualty insurance company doing the same kinds of insurance and shall thereafter maintain a surplus to policyholders at least equal to the amount required to be maintained by such paragraph for a similarly licensed stock property/casualty insurance company. (h) A licensed reciprocal insurer may be licensed (except with respect to the kinds of insurance defined respectively in the following paragraphs of subsection (a) of section one thousand one hundred thirteen of this chapter: life insurance (1), annuities (2) and title insurance (18)) to (i) reinsure risks of every kind or description, and (ii) insure property or risks of every kind or description located or resident outside of the United States, its territories and possessions, provided such insurer maintains a surplus to policyholders of at least thirty-five million dollars. The provisions of this subsection shall not apply to a municipal reciprocal insurer. (i) The financial requirements of subsections (e) and (g) hereof shall be reduced by fifty percent for a reciprocal insurer initially licensed to do business in this state prior to July first, nineteen hundred eighty-two. Such reduction shall not apply to the specified financial requirements in order to write paragraph twenty-two, twenty-four or twenty-six of subsection (a) of section one thousand one hundred thirteen of this chapter. (j) A municipal reciprocal insurer shall: (1) comply with all applicable provisions of this chapter; (2) comply with such additional standards as the superintendent may by regulation prescribe; (3) not refuse to issue, renew or cancel a policy for any eligible, insurable risk based solely on geographical location; (4) not refuse to write coverages afforded by such insurer for any eligible risk in accordance with standards of insurability filed with and approved by the superintendent; and (5) establish and promote a risk management program among subscribers to identify and reduce risks by implementation of loss control, safety programs and other methods of risk management. (k) With respect to a municipal reciprocal insurer, the amount of the initial surplus to policyholders required by the provisions of subsection (e) of this section, in order for such an insurer to obtain a license to do business, may be collected from the subscribers as follows: within one year from the date a license to do business was granted twenty percent shall be so collected, within two years from such date forty percent shall be so collected, within three years from such date sixty percent shall be so collected, within four years from such date eighty percent shall be so collected, and within five years from such date one hundred percent shall be so collected. The amount of surplus to policyholders to be maintained by such an insurer during such five year period shall be the amount collected from subscribers pursuant to the schedule contained in this subsection. * SPECIAL NOTE.--Notwithstanding that Chapter 585 of the Laws of 1984: Bill sections 2, 3, 5, 6, 7, and 9 of such chapter amend provisions of the former Insurance Law that are not possible to juxtapose at this time due to the highly technical nature of such changes and will need future corrective legislation to implement such provisions into the new Insurance Law as enacted by such Chapter 367 of the Laws of 1984. * S 6103. Deposits. (a) Before being licensed, every domestic reciprocal insurer shall comply with the provisions of subsection (a) of section four thousand one hundred four of this chapter imposed upon a domestic property/casualty insurance company doing the same kind or kinds of insurance. Notwithstanding the foregoing, every municipal reciprocal insurer may comply with such provisions within one year from the date a license to do business was granted. (b) Before being licensed pursuant to subsection (h) of section six thousand one hundred two of this article to do insurance on risks outside of the United States, its territories and possessions, or to do reinsurance, a domestic reciprocal insurer shall comply with the provisions of subsection (b) of section four thousand one hundred four of this chapter imposed upon a domestic property/casualty insurance company. (c) Before being licensed to issue non-assessable policies pursuant to section six thousand one hundred eight of this article, a domestic reciprocal insurer shall comply with the provisions of subsection (c) of section four thousand one hundred four of this chapter imposed on a domestic mutual property/casualty insurance company. (d) The financial requirements of subsections (a) and (c) hereof shall be reduced by fifty percent for a reciprocal insurer initially licensed to do business in this state prior to July first, nineteen hundred eighty-two. (e) Before being granted any license or renewal license, every foreign reciprocal insurer shall comply with the provisions of subsection (d) of section four thousand one hundred four of this chapter imposed on a foreign property/casualty insurance company. * SPECIAL NOTE.--Notwithstanding that Chapter 585 of the Laws of 1984: Bill sections 2, 3, 5, 6, 7, and 9 of such chapter amend provisions of the former Insurance Law that are not possible to juxtapose at this time due to the highly technical nature of such changes and will need future corrective legislation to implement such provisions into the new Insurance Law as enacted by such Chapter 367 of the Laws of 1984. S 6104. Qualifications of subscribers. (a) (1) No authorized reciprocal insurer shall make any new agreement for insurance containing a provision for contingent liability of subscribers with any subscriber who or which does not have assets in his, their or its own right in an amount not less than fifty thousand dollars in excess of liabilities as shown by a commercial agency report as hereinafter provided, or by a sworn statement on file with the attorney-in-fact, verified by such subscriber or by an officer of a corporation subscriber. (2) (A) Before renewing a contract of insurance with a subscriber, containing a provision for contingent liability of subscribers, similar proof of financial responsibility shall be required unless the subscriber has accumulated and maintains the subscriber`s operating reserve required by section six thousand one hundred nine of this article. (B) The report of an established commercial agency having one hundred thousand or more subscribers shall be deemed presumptive evidence of the financial condition of a subscriber. (b) (1) All corporations and the directors or any representative thereof and all persons, firms or corporations holding property in trust may insure the same in reciprocal insurers and by so doing such directors, representatives or trustees, in their representative capacity, may assume the liabilities and be entitled to the rights of a subscriber of such reciprocal insurer. (2) Such directors, representatives or trustees shall not be personally liable as individuals upon such contract of insurance or subscriber`s agreement. S 6105. Licensing. (a) No person, firm, corporation or association as an underwriter or underwriters, and no reciprocal insurer, shall do any insurance business in this state, nor shall any person, firm, corporation or association as attorney-in-fact or other representative of any reciprocal insurer do or cause to be done within this state any act which effects, aids or promotes the doing of an insurance business in this state by any reciprocal insurer, unless authorized so to do pursuant to the provisions of this article. (b) Every license to do an insurance business issued by the superintendent to any reciprocal insurer pursuant to the provisions of this article shall specify its name, the location of its principal office, the name and principal address of its attorney-in-fact, and the kind or kinds of insurance business, specified in terms of subsection (a) of section one thousand one hundred thirteen of this chapter, which it is authorized to do in this state. (c) No person shall act in the capacity of an attorney-in-fact for a subscriber whose risk is located in this state or for a reciprocal licensed to do business in this state, unless such person is authorized as such by the superintendent. (d) The superintendent may require the attorney-in-fact, or any person to which its functions, in whole or in part, have been delegated, unless wholly owned or controlled by the reciprocal to: (1) provide a bond issued by an insurer and in an amount acceptable to the superintendent for the protection of the subscribers to the reciprocal; and (2) maintain an errors and omissions policy, providing coverage in an amount and issued by an insurer acceptable to the superintendent. (e) The attorney-in-fact authorized as such pursuant to subsection (c) of this section shall not, merely by virtue of such authorization, be thereby deemed to be doing business in this state within the meaning of any laws of this state applicable to general business corporations. (f) An attorney-in-fact of a reciprocal insurer licensed in this state shall, on or before June first of each year, file with the superintendent an audited financial report of its financial condition and the results of its operations as related to its management of the reciprocal, covering the previous calendar year, prepared in accordance with generally accepted accounting principles by an independent certified public accountant who certified to the reciprocal`s annual statement pursuant to section three hundred seven of this chapter. In lieu of such a report, an attorney-in-fact of a foreign reciprocal who is an individual, shall file a statement prepared by such independent certified public accountant stating that its audit of the reciprocal discloses any direct or indirect compensation or benefit paid by the reciprocal to the attorney-in-fact. The report or statement filed pursuant to this subsection shall be a confidential document, not subject to disclosure pursuant to this chapter or article six of the public officers law. (g) An attorney-in-fact of a reciprocal licensed in this state shall submit to examination by order of the superintendent for the purposes of determining compliance with this article and all other relevant provisions of this chapter relating to the operations of the reciprocal or its attorney-in-fact, which the superintendent determines (as specified in the order) cannot be obtained by examination of the reciprocal. The cost of the examination shall be assessed against the attorney-in-fact and no portion thereof shall be reimbursed directly or indirectly by the reciprocal or its subscribers. (h) The advisory committee shall meet at least annually and shall consist of at least nine individuals elected by the subscribers, at least two-thirds of whom are subscribers or officers or directors of subscribers and, except for a municipal reciprocal or a reciprocal which wholly owns its attorney-in-fact, not more than one-third of whom may be: (1) the attorney-in-fact; or (2) an employee, officer, director, or affiliate of the attorney-in-fact; or (3) any person having a financial interest in the attorney-in-fact; or (4) any person representing any of the foregoing. (i) Members of the advisory committee may be elected and re-elected to a term of office of not less than one year nor more than four years, and terms may be staggered to provide for continuity. (j) The chair of the advisory committee of a domestic reciprocal, who shall not be any of those persons enumerated in paragraphs one through four of subsection (h) of this section, shall be elected by the other members of the committee and the committee of a domestic reciprocal shall adopt rules consistent with its purposes, as approved by the superintendent. (k) Special meetings of the advisory committee may be called by the attorney-in-fact, the chair of the committee, any three members of the committee, or a signed petition of at least one percent of the subscribers as of the most recent annual report of the reciprocal. S 6106. Subscriber`s agreement. (a) (1) Every subscriber of an authorized reciprocal insurer shall have executed a subscriber`s agreement, and every subscriber executing such a subscriber`s agreement containing a provision for contingent liability of subscribers shall execute and duly acknowledge the same, in a manner sufficient for the acknowledgment of conveyances of real property to be recorded in the state in which such subscriber is domiciled. (2) Every subscriber`s agreement shall be identical in terms, except as to the date and the name and address of the subscriber, with all other subscriber`s agreements currently in force and effect with all other subscribers of such reciprocal insurers. However, in the case of any reciprocal insurer authorized pursuant to section six thousand one hundred eight of this article to issue non-assessable policies or agreements the acceptance of a policy or binder of insurance containing the subscriber`s agreement printed at the end of the standard policy provisions or the binder, as the case may be, preceded by the words printed upon the policy or binder: "The acceptance of this policy or binder shall constitute that insured designated therein is a subscriber of the reciprocal insurer and shall constitute the execution and delivery by the insured of the subscriber`s agreement which is appended to this policy or binder, and hereby made a part thereof", shall constitute the execution and delivery of said subscriber`s agreement by that insured as fully and to the same extent as though said agreement had been signed and acknowledged by that insured. (3) Every such subscriber`s agreement shall contain in substance the following provisions: (A) A designation and appointment of the attorney-in-fact to act for and bind the subscriber in all transactions relating to or arising out of the operations of such reciprocal insurer, subject to such limitations as may be lawfully provided. (B) An agreement that service of summons or other legal process on the attorney-in-fact or on any other person appointed by the attorney-in-fact to receive such process, shall, in any action, suit or proceeding arising out of any contract, agreement or transaction of such reciprocal insurer, be equivalent to personal service of such summons or other legal process on each and every subscriber. (C) Unless the reciprocal insurer is authorized to issue non-assessable policies under section six thousand one hundred eight of this article an agreement for the contingent liability of the subscriber, which shall state that such subscriber agrees to pay on demand such subscriber`s proportionate share of any assessment lawfully ordered or levied by the advisory committee or by the superintendent under article seventy-four of this chapter. (D) A provision that there shall be an annual meeting of the subscribers, in person or by proxy, at a time and place to be determined in accordance with such agreement, of which each subscriber shall be duly notified and at which each subscriber shall have power to vote in person or by proxy for all members of the advisory committee to be chosen or appointed at such time, except that in the case of a foreign reciprocal insurer, the superintendent may permit a modification of such provision provided that he is satisfied that the interests of the subscribers are properly protected. (E) A provision specifying the powers and duties of the advisory committee, which shall include the power and duty to regulate the compensation, powers and duties of the attorney-in-fact, if not specifically provided in the subscriber`s agreement, and shall also include the power to make regulations for the effective control and custody of the funds and investments of the reciprocal insurer. In addition, the advisory committee of a municipal reciprocal insurer shall establish procedures to prevent any conflicts of interest between the attorney-in-fact and such insurer. Such procedures shall be submitted to and approved by the superintendent, who shall also approve the attorney-in-fact for a municipal reciprocal insurer. (F) Provisions setting forth the rights, privileges and obligations of the subscriber as an underwriter, and as a policyholder subject to the terms of insurance contracts required or permitted by law to be issued. (G) General provisions relating to the operations of the reciprocal insurer, including the subscriber`s operating reserve requirements, regulations for the return of savings or dividends, for withdrawals and refunds and such other matters as may be necessary to maintain the operation of such reciprocal insurer in compliance with the provisions of this chapter. In the case of a municipal reciprocal insurer, such agreement shall include procedures to: (i) establish and promote loss control, safety programs and other methods of risk management; (ii) establish equitable risk classifications; and (iii) establish uniform recordkeeping and reporting procedures.
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(4) The following provisions shall be contained in either the subscriber`s agreement or a separate management agreement between the attorney-in-fact and the advisory committee or the attorney-in-fact and any person to which its functions have been delegated after approval of the advisory committee: (A) A provision that the attorney-in-fact shall provide written notification of, and make all necessary arrangements as provided in the subscriber`s agreement, for the election, in person or by proxy, of the members of the advisory committee. The cost of notification, ballot, or proxy for any meeting of the advisory committee and for any meeting which may be called for the election shall be incurred by the reciprocal. (B) A provision that the attorney-in-fact shall provide written notification to the members of the advisory committee of not less than ten days for any regular meeting or five days for any special meeting called pursuant to subsection (k) of section six thousand one hundred five of this article. The cost of such notification shall be incurred by the reciprocal. (C) A provision that the advisory committee may, upon a vote of a majority of its members at any regular or special meeting thereof and upon written notice to the superintendent and the attorney-in-fact, recommend termination of the attorney-in-fact for a stated cause and appointment of a new attorney-in-fact, subject to the provisions of any management agreement approved by the superintendent. Termination of the attorney-in-fact shall require the approval of a two-thirds majority of the subscribers present in person or by proxy at a special meeting called for that purpose. The attorney-in-fact shall provide by mail not less than thirty days prior written notification of such meeting to all subscribers. The mailing of notification shall include the recommendation of termination and replacement as prepared by the advisory committee, and any other appropriate documents submitted by the attorney-in-fact. A copy of all documents mailed and certification of their mailing to all subscribers shall be provided to all members of the advisory committee. The cost of notification and proxy for any such meeting shall be incurred by the reciprocal. For reciprocals with less than two thousand five hundred subscribers, at least twenty-five percent of all subscribers shall be required to constitute a quorum. For all other reciprocals, the greater of twenty-five hundred subscribers or five percent of all subscribers shall constitute a quorum. (D) A provision that the attorney-in-fact shall cause all assets of the reciprocal and its subscribers to be invested in accordance with investment guidelines approved by the advisory committee and shall be properly accounted for on the financial records of the reciprocal as being held for or on behalf of the subscribers. All cash assets of the reciprocal and its subscribers, not otherwise invested in short term securities such as money market funds, covering policy obligations arising out of policies issued or issued for delivery in the United States shall be held in one or more appropriately identified accounts in banks that are members of the federal reserve system. These accounts shall be drawn on by the attorney-in-fact, or by employees or representatives of the reciprocal authorized by the attorney-in-fact for all payments on behalf of the reciprocal. (E) A provision that if the attorney-in-fact is acting for more than one reciprocal, separate records and accounts shall be maintained for each reciprocal. (F) A provision that the attorney-in-fact may not assign its responsibilities as detailed in the subscriber`s agreement in whole or part or enter into management agreements delegating its duties in whole or part to another party without the prior approval of the advisory committee and the superintendent. (G) A provision that the attorney-in-fact shall establish and maintain underwriting procedures and manuals, setting forth the rates and conditions for the acceptance or rejection of risks. (H) A provision that the attorney-in-fact shall make a report to the advisory committee at each regular meeting of the committee on the financial condition of the reciprocal and all material transactions during the period since the last meeting. (I) A provision that the attorney-in-fact shall annually provide to each member of the advisory committee: (i) On or before March first of each year, a copy of the reciprocal`s annual statement and the accompanying statement of actuarial opinion filed with the superintendent pursuant to section three hundred seven of this chapter; and (ii) On or before June first of each year, a copy of: (I) The certified statement filed with the superintendent pursuant to subsection (f) of section six thousand one hundred five of this article; and (II) The certified annual statement of the reciprocal filed with the superintendent pursuant to section three hundred seven of this chapter. (J) A provision specifying all forms and amounts (or formulas to determine the amounts) of compensation the attorney-in-fact will receive for services rendered and, if all or part of the compensation will be contingent upon the reciprocal`s profits, a provision that such compensation shall not be paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other kind of insurance and, in no event shall the compensation be paid until the adequacy of reserves on outstanding claims has been independently verified by the same actuary who opined on the latest annual statement filed with the superintendent pursuant to section three hundred seven of this chapter. (K) A provision that the independent certified public accountant who will prepare the annual report required by subsection (f) of section six thousand one hundred five of this article and the independent actuary who will prepare the opinion accompanying the annual statement pursuant to section three hundred seven of this chapter shall be selected by the attorney-in-fact, subject to the approval of the advisory committee. (L) A provision that the books, accounts and records of the reciprocal shall be maintained by the attorney-in-fact to clearly and accurately disclose the nature and details of all transactions including all information necessary to determine that the compensation received by, or owing to, the attorney-in-fact is provided in a manner consistent with the subscriber`s agreement and any management agreement. The books, accounts and records of the reciprocal shall be the sole property of the reciprocal. (M) A provision that the attorney-in-fact shall conduct the affairs of the reciprocal in accordance with the provisions of this chapter. (b) (1) The subscriber`s agreement may contain such further provisions as may be necessary or proper; but neither the subscriber`s agreement nor the articles of association, if any, of an authorized reciprocal insurer shall contain any provisions inconsistent with the provisions of subsection (a) hereof. (2) The superintendent may, if he finds it necessary to carry out the purpose and intent of this article, by regulation prescribe additional provisions, not inconsistent with any law of this state, to be contained in the subscriber`s agreement of reciprocal insurers. (c) Every subscriber to a municipal reciprocal insurer shall agree to participate in a risk management program established by the attorney-in-fact. The attorney-in-fact of each insurer shall, with the approval of the advisory committee, establish, promote and manage a risk management program among the subscribers. Each program shall include identifying and reducing risks through the implementation of loss control, safety programs and other methods of risk management. The attorney-in-fact may enter into contracts with any person, firm, or corporation for services necessary to perform and administer the risk management program or to perform or administer other functions deemed necessary by the advisory committee and approved by the superintendent. An individual subscriber may enter into contracts with any person, firm or corporation for services necessary to perform and administer any function which that subscriber shall deem necessary. S 6107. Changes and amendments. (a) (1) No reciprocal insurer shall change its name or amend its subscriber`s agreement without first obtaining the written approval of the superintendent. (2) No such insurer shall establish branch offices under other or different names or titles. (b) The superintendent shall approve any change or substitution in the attorney-in-fact of any such insurer and there shall be filed in the office of the new attorney-in-fact new subscriber`s agreements or amendments to the existing subscriber`s agreements containing the new powers of attorney signed by every subscriber of such reciprocal insurer. Notwithstanding the foregoing, a foreign reciprocal that primarily provides coverage to former and current military officers and their families shall notify the superintendent of any change or substitution in the attorney-in-fact of such insurer and the new attorney-in-fact shall apply for licensure pursuant to section six thousand one hundred five of this article within thirty days of such change or substitution. (c) After any reciprocal insurer is authorized to do business in this state, it may be joined by other and additional subscribers who have been accepted and are qualified and have executed a subscriber`s agreement and power of attorney identical with the instruments in effect at that time and which all other subscribers have executed. (d) (1) No such change and no amendment or modification in the provisions of the subscriber`s agreement shall be submitted to the subscribers for execution unless approved by the advisory committee at a meeting duly called for such purpose. (2) Every such change, amendment or modification shall be submitted for execution to all existing subscribers contemporaneously and shall take effect, as to all subscribers executing the same, at the expiration of one year from the date of such submission. (3) Any subscriber failing to execute any new subscriber`s agreement or any amendment to an existing subscriber`s agreement within one year after its submission to such subscriber shall be deemed to have withdrawn from membership in such reciprocal. (4) Notwithstanding paragraphs one, two and three hereof, in the case of any reciprocal insurer which shall have issued its policies, or binders, with the subscriber`s agreement and statement printed thereon pursuant to paragraph two of subsection (a) of section six thousand one hundred six of this article, the failure of any subscriber at such reciprocal to object in writing thereto within sixty days after the date of such submission shall constitute such subscriber`s acceptance of such change, amendment or modification as fully and to the same extent as though acceptance of such change, amendment or modification had been signed and acknowledged by that subscriber and such change, amendment or modification shall take effect, as to all subscribers at such reciprocal who have not objected thereto in writing, at the expiration of sixty days from the date of submission. Any subscriber at such reciprocal who objects in writing, within sixty days from the date of such submission, to such change, amendment or modification shall be deemed to have withdrawn from membership in such reciprocal. S 6108. Contingent liability; non-assessable policies. (a) Every contract of insurance and subscriber`s agreement under or by which contracts of insurance are issued or exchanged by any authorized reciprocal insurer shall provide for a contingent several liability for assessment of the subscriber as an inter-insurer on the risks of every other subscriber in an amount not less than one nor more than ten times the annual premium and in addition to the annual premium expressed in such contracts of insurance issued to the subscriber by the reciprocal insurer. (b) If the admitted assets of any such insurer are at any time insufficient for the payment of losses and expenses after providing for all other liabilities of such insurer and the minimum surplus to policyholders required by this chapter, the advisory committee shall, within thirty days thereafter, order an assessment for the amount necessary to pay such losses and expenses, and authorize the attorney-in-fact to collect from each subscriber liable therefor a pro rata share of the amount of such assessment, subject to the limit specified in the contract of such subscriber and to maintain an action therefor in the name of the attorney-in-fact. (c) Every policy issued by any such insurer shall clearly state whether or not the holder of the policy is subject to liability for assessment. All policies issued by any such insurer which are subject to liability for assessment shall contain a clear statement of the liability of the policyholder for payment of a proportionate share of any deficiency or impairment as provided by law within the limit provided by the policy, and shall further state that any assessment shall be for the exclusive benefit of holders of policies which provide for such a contingent liability, and the holders of policies subject to assessment shall not be liable to assessment in an amount greater in proportion to the total deficiency than the ratio that the deficiency attributable to the assessable business bears to the total deficiency. (d) Any reciprocal insurer, except a municipal reciprocal insurer which issues policies not covered by the property/casualty insurance security fund, may with the permission of the superintendent issue non-assessable policies or agreements in this state upon compliance with the following requirements: (1) It shall have and maintain a surplus to policyholders at least equal to one hundred fifty percent of the amount of surplus to policyholders which such insurer is required to maintain by the provisions of section six thousand one hundred two of this article. Such surplus shall be inclusive of any surplus required by any other sections of this chapter. (2) It shall have submitted a copy of its proposed non-assessable policy or policies for approval of the superintendent, and shall have obtained his approval thereof. S 6109. Subscriber`s operating reserve. (a) (1) Every subscriber of an authorized reciprocal insurer in which subscribers are subject to contingent liability shall accumulate a minimum operating reserve, to be credited to such subscriber on the books and records of such reciprocal insurer, by authorizing the attorney-in-fact to credit to such account at the end of the fiscal year of such reciprocal insurer, an amount not less than one quarter of such subscriber`s underwriting earnings during such period. (2) Such accumulation shall be made so long as such subscriber`s operating reserve is less than twice the amount of annual premiums in force. (3) Notwithstanding the foregoing, the superintendent may, upon application from the attorney-in-fact, approve other methods for accumulating such subscriber`s operating reserve. (b) Any authorized reciprocal insurer may, pursuant to the terms of the subscriber`s agreement and to any action of its advisory committee authorized thereunder, require its subscribers to accumulate subscriber`s operating reserves in excess of the minimum specified in subsection (a) hereof and may require a longer period of notice for the withdrawal of all or any part of such reserve than that herein specified. (c) (1) No subscriber shall have a secured or preferred claim against any assets of the reciprocal insurer arising out of such operating reserve, but all assets held by such insurer shall be available for the payment of claims of policyholders and creditors of such reciprocal insurer in preference to any claim for withdrawal by a subscriber as such. (2) Any subscriber`s operating reserve accumulated by any such reciprocal insurer shall be maintained at all times, except that a subscriber may, upon withdrawal from membership and cancellation of all insurance contracts held by him in such insurer, and after giving to the attorney-in-fact written notice of withdrawal at least sixty days in advance, withdraw the amount of his operating reserve less such surrender charges as may be deducted pursuant to the subscriber`s agreement. (3) No such withdrawal shall be permitted after an order of liquidation of, or the appointment of a receiver or liquidating trustee for, any such reciprocal insurer. S 6110. Limitation of risk. Every reciprocal insurer authorized to do business in this state shall be subject to the provisions of sections one thousand one hundred fifteen and four thousand one hundred eighteen of this chapter. S 6111. Assets, liabilities and surplus. (a) All of the assets of any reciprocal insurer including subscribers` operating reserves shall be liable primarily for payment of all liabilities incurred under its policies or other contracts. (b) No part of the surplus funds of such reciprocal insurer shall be subject to the claims of general creditors of any of the individual subscribers of such insurer until all policies under which any such subscriber is obligated have been terminated and in no event beyond the amount of such subscriber`s operating reserve. (c) The contingent liability of subscribers for additional premiums or assessments shall not be included as an asset in the financial statement of a reciprocal insurer. (d) Subscribers` operating reserves for which notice of withdrawal has been given shall be reported as liabilities until paid. (e) In any statement or report of the financial condition of a reciprocal insurer filed in this state, the surplus to policyholders, after providing for the unearned premium reserves, loss reserves and other liabilities, as required by this chapter, shall be reported as follows: (1) special contingent surplus; (2) subscribers` operating reserves, if required; (3) all other surplus, if any. (f) Unless the reciprocal is subject to the provisions of article fifteen of this chapter or substantially similar legislation in its state of domicile, all material transactions between or among the reciprocal, its subscribers, the attorney-in-fact and any affiliate of the attorney-in-fact shall not be entered into, unless they have been filed with the superintendent at least thirty days prior thereto and the superintendent has not disapproved them; provided, however, that any such transaction involving five percent or more of the reciprocal`s admitted assets shall be subject to prior approval of the superintendent and all transactions shall meet the following standards: (1) The terms shall be fair and equitable; (2) Charges or fees for services performed shall be reasonable; and (3) Expenses incurred and payments received shall be allocated to the reciprocal on an equitable basis in conformity with statutory insurance accounting practices consistently applied. S 6112. Subscribers` accounts. (a) The attorney-in-fact, in addition to the books of account of the collective transactions of all subscribers of the reciprocal insurer, shall keep and maintain a separate account for each individual subscriber setting forth the entries determining the operating reserve, if any, of such subscriber. (b) Each subscriber`s account shall be credited with the premiums earned by him as an underwriter on the policies issued by the insurer, and charged with his proper share of all losses incurred under such policies as well as with the expenses incurred by the insurer. (c) Earnings and interest income from investments of all subscribers` operating reserves shall be apportioned and credited to subscribers on the basis of their accumulated operating reserves and all other interest and investment income may be apportioned and credited to the subscribers on the basis of their premiums earned as underwriters. (d) The subscriber`s agreement of an authorized reciprocal insurer may with the permission of the superintendent contain provisions which modify the credits, charges and apportionments to the subscribers` account, as required by subsections (b) and (c) of this section. S 6113. Foreign or alien reciprocal insurers. (a) The superintendent may, in his discretion, pursuant to section one thousand one hundred six of this chapter, issue a license to a reciprocal insurer domiciled in, or organized under the laws of another state or of any province of Canada, to do in this state such kind or kinds of insurance business as a domestic reciprocal insurer may be authorized to do in this state. (b) Such foreign or alien reciprocal insurer shall comply with substantially the same requirements of this chapter which are applicable to domestic reciprocal insurers organized and authorized to do the same kind or kinds of insurance business and in addition every such alien reciprocal shall be subject to the provisions of this chapter relating to alien insurance companies authorized to do the same kind or kinds of insurance business. (c) Nothing herein contained shall be deemed to require that the attorney-in-fact of a foreign or alien reciprocal insurer shall be resident or domiciled in this state, or shall maintain his or its principal office in this state, or shall be organized under the laws of this state; but every authorized reciprocal insurer shall maintain at least one office in this state. (d) Every foreign or alien reciprocal insurer shall maintain a minimum surplus to policyholders in an amount at least equal to that required of a similar domestic reciprocal insurer organized and licensed to do the same kind or kinds of insurance. (e) The superintendent shall pursuant to section one thousand two hundred twelve of this chapter be appointed the true and lawful attorney for every such foreign or alien reciprocal insurer and any service upon him shall be equivalent to the personal service within this state of such process on each and every of the individual subscribers or underwriters, by whatever name called, of such reciprocal insurer. (f) (1) The superintendent may accept the statement of the duly authorized attorney-in-fact, or of any officer of a corporation attorney-in-fact, or of any member of a firm attorney-in-fact, subscribed and affirmed by him as true under the penalties of perjury, that all of the subscribers have executed the subscriber`s agreement used by such reciprocal insurer, which agreement shall authorize the attorney-in-fact to designate and appoint the superintendent as attorney in this state and the supervisory insurance officials of other jurisdictions upon whom legal process may be served. (2) Whenever any change, amendment or modification of the power of attorney or subscriber`s agreement has been submitted for execution to subscribers, in the manner prescribed by section six thousand one hundred seven of this article, a certified copy thereof shall be filed with the superintendent and within thirteen months thereafter there shall be filed with the superintendent a statement similarly subscribed to the effect that it has been signed by all subscribers of record. (3) The attorney-in-fact shall annually with the filing of the annual statement of such foreign or alien reciprocal insurer certify that all other and additional subscribers which have joined such insurer have executed the subscriber`s agreement as last amended and on file with the superintendent. (g) The subscriber`s agreement and articles of association, if any, of every foreign reciprocal insurer licensed to do business in this state on January first, nineteen hundred forty shall conform to the requirements applicable to a domestic reciprocal insurer organized and licensed after such date. S 6114. Application of other sections. (a) Except as otherwise provided in this article, and except where the context otherwise requires, all of the provisions of this chapter relating to all insurers and those relating to insurers transacting the same kind or kinds of insurance which reciprocal insurers are permitted to transact, shall be applicable to reciprocal insurers authorized to do business in this state. (b) Where any of such sections refer to a corporation, company or insurer, the same, when read in connection with and applicable to this article, shall mean a reciprocal insurer. S 6115. Merger. (a) (1) Two or more reciprocal insurers may, by a two-thirds affirmative vote of the subscribers of each insurer, merge in accordance with the provisions of article seventy-one of this chapter. (2) The powers of such new reciprocal insurer under this article shall not be greater than those possessed hereunder by the merging insurers. (3) The operating reserve accumulations of the respective subscribers shall be transferred and credited to such subscribers as members of the new reciprocal insurer and all other reserves, guaranty funds and other undistributed funds shall be transferred to the corresponding reserve or guaranty fund accounts of the new insurer. (b) (1) If after examination, the superintendent finds that the merger of any such insurers is in conformity with law, and that the new reciprocal insurer meets with the requirements of this chapter, he may issue a license to such insurer to do business under the provisions of this chapter. Thereupon, the remaining assets shall be forthwith transferred to it, and the predecessor reciprocal insurers shall cease to have authority to do business as such and shall be deemed extinguished. (2) Every such new reciprocal insurer formed by merger shall assume and succeed to all of the obligations and liabilities of the respective merging reciprocal insurers and shall be held liable to pay and discharge all such debts and liabilities in the same manner as if they had been incurred or contracted by it, but the subscribers of such predecessor reciprocal insurers shall continue subject to all the liabilities, claims and demands which shall then exist, or which may thereafter accrue against them, or any of them, by reason of any obligations incurred by them or on their behalf as such subscribers before the date of merger. (3) Upon the merger of any reciprocal insurer, dissenting subscribers shall be entitled to the conditional withdrawal of their accumulated operating reserves on deposit with the predecessor insurer as of the date of merger but a sufficient amount thereof shall be retained by the new reciprocal insurer as a deposit until all of the obligations incurred on their behalf have been extinguished. (4) When all of such obligations have been paid, discharged or terminated, and the superintendent after an examination shall have so certified, the said subscribers` deposits or the balances thereof remaining to their credit shall be returned and released, whereupon the powers of the attorney-in-fact relating thereto shall cease and terminate. S 6116. Lloyds underwriters. (a) Any existing Lloyds underwriters heretofore organized under any law of this state and authorized to do an insurance business herein, which has exercised its powers of issuing insurance policies continuously during each of the two years immediately prior to January first, nineteen hundred forty, may, by maintaining a minimum surplus at least equal to the amount maintained prior to January first, nineteen hundred forty, continue to do an insurance business in this state of the kind or kinds which it was authorized to do on January first, nineteen hundred forty, and shall be entitled to exercise all of the powers granted by its existing charter or articles of association. (b) Except as the context otherwise requires, every such Lloyds underwriters shall be subject to all of the provisions of this chapter which are applicable to reciprocal insurers. (c) No Lloyds underwriters shall hereafter be organized in this state and no foreign or alien Lloyds underwriters shall be licensed to do an insurance business in this state. (d) This section shall not alter or abridge any rights of the New York insurance exchange as set forth in article sixty-two of this chapter.
