RS 1404 - Allocation of surplus; full faith and credit; exemptions; sunset
A. Any profit indicated on the annual financial statement of the corporation shall be allocated during the next accounting period as follows:
(1) No less than fifty percent of the profit shall be applied to liquidate any outstanding indebtedness of the corporation, until all such indebtedness has been liquidated.
(2) The remainder of the profit shall be used to establish and maintain surplus and reserve requirements as required for a domestic mutual insurer.
B.(1)(a) Should the corporation's assets be insufficient to pay claims as they become due, then the full faith and credit of the state of Louisiana shall be pledged for the purposes as provided in R.S. 23:1395 and for the payment of claims. This full faith and credit guarantee shall expire in five years or at such time as the United States Department of Labor approves United States Longshore and Harbor Worker's Compensation Act coverage by the corporation without such security, whichever occurs later.
(b) The corporation shall seek the approval of the United States Department of Labor to provide United States Longshore and Harbor Worker's Compensation coverage upon obtaining an A.M. Best rating of "A-" or better. Beginning no later than five years after the issuance of its first policy, the corporation shall make diligent efforts to obtain an A.M. Best rating of "A-" or better.
(c) The extinguishment of the full faith and credit guarantee shall be self-executing immediately upon the United States Department of Labor's approval. The provisions of this Part affected by extinguishment of the full faith and credit guarantee shall also be immediately self-executing.
(d) Notwithstanding the self-execution of the extinguishment, within ten days of the receipt of the United States Department of Labor's approval, the corporation shall provide formal written notice of this approval to the governor, the speaker of the House of Representatives, the president of the Senate, the commissioner of insurance, the legislative auditor, the treasurer, and the director of the office of risk management.
(2) In the event that the corporation is dissolved, the funds reserved to pay the claims of policyholders and beneficiaries arising from and within the coverage of insurance policies issued by the corporation shall be held in trust for the benefit of those policyholders and beneficiaries. Any remaining assets of the corporation shall be transferred to the state of Louisiana.
(3) The full faith and credit guarantee, equal to the minimum surplus requirements for a domestic mutual insurer less any actual surplus of the corporation, shall be included as an asset in the configuration of the financial statements required under the provisions of R.S. 23:1411, until its extinguishment.
C. The exemption from surplus and loss reserve requirements shall cease when the corporation has:
(1) Paid off its initial principal debt.
(2) Established sufficient reserves to bring it into compliance with the Louisiana Insurance Code.
(3) Experienced growth in the number of policies in each of the preceding three years of less than ten percent annually.
Acts 1991, No. 814, §1, eff. Nov. 20, 1991; Acts 1992, No. 374, §1; Acts 1993, No. 564, §1, eff. June 10, 1993; Acts 1999, No. 1256, §1, eff. July 12, 1999.