(A) A domestic title insurer shall establish and maintain a reinsurance reserve computed in accordance with this section, and all sums attributed to the reserve are at all times and for all purposes considered unearned portions of the original premiums. This reserve must be reported as a liability of the title insurer in its financial statements.
(B) The reinsurance reserve must be maintained by the title insurer for the protection of holders of title insurance policies. Except as provided in this section, assets equal in value to the reinsurance reserve are not subject to distribution among creditors or stockholders of the title insurer until all claims of policyholders or claims under reinsurance contracts have been paid in full, and all liability on the policies or reinsurance contracts has been paid in full and discharged or lawfully reinsured.
(C) A foreign or alien title insurer licensed to transact title insurance business in this State shall maintain at least the same reserves on title insurance policies issued on properties located in this State as are required of domestic title insurers, unless the laws of jurisdiction of domicile of the foreign or alien title insurer require a higher amount.
(D) The reinsurance reserve consists of:
(1) the amount of the reinsurance reserve on the effective date of this act; and
(2) one dollar and fifty cents a policy and, in addition, a sum equal to twelve and one-half cents for each one thousand dollars of net retained liability under each title insurance policy on a single risk written on properties located in this State written after the effective date of this act.
(E) Amounts placed in the reinsurance reserve in any year in accordance with subsection (D)(2) of this section must be deducted in determining the net profit of the title insurer for that year.
(F) A title insurer shall release from the reinsurance reserve a sum equal to ten percent of the amount added to the reserve during a calendar year on July first of each of the five years following the year in which the sum was added and shall release from the reinsurance reserve a sum equal to three and one-third percent of the amount added to the reserve during that year on each succeeding July first until the entire amount for that year has been released. The amount of the reinsurance reserve or similar unearned premium reserve maintained before the effective date of this act must be released in accordance with the law in effect before the effective date of this act.
HISTORY: 1988 Act No. 562.