20-2211. Rates; actuary
A. The rates, rating plans, rating rules, rating classifications and territories
applicable to insurance written by the association, and the statistics relating thereto,
are subject to the provisions of chapter 2, article 4.1 of this title, giving
consideration to the past and prospective loss and expense experience for the designated
class or classes of liability insurance, trends in the frequency and severity of losses,
the investment income of the association and other relevant information. The premium
rates for an occurrence policy and a claims-made policy for each year the association
issues policies shall be established by the association. In determining whether the
association's rates are not inadequate, excessive or unfairly discriminatory, the
director shall consider recommendations made by the actuary. All rates shall be on an
actuarially sound basis, giving consideration to the group retrospective rating plan, and
shall be calculated to be self-supporting, except that the total initial expenses
necessary to establish, commence and manage operations may be amortized over a period of
at least five years. Such rates shall be deemed not inadequate if they are so
constituted that the expenses and loss costs of the plan of operation are equal to or
exceeded by the premium. Competition or lack of competition shall not be considered as a
rating standard under this section.
B. All policies issued by the association are subject to a group retrospective
rating plan under which the final premium for all policyholders of the association, as a
group, shall be equal to administrative, servicing and contingency expenses, modified as
applicable in accordance with subsection A, loss and loss adjustment expenses, and
taxes. Policyholders shall be given full credit for all investment income, net of
expenses and a reasonable management fee on policyholder supplied monies. The maximum
final premium for all policyholders of the association, as a group, is limited as
provided in this chapter.
C. The director shall examine the association as often as he deems appropriate to
ensure that the group retrospective rating plan is being operated in a manner consistent
with this section. If he finds that it is not being so operated, he shall issue an order
to the association, specifying in what respect its operation is deficient and stating
what corrective action shall be taken.
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