2785.1100 Premiums, Cash Flow, And Dividends


Published: 2015

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2785.1100 PREMIUMS, CASH FLOW, AND DIVIDENDS.


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Subpart 1.

Minimum annual premium.

All pools must have and maintain an annual premium volume of no less that $300,000. A pool or prospective pool may apply to the commissioner for reduction of the minimum annual premium requirement, stating the amount of reduction requested and the supporting rationale and data. The commissioner must approve the applications within 60 days after receipt if the pool has demonstrated that the lesser premium volume would not compromise its financial integrity and stability.


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Subp. 2.

Monitoring premium volume.

A pool must monitor its premium volume. If premium decreases to an annualized volume of less than $400,000, or less than 133 percent of the amount approved pursuant to subpart 1, the pool must notify the commissioner at monthly intervals of the then-current annualized premium volume, until the annualized volume exceeds $400,000. "Annualized premium volume" means the gross premiums written for the previous 12 months. If premium decreases to an annualized volume of less than $300,000, or a lesser amount if approved pursuant to subpart 1, the pool must notify the commissioner:

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A.

of its intent to end its self-insurance authority; or


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B.

of its proposal for restoring compliance with subpart 1. If the proposal is unlikely, in the commissioner's judgment, to restore compliance with subpart 1 within 90 days, or if after 90 days the pool continues to be out of compliance, the commissioner shall revoke the pool's self-insurance authority.



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Subp. 3.

Surplus or stop-loss advancement.

A pool may protect itself from cash flow difficulties by methods including but not limited to the following:

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A.

establishing and maintaining a surplus consisting of funds contributed by members and the pool's retained earnings; or


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B.

obtaining language in the pool's stop-loss insurance policy requiring the insurer to advance funds to the pool if the policy limits have been or are likely to be exceeded. The funds may be considered an advance against the insurer's potential liability for the policy period.



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Subp. 4.

New pool deposit premium.

As a condition for authorization to self-insure a prospective pool must submit evidence that an initial premium payment has been made. The following requirements also apply to premium payments in a pool's first year of operation:

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A.

For all pools except employee health benefit pools, the initial payment must equal no less than 50 percent of the initial members' first year premium. If the initial payment is less than 100 percent of the initial members' first year premium, the remainder of the initial members' first year premium must be paid in three or more equal installments at equal intervals throughout the year.


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B.

For employee health benefit pools, the initial premium payment must be no less than 25 percent of the initial members' first year premium. If the initial payment is less than 100 percent of the initial members' first year premium, the remainder of the initial members' first year premium must be paid in six or more equal installments at equal intervals throughout the year.


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C.

A prospective pool may apply to the commissioner for reduction of the new pool deposit premium requirement, stating the payment schedule requested and the supporting rationale and data. The commissioner must approve the applications within 60 days after receipt if the pool has demonstrated that a less restrictive payment schedule would not compromise its ability to pay large claims promptly during its first year of operation. The commissioner must consider arrangements the pool has made under subpart 3 in evaluating the application.



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Subp. 5.

Premium payments.

A pool may permit installment payments if payment is always due before premium is to be earned. A pool shall promptly take appropriate action to collect premiums, assessments, or penalties that are past due. Collection costs are the obligation of the delinquent member.


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Subp. 6.

Dividend procedures.

A pool may declare and pay a dividend or distribution from its surplus only if:

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A.

the dividend would not cause the pool's surplus to be negative;


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B.

the pool does not have a stop-loss advancement liability or other borrowed money; and


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C.

for workers' compensation pools, the dividend will not be paid sooner than one year after it is declared, and at the time of payment the conditions of items A and B are fulfilled.