(a) Rates.
(1) The Arkansas Earthquake Authority shall establish rates for plan coverage. These rates and rating schedules may be adjusted for appropriate factors such as geographical variation in claim costs, retrofitting, and other mitigation efforts and shall take into consideration appropriate factors in accordance with established actuarial and underwriting practices.
(2) The rates charged by the authority shall not compete with voluntary market rates so that the authority functions as a residual market mechanism to provide insurance when insurance cannot be procured in the voluntary market. Rates and schedules shall be submitted to the Insurance Commissioner for approval prior to use.
(b) Initial Assessment. Initial operating capital shall be contributed based on the following:
(1) All authorized insurers reporting one million dollars ($1,000,000) or more in premium on their most recent annual statement shall pay a maximum initial assessment of up to one thousand dollars ($1,000) plus twenty-five thousandths of one percent (.025%) of their net direct written premium in the State of Arkansas as reported in their most recent annual statement. This assessment may be collected in incremental amounts or as one (1) single assessment; and
(2) All authorized insurers reporting less than one million dollars ($1,000,000) in premium on their most recent annual statement shall pay a maximum initial assessment of up to five hundred dollars ($500), plus twenty-five thousandths of one percent (.025%) of their net direct written premium in the State of Arkansas as reported in their most recent annual statement. This assessment may be collected in incremental amounts or as one (1) single assessment.
(c) Administrative Assessments.
(1)
(A) Insurers shall contribute additional assessments as may be reasonable and necessary to meet the authority's annual projected administrative expenses.
(B) For the purposes of this section, administrative expenses shall include all reasonable and necessary operating expenses incurred or to be incurred by the authority and may be up to, but not exceeding, an aggregate total of one million dollars ($1,000,000) for all authorized insurers identified in subdivision (c)(2) of this section.
(2)
(A) These assessments shall be made as the actual need for additional administrative funds arises to ensure that the authority incurs no deficit spending.
(B) Assessments shall be apportioned by the Board of the Arkansas Earthquake Authority among authorized insurers writing homeowner, farmowner, fire and allied lines, excluding commercial policies and crop hail, in proportion to the ratio that the total net direct written premium collected in the State of Arkansas by the insurer on its homeowner, farmowner, fire and allied lines during the preceding calendar year bears to the total net direct written premium collected by all insurers on their homeowner, farmowner, fire and allied lines in the State of Arkansas for the preceding calendar year.
(C) Each insurer's assessment shall be determined by the board based on annual statements and other reports deemed necessary by the board and filed by the insurer with the board or the commissioner.
(3)
(A) An insurer may petition the commissioner for an abatement or deferment of all or part of an assessment imposed by the authority.
(B) The commissioner may abate or defer, in whole or in part, such an assessment if, in the opinion of the commissioner, payment of the assessment would cause the insurer to be deemed in hazardous financial condition, as defined in § 23-68-102.
(C)
(i) In the event an assessment against an insurer is abated or deferred in whole or in part, the amount by which such an assessment is abated or deferred shall be assessed against the other insurers in a manner consistent with the basis for assessments set forth in subsection (a) of this section.
(ii) The insurer receiving such an abatement or deferment shall remain liable to the plan for the deficiency for four (4) years.
(4) Insurers determined to be insolvent insurers by a court of competent jurisdiction shall be exempt from assessment from and after the date of that determination and until the commissioner determines that the insurer is no longer an insolvent insurer.
(5)
(A)
(i) All assessments shall be due and payable upon receipt and shall be delinquent if not paid within thirty (30) days of the receipt of the notice by the insurer.
(ii) Failure to timely pay the assessment will automatically subject the insurer to a ten percent (10%) penalty, which will be due and payable within the next thirty-day period.
(B) The board and the commissioner shall have the authority to enforce the collection of the assessment and penalty in accordance with the provisions of this chapter and the Arkansas Insurance Code.
(C) The board may waive the penalty authorized by this subsection if it determines that compelling circumstances exist which justify such a waiver.
(d) Post-event Assessments.
(1) If loss from an event occurs, the authority, in addition to any assessments in subsections (a) and (b) of this section, shall assess all authorized insurers writing homeowner, farmowner, fire and allied lines, excluding commercial policies and crop hail, as may be necessary to produce the additional funds needed to make payment of all covered claims and expenses of the authority.
(2) Assessments during a calendar year may be made up to but not in excess of five percent (5%) of each insurer's net direct homeowner, farmowner, fire and allied lines, excluding commercial policies and crop hail, written premium in the State of Arkansas for the preceding calendar year.
(3) Insurers shall recover the post-event assessment through a surcharge on homeowner, farmowner, fire and allied lines policyholder, excluding crop hail policyholders, equal to the percentage identified by the board for the insurers' post-event assessment. This surcharge shall be exempt from insurance premium taxes.
(4) Pursuant to § 23-102-108, the board shall establish surcharge policies and guidelines for insurers entering the residential homeowner, farmowner, fire and allied lines and earthquake markets, excluding commercial policies and crop hail, after an event to ensure a fair and competitive market.
(5) If the maximum assessment in any calendar year does not provide an amount sufficient for payment of covered claims, the moneys available shall be prorated with the unpaid portion being paid as soon thereafter as moneys become available, with assessments being made in the next and successive calendar years. However, in no event shall the total assessment exceed two hundred fifty million dollars ($250,000,000) in the aggregate, regardless of the frequency or severity of earthquake losses at any and all times subsequent to the creation of the authority.
(6) The authority may exempt or defer, in whole or in part, the assessment of any insurer if the assessment would cause the insurer to be deemed in hazardous financial condition, as defined in § 23-68-102.
(7) Insurers determined to be insolvent insurers by a court of competent jurisdiction shall be exempt from assessment from and after the date of that determination and until the commissioner determines that the insurer is no longer an insolvent insurer.
(8) It shall be the duty of each insurer to pay the amount of its assessment to the authority within thirty (30) days after it gives notice of the assessment.
(e) Failure to Pay Assessments.
(1) The commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact business in this state of any insurer who fails to pay an assessment when due.
(2) As an alternative, the commissioner may levy a fine on any insurer which fails to pay an assessment when due. The fine shall not exceed one thousand dollars ($1,000) per day and shall be payable to the authority for use in its operations.
(3) In addition, assessments may be collected by the authority through suits brought for that purpose. Venue for suits shall lie in Pulaski County, Arkansas, and the authority shall not be required to give an appeal bond in any cause arising hereunder.
(4) Any insurer whose certificate of authority to do business in this state is cancelled or surrendered shall be liable for any unpaid assessments made prior to the date of the cancellation or surrender.