40-234. Unearned premium reserves of insurance companies; domestic title insurance companies; noncancelable policies, additional reserves.
40-234
40-234. Unearned premium reserves of insurance companies; domestictitle insurance companies;noncancelable policies, additional reserves.Unless otherwise specifically provided in this code, the unearnedpremiums or reserves of any insurance companyshall consist of a sum equal to a pro rata amountof the premiumsreceived on all unexpired risks.The "sum of the digits" or "rule of 78" unearned premium reserve methodmay be used only on policies where the exposure to risk is decreasing inequal amounts during the contract period and where premium refunds on suchpolicies would be computed using only the "sum of the digits" or "rule of78" method if such method places a sound value on its liabilities.Any domestic title insurancecompany engaged exclusively in the business of insuring titles to realestate shall establish and maintain, in addition to a special reserve inadequate amount to cover its liability as to losses incurred underpolicies issued by it, a reserve for unearned premiums on its policiesand guarantees in force and such reserve shall, at all times and for allpurposes, be considered a separate and distinct trust fund and shall bedeemed and shall constitute unearned portions of the original premiumsand shall be charged as a reserve liability of the insurer indetermining its financial condition. The unearned premium reserve shallbe retained and held by such domestic title insurance company for theprotection of the policyholders' interest in policies which have notexpired. Except upon liquidation, dissolution or insolvency, assetsequal to the amount of such reserve shall not be subject to distributionamong depositors or other creditors or stockholder of such titleinsurance company until all claims of policyholders or holders of othertitle insurance contracts or agreements of such domestic title insurancecompany have been paid in full and all liability on the policies orother title insurance contracts or agreements, whether contingent oractual, has been discharged or lawfully reinsured. Income from theinvestment of the amount of such reserve shall be the unrestrictedproperty of such title insurance company. The amount of the unearnedpremium reserve of every such domestic title insurance company shall becomputed in accordance with the provisions of this section. Any suchcompany, other than companies engagedexclusively in the business of insuring titles to real estate, issuingnoncancelable policies shall, in addition to the reserve required underthis section, accumulate an additional reserve of 3% perannum on all premiums received on such policies, and such reserves requiredshall be held and regarded as an absolute liability ofthe company.
History: L. 1927, ch. 231, 40-234; L. 1931, ch. 203, § 1; L.1935, ch. 197, § 1; L. 1971, ch. 159, § 1; L. 1979, ch. 136, § 1;L. 1985, ch. 159, § 1; July 1.