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The 190th General Court of the Commonwealth of Massachusetts

Section 4: Proposed plan of operation for internal structure and management, and corporate procedures; contents; approval or disapproval

Section 4. The Corporation shall submit to the commissioner of insurance for his approval a plan of operation addressing both the internal structure and management of the Corporation and the procedures by which the Corporation seeks to carry out the purposes of this chapter, including the promotion within the commonwealth of improved availability and affordability of pollution liability insurance.

The plan shall include criteria and procedures for acceptance and cession of reinsurance by the Corporation; underwriting standards; procedures for determining the coverage and limits of policies for which reinsurance will be accepted or ceded; criteria for the kind and terms of reinsurance that will be accepted or ceded; procedures for the initial review and continuing examination of the operations of any entity applying for or obtaining reinsurance, including such entity's surplus and overall financial resources, its rates and risk classifications, its underwriting standards, risk management and safety incentive programs, its claim adjustment procedures and other aspects of its services and administrative operations; criteria for a statistical plan for the purpose of collecting and reporting all appropriate operating data to the commissioner; and the plan shall address all other matters deemed necessary by the commissioner to carry out the purposes of this chapter.

The plan shall provide that the premium charged for reinsurance shall be the premium charged for the coverage and limits ceded, less an appropriate expense allowance to the entity obtaining reinsurance. The expense allowance shall consist of the amounts actually incurred by the ceding entity on the ceded risk subject to a maximum of the total expense allowance provided in ratemaking for the respective categories of risk in the latest rate review or experience review accepted by the commissioner for the entity obtaining reinsurance. Policies, rates for coverage, expense allowances, and membership or subscription agreements of an entity seeking reinsurance shall be subject to review and approval by the commissioner, and such entity shall also provide to the commissioner such additional information and permit examination of such records as the commissioner may request for the purpose of demonstrating its financial responsibility. The plan shall provide reasonable procedures to assure that the rates charged by such entity are adequate and that the Corporation's premium charges for reinsurance are adequate, on the basis of reasonable actuarial projections, to cover the Corporation's liability in connection with such reinsurance.

The plan shall also include a requirement that prior to acceptance of any pollution liability insurance policies for reinsurance by the Corporation, the following findings shall be made concerning the entity obtaining reinsurance or the members insured by such entity: (i) that the entity or its members has had difficulty in obtaining sufficient or affordable pollution liability reinsurance from the private market; (ii) that obtaining reinsurance is necessary for the continued operation of the affected businesses; (iii) that the affected businesses have a positive impact on economic development and employment in the commonwealth; (iv) that the entity or its members have or will soon implement adequate measures to limit the risk of future adverse disposal, discharge, release or escape of hazardous waste and other pollutants; and, (v) that the entity or its members will undertake adequate recordkeeping to allow access to information by the Corporation to ensure compliance with all necessary conditions of the reinsurance contract.

The plan shall provide for the assumption by the Corporation of up to one hundred per cent reinsurance on any policy or contract of insurance, or binder thereon, which the Corporation determines to be a pollution liability insurance policy acceptable for reinsurance under the provisions of this chapter; which is issued by a group self-insurance plan, group captive, or a reciprocal insurance exchange licensed or approved under applicable laws of the commonwealth; and which meets the Corporation's criteria for providing reinsurance, including underwriting and risk management standards.

Within forty-five days of its submission by the board, the proposed plan shall be reviewed by the commissioner and approved or disapproved. The commissioner shall approve the plan if he finds that it fulfills the purposes of this chapter. In his review of the proposed plan the commissioner may, in his discretion, consult with the directors and any other individual or organization. If the commissioner approves the proposed plan he shall certify such approval to the directors and said plan shall take effect ten days after such certification. If the commissioner disapproves all or any part of the proposed plan of operation, he shall return it to the directors with a statement, in writing, of the reasons for his disapproval and any recommendations he may wish to make. The directors may accept the commissioner's recommendations, or may propose a new plan, which accepted recommendations or a new plan shall be submitted to the commissioner within twenty-one days after the return of a disapproved plan to the directors. The accepted recommendations or new plan shall be reviewed by the commissioner within fourteen days. Upon approval and certification, the plan will take effect ten days thereafter.

If the directors do not submit a proposed plan of operation within the prescribed time, or upon disapproval of a proposed plan, accept the recommendations of the commissioner or submit a new plan in the prescribed time, the commissioner shall in a timely manner promulgate a plan of operation and certify same to the directors. Any such plan promulgated by the commissioner shall take effect ten days after certification to the directors.

The directors of the Corporation may, on their own initiative, amend the plan of operation at any time, subject to approval by the commissioner.

The commissioner may review the plan of operation whenever he deems expedient, and may amend said plan after consultation with the directors and upon certification to the directors of such amendment.