§ 58-45-47. Deficit event. - North Carolina Statutes

§ 58‑45‑47. Deficit event.

(a)        In the event oflosses and expenses to the Association exceeding available surplus,reinsurance, and other sources of funding of Association losses, theAssociation is authorized to issue a nonrecoupable assessment upon its membersin accordance with its Plan of Operation. Member assessments shall not exceedone billion dollars ($1,000,000,000) for losses incurred from any event orseries of events that occur in a given calendar year, regardless of when suchassessments are actually levied on or collected from member companies.

(b)        When theAssociation knows that it has incurred losses and loss expenses in a particularcalendar year that will exceed the combination of available surplus,reinsurance, and other sources of funding, including permissible member companyassessments, then the Association shall immediately give notice to theCommissioner that a deficit event has occurred.

(c)        Upon adetermination by the Association that a deficit event has occurred, theAssociation shall determine, in its discretion, the appropriate means offinancing the deficit, which may include, but is not limited to, the purchaseof reinsurance, arranging lines of credit, or other forms of borrowing orfinancing. If the Association determines that the member companies have paidone billion dollars ($1,000,000,000) in nonrecoupable assessments for lossesand expenses incurred in any given year pursuant to subsection (a) of thissection, the Association may, subject to the verification by the Commissionerthat the dollar value of losses and expenses has reached the level necessaryfor a catastrophe recovery charge, authorize member companies to impose acatastrophe recovery charge on their residential and commercial propertyinsurance policyholders statewide. Catastrophe recovery charges shall becharged as a uniform percentage of written premiums as prescribed by theCommissioner and shall not exceed an aggregate amount of ten percent (10%) ofthe annual policy premium on any one policy of insurance. Catastrophe recoverycharges collected under this section shall be transferred directly to theAssociation on a periodic basis as determined by the Association and ordered bythe Commissioner. The Association and the FAIR Plan also shall charge their policyholdersa catastrophe recovery charge as provided in this section.

(d)        The catastropherecovery charge shall be clearly identified to policyholders on the premiumstatement, declarations page, or by other appropriate electronic or writtenmethod. The identification shall refer to the post‑catastrophe loss forwhich the charge was imposed. Any such catastrophe recovery charge shall not beconsidered premium for any purpose, including premium taxes or commissions,except that failure to pay the catastrophe recovery charge shall be treated asfailure to pay premium and shall be grounds for termination of insurance. Theidentified catastrophe recovery charge shall be accompanied by an explanationof the charge and shall appear on the medium by which the charge is conveyed tothe policyholder. The explanatory language shall be prescribed by theCommissioner.

(e)        The Associationshall report quarterly to the Commissioner providing all financial informationfor each catastrophe recovery charge authorized by this section, includingtotal catastrophe recovery charge funds recovered to date and any informationreasonably requested by the Commissioner.

(f)         The Associationshall recalculate the catastrophe recovery charge amount annually and, subjectto procedure approved by the Commissioner, adjust the charge percentage asneeded.

(g)        The catastropherecovery charge amount shall continue until financing of the deficit event hasbeen paid in full. Upon order of cessation, any catastrophe recovery chargeamounts collected by member companies, the Association or the FAIR Plan thatexceed amounts necessary for payment of the debt shall be remitted to theAssociation and added to the surplus for the purposes of offsetting futureAssociation losses or expenses.

(h)        Nothing containedin this section prohibits the Association from entering into any financingarrangements for the purpose of financing a deficit, provided that the pledgeof catastrophe recovery charge amounts under such financing agreements shallnot result in the actual levying of any catastrophe recovery charge until afterthe Association has incurred a deficit and until after the Commissioner hasapproved implementation of the Association's catastrophe recovery charge plan.  (2009‑472, s. 1.)