1370. Every exchange shall maintain its required assets in any one,
or more, or all of the following forms:
(a) In cash or deposits in solvent banks.
(b) Invested in securities of the kind designated for the
investment of assets of incorporated insurers having a capital stock
by the laws of the state where the principal office is located.
(c) Invested in real property acquired by or for it to secure the
payment of loans heretofore contracted or for moneys heretofore due,
or purchased at sales upon deeds of trust or upon judgments obtained
for the loans or debts, or conveyed to it in satisfaction of debts
heretofore contracted in the course of its dealings. The real
property may be acquired, held, and conveyed on behalf of the
exchange in trust by the attorney, but shall be sold and disposed of
within five years after acquisition of title thereto unless the time
for any such sale or disposal is extended by the commissioner in
writing.
(d) Excess fund investments may be made in real estate and in
making improvements thereon for business or residential purposes as
an investment for the production of income. "Business or residential
purposes" does not include real estate primarily intended for use or
valued as agricultural, horticultural, farm, ranch, or mineral
property. Any such investment may be made only by admitted exchanges
having admitted assets aggregating in value not less than twenty-five
million dollars ($25,000,000). Real estate acquired and improvements
made thereon shall not exceed an amount equal to 5 percent of the
admitted assets of the exchange. Any investment in a single parcel of
real estate including improvements thereon made under the authority
of this subdivision shall not be made in an amount in excess of 1
percent of the admitted assets of the exchange. The percentage or
dollar value of assets as provided in this subdivision shall be
determined by the exchange's last preceding annual statement of
conditions and affairs made as of the December 31 last preceding and
which has been filed with the commissioner pursuant to law.
(e) In addition to the investments authorized by subdivisions (a)
to (d), inclusive, every exchange may purchase, hold, or reconvey
real estate for any of the following purposes:
(1) The building, and the land upon which that building stands,
owned by it and in which is located its home office or principal
office in this state by virtue of the occupancy thereof, in whole or
in part, by its attorney-in-fact. The exchange may make any type of
arrangement which is fair and reasonable for the occupation of the
building, in whole or in part, by its attorney.
(2) Real estate requisite for its accommodation in the convenient
transaction of its business.
(f) Subject to the limitations established under subdivisions (c),
(d), and (e), every exchange in its own name as in the case of an
individual, may purchase, receive, own, hold, lease, mortgage,
pledge, or encumber, by deed of trust or otherwise, manage, and sell
real estate for the purposes and objects of the exchange.
1370.2. Except as in this article (commencing with Section 1370)
otherwise provides, every exchange subject to this chapter
(commencing with Section 1280) shall on and after October 1, 1961, be
governed for all purposes as to required minimum surplus, (including
that for admission, amendment of certificate of authority and
solvency) by the same standards for minimum paid-in capital and
surplus applicable to capital stock insurers. As used in this chapter
surplus of an exchange is the amount by which its assets exceed a
sum sufficient to discharge all its liabilities. When the standard
prescribed for capital stock insurers consists of an amount of
minimum paid-in capital the minimum surplus required of the exchange
shall be such amount, and when the standard prescribed for capital
stock insurers consists of an amount of minimum paid-in capital and
an amount of surplus the minimum surplus required of the exchange
shall be the aggregate of such amounts.
This section shall not affect the provisions of Section 1401.
1370.4. An exchange admitted prior to October 1, 1961, shall be
exempt from the provisions of Section 1370.2 until it replaces its
attorney in fact, except when the replacement is in strict compliance
with a contract between the exchange and its current attorney in
fact entered into prior to October 1, 1961, or the effective legal
control of its attorney in fact passes, by means other than by way of
judicial process (including but not limited to: probate proceedings,
bankruptcy proceedings or an action by a dissident minority interest
to force a sale or partition of the attorney in fact) to persons
none of whom had a proprietary interest therein on October 1, 1961,
subject to the further provisions of this section and to the
provisions of Section 1370.8.
While exempted from the provisions of Section 1370.2 as modified
by Section 1370.8, such an exchange shall be subject to and comply
with the surplus requirements provided in this chapter (commencing
with Section 1280) immediately prior to October 1, 1961.
The exemption from Section 1370.2 provided by this section shall
be progressively abolished so that on and after the dates specified
in the left-hand column of the following table every exchange shall
be required to maintain at least a minimum surplus equal to that
percentage of the minimum paid-in capital required by this code of
capital stock insurers transacting the same classes of insurance
which is set forth in the right-hand column of the following table.
January 1, 1967........................ 20%
January 1, 1970........................ 40%
January 1, 1973........................ 70%
January 1, 1976........................ 100%
In a case where the provisions of Section 1370.8 become applicable
any additional minimum surplus required by that section shall be in
addition to any required under the provisions of this paragraph.
1370.8. Any exchange exempted at any time from the provisions of
Section 1370. 2 shall irrespective of such exemption be subject to
the provisions of this section. No amended certificate of authority
adding classes of insurance shall be issued to the attorney in fact
of any such exchange on or after October 1, 1961, unless at the time
of the amendment the exchange has a surplus equal in the aggregate to
the sum of the surplus amount it was required to maintain by the
provisions of this chapter (commencing with Section 1280) as the same
were in effect immediately prior to October 1, 1961, plus the
aggregate amount of additional minimum amount of capital and surplus
which, at the time of such amendment, would be required of a capital
stock insurer by the provisions of this code in order to add the same
classes of insurance to its certificate of authority if it were
authorized at the time of the amendment to transact the same classes
of insurance as those which the attorney in fact of such reciprocal
is authorized to transact.
1371. If an exchange does either liability or workmen's
compensation insurance, it shall at all times maintain assets in a
sum sufficient to discharge all liabilities and to provide a surplus
over all liabilities of one hundred thousand dollars ($100,000).
An exchange subject to the provisions of this section is also
subject to the provisions of Sections 1370.2, 1370.4 and 1370.8.
1372. Every other exchange shall maintain at all times assets in a
sum sufficient to discharge all liabilities and to provide a surplus
over all liabilities of fifty thousand dollars ($50,000).
An exchange subject to the provisions of this section is also
subject to the provisions of Sections 1370.2, 1370.4, and 1370.8.
1373.1. No certificate of authority, other than a renewal
certificate of authority, shall be issued to the attorney within
three years from and after the time when the exchange commences
business as an insurer nor within three years from and after the time
it is first organized unless assets equal to the sum of its
liabilities and the minimum surplus required by this chapter are
maintained in cash or one or more of the following:
(a) Securities specified in Sections 1170 to 1175 inclusive;
(b) Bonds specified in Section 1176, if such bonds are legal for
investment of savings banks in this State;
(c) Such securities specified in Sections 1178 to 1202, inclusive,
as are legal for investment of savings banks in this State;
(d) Premiums in course of collection, or agents' balances
representing premiums, on policies effected not more than 90 days
prior to the date on which such premiums or balances are valued for
the purposes of this section, and earned service fees receivable, not
over 90 days due, and evidences of debt representing such assets;
(e) Interest accrued and dividends declared, receivable on any of
the assets specified in subsections (a) to (d), inclusive, no part of
which interest or dividends has been due in excess of one year;
(f) Amount of reinsurance recoverable from admitted insurers.
1373.2. (a) Except as provided in subsection (b) hereof, an
exchange, the attorney for which holds a certificate of authority,
which has been in business as an insurer less than three years from
and after the time when it commenced business as an insurer shall
maintain its assets during the balance of such three-year period in
the type of assets specified in Section 1373.1, excepting such of its
assets as are in excess of the sum of its liabilities and the
surplus required for issuance of a certificate of authority, other
than a renewal certificate of authority. Upon its failure so to do
the commissioner may revoke the certificate of authority. The
proceedings shall be conducted in accordance with Chapter 5 of Part 1
of Division 3 of Title 2 of the Government Code, and the
commissioner shall have all the powers granted therein.
(b) This section shall not apply to an exchange, the attorney for
which holds a certificate of authority on the effective date hereof,
until January 1, 1954.
1374. In estimating the financial condition of any exchange the
commissioner shall observe the following rules:
(a) He or she shall charge as liabilities the same reserves as are
required of incorporated insurers issuing nonassessable policies on
a reserve basis.
(b) Surplus deposits of subscribers shall not be charged as a
liability.
(c) All premium deposits and surplus deposits of subscribers due
and unpaid for a period not exceeding 90 days shall be allowed as
admitted assets, as in the case of incorporated insurers issuing
nonassessable policies on a reserve basis.
(d) An assessment levied as provided in this chapter, and not
collected shall in no event be allowed as an asset.
(e) The computation of reserves shall be based upon premium
deposits without any deduction for the compensation of the attorney.
1374.1. (a) "Surplus deposits of subscribers," as used in this
chapter, means amounts, over and above any premium charges, which are
contributed by subscribers and which are used for the purpose of
funding the surplus of a reciprocal or interinsurance exchange. No
subscriber shall have a secured or preferred claim against any of the
assets of the reciprocal or interinsurance exchange arising out of
surplus deposits. All assets, including the surplus deposits, shall
be held by the reciprocal or interinsurance exchange and made
available for payment of claims of policyholders and creditors of the
reciprocal or interinsurance exchange in preference to any claim for
withdrawal by a subscriber. A subscriber may, upon withdrawal from
membership and cancellation of all such insurance contracts held by
the subscriber with the insurer, withdraw the amount of the
subscriber's surplus deposits, less such surrender charges as may be
deducted pursuant to the subscriber's or insured's agreement, but
only if the subscriber has given written notice to the
attorney-in-fact at least 60 days in advance of the withdrawal.
(b) Withdrawal of surplus deposits of subscribers shall not be
permitted if, as a result of the withdrawal, the policyholder's
surplus of the exchange would be less than the capital and surplus
required by Sections 700.01, 700.02, and 700. 025.
(c) Withdrawal of surplus deposits of subcribers shall not be
permitted after an order of conservation or liquidation of, or the
appointment of a conservator or liquidator for, any such reciprocal
or interinsurance exchange.
1375. Where the subscribers are grouped by industries or otherwise
under any ruling or agreement which exempts the funds of one group
from liability in whole or in part for the payment of losses or
expenses chargeable against another group, each such independent
group shall maintain the reserves and surplus required for a separate
exchange and the requirements of subdivisions (f) and (g) of section
1322 relative to the number and amount of risks to be assumed must
be observed as to each group.
1370. Every exchange shall maintain its required assets in any one,
or more, or all of the following forms:
(a) In cash or deposits in solvent banks.
(b) Invested in securities of the kind designated for the
investment of assets of incorporated insurers having a capital stock
by the laws of the state where the principal office is located.
(c) Invested in real property acquired by or for it to secure the
payment of loans heretofore contracted or for moneys heretofore due,
or purchased at sales upon deeds of trust or upon judgments obtained
for the loans or debts, or conveyed to it in satisfaction of debts
heretofore contracted in the course of its dealings. The real
property may be acquired, held, and conveyed on behalf of the
exchange in trust by the attorney, but shall be sold and disposed of
within five years after acquisition of title thereto unless the time
for any such sale or disposal is extended by the commissioner in
writing.
(d) Excess fund investments may be made in real estate and in
making improvements thereon for business or residential purposes as
an investment for the production of income. "Business or residential
purposes" does not include real estate primarily intended for use or
valued as agricultural, horticultural, farm, ranch, or mineral
property. Any such investment may be made only by admitted exchanges
having admitted assets aggregating in value not less than twenty-five
million dollars ($25,000,000). Real estate acquired and improvements
made thereon shall not exceed an amount equal to 5 percent of the
admitted assets of the exchange. Any investment in a single parcel of
real estate including improvements thereon made under the authority
of this subdivision shall not be made in an amount in excess of 1
percent of the admitted assets of the exchange. The percentage or
dollar value of assets as provided in this subdivision shall be
determined by the exchange's last preceding annual statement of
conditions and affairs made as of the December 31 last preceding and
which has been filed with the commissioner pursuant to law.
(e) In addition to the investments authorized by subdivisions (a)
to (d), inclusive, every exchange may purchase, hold, or reconvey
real estate for any of the following purposes:
(1) The building, and the land upon which that building stands,
owned by it and in which is located its home office or principal
office in this state by virtue of the occupancy thereof, in whole or
in part, by its attorney-in-fact. The exchange may make any type of
arrangement which is fair and reasonable for the occupation of the
building, in whole or in part, by its attorney.
(2) Real estate requisite for its accommodation in the convenient
transaction of its business.
(f) Subject to the limitations established under subdivisions (c),
(d), and (e), every exchange in its own name as in the case of an
individual, may purchase, receive, own, hold, lease, mortgage,
pledge, or encumber, by deed of trust or otherwise, manage, and sell
real estate for the purposes and objects of the exchange.
1370.2. Except as in this article (commencing with Section 1370)
otherwise provides, every exchange subject to this chapter
(commencing with Section 1280) shall on and after October 1, 1961, be
governed for all purposes as to required minimum surplus, (including
that for admission, amendment of certificate of authority and
solvency) by the same standards for minimum paid-in capital and
surplus applicable to capital stock insurers. As used in this chapter
surplus of an exchange is the amount by which its assets exceed a
sum sufficient to discharge all its liabilities. When the standard
prescribed for capital stock insurers consists of an amount of
minimum paid-in capital the minimum surplus required of the exchange
shall be such amount, and when the standard prescribed for capital
stock insurers consists of an amount of minimum paid-in capital and
an amount of surplus the minimum surplus required of the exchange
shall be the aggregate of such amounts.
This section shall not affect the provisions of Section 1401.
1370.4. An exchange admitted prior to October 1, 1961, shall be
exempt from the provisions of Section 1370.2 until it replaces its
attorney in fact, except when the replacement is in strict compliance
with a contract between the exchange and its current attorney in
fact entered into prior to October 1, 1961, or the effective legal
control of its attorney in fact passes, by means other than by way of
judicial process (including but not limited to: probate proceedings,
bankruptcy proceedings or an action by a dissident minority interest
to force a sale or partition of the attorney in fact) to persons
none of whom had a proprietary interest therein on October 1, 1961,
subject to the further provisions of this section and to the
provisions of Section 1370.8.
While exempted from the provisions of Section 1370.2 as modified
by Section 1370.8, such an exchange shall be subject to and comply
with the surplus requirements provided in this chapter (commencing
with Section 1280) immediately prior to October 1, 1961.
The exemption from Section 1370.2 provided by this section shall
be progressively abolished so that on and after the dates specified
in the left-hand column of the following table every exchange shall
be required to maintain at least a minimum surplus equal to that
percentage of the minimum paid-in capital required by this code of
capital stock insurers transacting the same classes of insurance
which is set forth in the right-hand column of the following table.
January 1, 1967........................ 20%
January 1, 1970........................ 40%
January 1, 1973........................ 70%
January 1, 1976........................ 100%
In a case where the provisions of Section 1370.8 become applicable
any additional minimum surplus required by that section shall be in
addition to any required under the provisions of this paragraph.
1370.8. Any exchange exempted at any time from the provisions of
Section 1370. 2 shall irrespective of such exemption be subject to
the provisions of this section. No amended certificate of authority
adding classes of insurance shall be issued to the attorney in fact
of any such exchange on or after October 1, 1961, unless at the time
of the amendment the exchange has a surplus equal in the aggregate to
the sum of the surplus amount it was required to maintain by the
provisions of this chapter (commencing with Section 1280) as the same
were in effect immediately prior to October 1, 1961, plus the
aggregate amount of additional minimum amount of capital and surplus
which, at the time of such amendment, would be required of a capital
stock insurer by the provisions of this code in order to add the same
classes of insurance to its certificate of authority if it were
authorized at the time of the amendment to transact the same classes
of insurance as those which the attorney in fact of such reciprocal
is authorized to transact.
1371. If an exchange does either liability or workmen's
compensation insurance, it shall at all times maintain assets in a
sum sufficient to discharge all liabilities and to provide a surplus
over all liabilities of one hundred thousand dollars ($100,000).
An exchange subject to the provisions of this section is also
subject to the provisions of Sections 1370.2, 1370.4 and 1370.8.
1372. Every other exchange shall maintain at all times assets in a
sum sufficient to discharge all liabilities and to provide a surplus
over all liabilities of fifty thousand dollars ($50,000).
An exchange subject to the provisions of this section is also
subject to the provisions of Sections 1370.2, 1370.4, and 1370.8.
1373.1. No certificate of authority, other than a renewal
certificate of authority, shall be issued to the attorney within
three years from and after the time when the exchange commences
business as an insurer nor within three years from and after the time
it is first organized unless assets equal to the sum of its
liabilities and the minimum surplus required by this chapter are
maintained in cash or one or more of the following:
(a) Securities specified in Sections 1170 to 1175 inclusive;
(b) Bonds specified in Section 1176, if such bonds are legal for
investment of savings banks in this State;
(c) Such securities specified in Sections 1178 to 1202, inclusive,
as are legal for investment of savings banks in this State;
(d) Premiums in course of collection, or agents' balances
representing premiums, on policies effected not more than 90 days
prior to the date on which such premiums or balances are valued for
the purposes of this section, and earned service fees receivable, not
over 90 days due, and evidences of debt representing such assets;
(e) Interest accrued and dividends declared, receivable on any of
the assets specified in subsections (a) to (d), inclusive, no part of
which interest or dividends has been due in excess of one year;
(f) Amount of reinsurance recoverable from admitted insurers.
1373.2. (a) Except as provided in subsection (b) hereof, an
exchange, the attorney for which holds a certificate of authority,
which has been in business as an insurer less than three years from
and after the time when it commenced business as an insurer shall
maintain its assets during the balance of such three-year period in
the type of assets specified in Section 1373.1, excepting such of its
assets as are in excess of the sum of its liabilities and the
surplus required for issuance of a certificate of authority, other
than a renewal certificate of authority. Upon its failure so to do
the commissioner may revoke the certificate of authority. The
proceedings shall be conducted in accordance with Chapter 5 of Part 1
of Division 3 of Title 2 of the Government Code, and the
commissioner shall have all the powers granted therein.
(b) This section shall not apply to an exchange, the attorney for
which holds a certificate of authority on the effective date hereof,
until January 1, 1954.
1374. In estimating the financial condition of any exchange the
commissioner shall observe the following rules:
(a) He or she shall charge as liabilities the same reserves as are
required of incorporated insurers issuing nonassessable policies on
a reserve basis.
(b) Surplus deposits of subscribers shall not be charged as a
liability.
(c) All premium deposits and surplus deposits of subscribers due
and unpaid for a period not exceeding 90 days shall be allowed as
admitted assets, as in the case of incorporated insurers issuing
nonassessable policies on a reserve basis.
(d) An assessment levied as provided in this chapter, and not
collected shall in no event be allowed as an asset.
(e) The computation of reserves shall be based upon premium
deposits without any deduction for the compensation of the attorney.
1374.1. (a) "Surplus deposits of subscribers," as used in this
chapter, means amounts, over and above any premium charges, which are
contributed by subscribers and which are used for the purpose of
funding the surplus of a reciprocal or interinsurance exchange. No
subscriber shall have a secured or preferred claim against any of the
assets of the reciprocal or interinsurance exchange arising out of
surplus deposits. All assets, including the surplus deposits, shall
be held by the reciprocal or interinsurance exchange and made
available for payment of claims of policyholders and creditors of the
reciprocal or interinsurance exchange in preference to any claim for
withdrawal by a subscriber. A subscriber may, upon withdrawal from
membership and cancellation of all such insurance contracts held by
the subscriber with the insurer, withdraw the amount of the
subscriber's surplus deposits, less such surrender charges as may be
deducted pursuant to the subscriber's or insured's agreement, but
only if the subscriber has given written notice to the
attorney-in-fact at least 60 days in advance of the withdrawal.
(b) Withdrawal of surplus deposits of subscribers shall not be
permitted if, as a result of the withdrawal, the policyholder's
surplus of the exchange would be less than the capital and surplus
required by Sections 700.01, 700.02, and 700. 025.
(c) Withdrawal of surplus deposits of subcribers shall not be
permitted after an order of conservation or liquidation of, or the
appointment of a conservator or liquidator for, any such reciprocal
or interinsurance exchange.
1375. Where the subscribers are grouped by industries or otherwise
under any ruling or agreement which exempts the funds of one group
from liability in whole or in part for the payment of losses or
expenses chargeable against another group, each such independent
group shall maintain the reserves and surplus required for a separate
exchange and the requirements of subdivisions (f) and (g) of section
1322 relative to the number and amount of risks to be assumed must
be observed as to each group.
1370. Every exchange shall maintain its required assets in any one,
or more, or all of the following forms:
(a) In cash or deposits in solvent banks.
(b) Invested in securities of the kind designated for the
investment of assets of incorporated insurers having a capital stock
by the laws of the state where the principal office is located.
(c) Invested in real property acquired by or for it to secure the
payment of loans heretofore contracted or for moneys heretofore due,
or purchased at sales upon deeds of trust or upon judgments obtained
for the loans or debts, or conveyed to it in satisfaction of debts
heretofore contracted in the course of its dealings. The real
property may be acquired, held, and conveyed on behalf of the
exchange in trust by the attorney, but shall be sold and disposed of
within five years after acquisition of title thereto unless the time
for any such sale or disposal is extended by the commissioner in
writing.
(d) Excess fund investments may be made in real estate and in
making improvements thereon for business or residential purposes as
an investment for the production of income. "Business or residential
purposes" does not include real estate primarily intended for use or
valued as agricultural, horticultural, farm, ranch, or mineral
property. Any such investment may be made only by admitted exchanges
having admitted assets aggregating in value not less than twenty-five
million dollars ($25,000,000). Real estate acquired and improvements
made thereon shall not exceed an amount equal to 5 percent of the
admitted assets of the exchange. Any investment in a single parcel of
real estate including improvements thereon made under the authority
of this subdivision shall not be made in an amount in excess of 1
percent of the admitted assets of the exchange. The percentage or
dollar value of assets as provided in this subdivision shall be
determined by the exchange's last preceding annual statement of
conditions and affairs made as of the December 31 last preceding and
which has been filed with the commissioner pursuant to law.
(e) In addition to the investments authorized by subdivisions (a)
to (d), inclusive, every exchange may purchase, hold, or reconvey
real estate for any of the following purposes:
(1) The building, and the land upon which that building stands,
owned by it and in which is located its home office or principal
office in this state by virtue of the occupancy thereof, in whole or
in part, by its attorney-in-fact. The exchange may make any type of
arrangement which is fair and reasonable for the occupation of the
building, in whole or in part, by its attorney.
(2) Real estate requisite for its accommodation in the convenient
transaction of its business.
(f) Subject to the limitations established under subdivisions (c),
(d), and (e), every exchange in its own name as in the case of an
individual, may purchase, receive, own, hold, lease, mortgage,
pledge, or encumber, by deed of trust or otherwise, manage, and sell
real estate for the purposes and objects of the exchange.
1370.2. Except as in this article (commencing with Section 1370)
otherwise provides, every exchange subject to this chapter
(commencing with Section 1280) shall on and after October 1, 1961, be
governed for all purposes as to required minimum surplus, (including
that for admission, amendment of certificate of authority and
solvency) by the same standards for minimum paid-in capital and
surplus applicable to capital stock insurers. As used in this chapter
surplus of an exchange is the amount by which its assets exceed a
sum sufficient to discharge all its liabilities. When the standard
prescribed for capital stock insurers consists of an amount of
minimum paid-in capital the minimum surplus required of the exchange
shall be such amount, and when the standard prescribed for capital
stock insurers consists of an amount of minimum paid-in capital and
an amount of surplus the minimum surplus required of the exchange
shall be the aggregate of such amounts.
This section shall not affect the provisions of Section 1401.
1370.4. An exchange admitted prior to October 1, 1961, shall be
exempt from the provisions of Section 1370.2 until it replaces its
attorney in fact, except when the replacement is in strict compliance
with a contract between the exchange and its current attorney in
fact entered into prior to October 1, 1961, or the effective legal
control of its attorney in fact passes, by means other than by way of
judicial process (including but not limited to: probate proceedings,
bankruptcy proceedings or an action by a dissident minority interest
to force a sale or partition of the attorney in fact) to persons
none of whom had a proprietary interest therein on October 1, 1961,
subject to the further provisions of this section and to the
provisions of Section 1370.8.
While exempted from the provisions of Section 1370.2 as modified
by Section 1370.8, such an exchange shall be subject to and comply
with the surplus requirements provided in this chapter (commencing
with Section 1280) immediately prior to October 1, 1961.
The exemption from Section 1370.2 provided by this section shall
be progressively abolished so that on and after the dates specified
in the left-hand column of the following table every exchange shall
be required to maintain at least a minimum surplus equal to that
percentage of the minimum paid-in capital required by this code of
capital stock insurers transacting the same classes of insurance
which is set forth in the right-hand column of the following table.
January 1, 1967........................ 20%
January 1, 1970........................ 40%
January 1, 1973........................ 70%
January 1, 1976........................ 100%
In a case where the provisions of Section 1370.8 become applicable
any additional minimum surplus required by that section shall be in
addition to any required under the provisions of this paragraph.
1370.8. Any exchange exempted at any time from the provisions of
Section 1370. 2 shall irrespective of such exemption be subject to
the provisions of this section. No amended certificate of authority
adding classes of insurance shall be issued to the attorney in fact
of any such exchange on or after October 1, 1961, unless at the time
of the amendment the exchange has a surplus equal in the aggregate to
the sum of the surplus amount it was required to maintain by the
provisions of this chapter (commencing with Section 1280) as the same
were in effect immediately prior to October 1, 1961, plus the
aggregate amount of additional minimum amount of capital and surplus
which, at the time of such amendment, would be required of a capital
stock insurer by the provisions of this code in order to add the same
classes of insurance to its certificate of authority if it were
authorized at the time of the amendment to transact the same classes
of insurance as those which the attorney in fact of such reciprocal
is authorized to transact.
1371. If an exchange does either liability or workmen's
compensation insurance, it shall at all times maintain assets in a
sum sufficient to discharge all liabilities and to provide a surplus
over all liabilities of one hundred thousand dollars ($100,000).
An exchange subject to the provisions of this section is also
subject to the provisions of Sections 1370.2, 1370.4 and 1370.8.
1372. Every other exchange shall maintain at all times assets in a
sum sufficient to discharge all liabilities and to provide a surplus
over all liabilities of fifty thousand dollars ($50,000).
An exchange subject to the provisions of this section is also
subject to the provisions of Sections 1370.2, 1370.4, and 1370.8.
1373.1. No certificate of authority, other than a renewal
certificate of authority, shall be issued to the attorney within
three years from and after the time when the exchange commences
business as an insurer nor within three years from and after the time
it is first organized unless assets equal to the sum of its
liabilities and the minimum surplus required by this chapter are
maintained in cash or one or more of the following:
(a) Securities specified in Sections 1170 to 1175 inclusive;
(b) Bonds specified in Section 1176, if such bonds are legal for
investment of savings banks in this State;
(c) Such securities specified in Sections 1178 to 1202, inclusive,
as are legal for investment of savings banks in this State;
(d) Premiums in course of collection, or agents' balances
representing premiums, on policies effected not more than 90 days
prior to the date on which such premiums or balances are valued for
the purposes of this section, and earned service fees receivable, not
over 90 days due, and evidences of debt representing such assets;
(e) Interest accrued and dividends declared, receivable on any of
the assets specified in subsections (a) to (d), inclusive, no part of
which interest or dividends has been due in excess of one year;
(f) Amount of reinsurance recoverable from admitted insurers.
1373.2. (a) Except as provided in subsection (b) hereof, an
exchange, the attorney for which holds a certificate of authority,
which has been in business as an insurer less than three years from
and after the time when it commenced business as an insurer shall
maintain its assets during the balance of such three-year period in
the type of assets specified in Section 1373.1, excepting such of its
assets as are in excess of the sum of its liabilities and the
surplus required for issuance of a certificate of authority, other
than a renewal certificate of authority. Upon its failure so to do
the commissioner may revoke the certificate of authority. The
proceedings shall be conducted in accordance with Chapter 5 of Part 1
of Division 3 of Title 2 of the Government Code, and the
commissioner shall have all the powers granted therein.
(b) This section shall not apply to an exchange, the attorney for
which holds a certificate of authority on the effective date hereof,
until January 1, 1954.
1374. In estimating the financial condition of any exchange the
commissioner shall observe the following rules:
(a) He or she shall charge as liabilities the same reserves as are
required of incorporated insurers issuing nonassessable policies on
a reserve basis.
(b) Surplus deposits of subscribers shall not be charged as a
liability.
(c) All premium deposits and surplus deposits of subscribers due
and unpaid for a period not exceeding 90 days shall be allowed as
admitted assets, as in the case of incorporated insurers issuing
nonassessable policies on a reserve basis.
(d) An assessment levied as provided in this chapter, and not
collected shall in no event be allowed as an asset.
(e) The computation of reserves shall be based upon premium
deposits without any deduction for the compensation of the attorney.
1374.1. (a) "Surplus deposits of subscribers," as used in this
chapter, means amounts, over and above any premium charges, which are
contributed by subscribers and which are used for the purpose of
funding the surplus of a reciprocal or interinsurance exchange. No
subscriber shall have a secured or preferred claim against any of the
assets of the reciprocal or interinsurance exchange arising out of
surplus deposits. All assets, including the surplus deposits, shall
be held by the reciprocal or interinsurance exchange and made
available for payment of claims of policyholders and creditors of the
reciprocal or interinsurance exchange in preference to any claim for
withdrawal by a subscriber. A subscriber may, upon withdrawal from
membership and cancellation of all such insurance contracts held by
the subscriber with the insurer, withdraw the amount of the
subscriber's surplus deposits, less such surrender charges as may be
deducted pursuant to the subscriber's or insured's agreement, but
only if the subscriber has given written notice to the
attorney-in-fact at least 60 days in advance of the withdrawal.
(b) Withdrawal of surplus deposits of subscribers shall not be
permitted if, as a result of the withdrawal, the policyholder's
surplus of the exchange would be less than the capital and surplus
required by Sections 700.01, 700.02, and 700. 025.
(c) Withdrawal of surplus deposits of subcribers shall not be
permitted after an order of conservation or liquidation of, or the
appointment of a conservator or liquidator for, any such reciprocal
or interinsurance exchange.
1375. Where the subscribers are grouped by industries or otherwise
under any ruling or agreement which exempts the funds of one group
from liability in whole or in part for the payment of losses or
expenses chargeable against another group, each such independent
group shall maintain the reserves and surplus required for a separate
exchange and the requirements of subdivisions (f) and (g) of section
1322 relative to the number and amount of risks to be assumed must
be observed as to each group.
