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2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-105 - Prerequisites to Solicitation by Prospective Mutual Insurer

(a)    A person proposing to form a mutual insurer may not solicit in the State applications or premiums for policies of the proposed mutual insurer until the person provides the Commissioner with specific information about the methods and proposed cost of the promotion.
(b)    (1)    Before a person proposing to form a mutual insurer solicits applications or premiums for policies, the person shall have funds acquired in accordance with § 3-116 of this subtitle in the amount of:
(i)    $125,000, if the person will solicit applications or premiums for one kind of insurance business, as set out in § 4-104 of this article; or
(ii)    $250,000, if the person will solicit applications or premiums for two or more kinds of insurance business.
(2)    The funds shall be held in cash or in investments authorized for capital and reserve under Title 5, Subtitle 6 of this article.
(c)    (1)    A person must obtain a license from the Commissioner before the person forms a mutual insurer in the State.
(2)    Before issuing a license, the Commissioner shall investigate the record of the applicant.
(3)    The Commissioner shall issue a license under this subsection if the Commissioner finds that the applicant is honest and trustworthy.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-106 - Assets Required for Mutual Insurer -- in General

To qualify for a certificate of authority to engage in the insurance business, a mutual insurer must:
(1)    meet the requirements of § 3-105 of this subtitle; and
(2)    have received applications and collected cash premiums in an amount that, when added to any other legally available funds, results in unencumbered assets greater than all required reserves and other liabilities at least equal to the amount required by:
(i)    Sections 4-104 and 4-105 of this article, if the mutual insurer will be authorized to engage in insurance business on a nonassessable basis; or
(ii)    Section 3-107 of this subtitle, if the mutual insurer will be authorized to engage in insurance business on an assessable basis.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-108 - Engaging in Additional Kinds of Insurance Business

After being authorized to engage in one kind of insurance business, a mutual insurer may be authorized by the Commissioner to engage in additional kinds of insurance business as allowed by § 4-111 of this article if the mutual insurer otherwise complies with this article.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-109 - Impairment of Required Surplus

(a)    If the minimum surplus of a stock insurer required to be maintained by § 4-105 of this article becomes impaired, or if the assets of a mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by §§ 3-106 and 3-107 of this subtitle for authority to engage in the kinds of insurance business being transacted, the Commissioner immediately shall:
(1)    determine the amount of deficiency; and
(2)    serve notice on the insurer to cure the deficiency within 60 days after service of the notice.
(b)    An insurer may cure the deficiency:
(1)    in cash or in assets eligible for the investment of the insurer’s funds under Title 5, Subtitle 5 or Subtitle 6 of this article;
(2)    if a stock insurer, by reducing its capital to an amount not below the minimum required for the kinds of insurance that the stock insurer will transact; or
(3)    if a mutual insurer, by amending its certificate of authority to cover only the kinds of insurance for which the mutual insurer has sufficient surplus under this article.
(c)    (1)    Except as provided in paragraph (2) of this subsection, if an insurer does not cure the deficiency and file proof that it has done so with the Commissioner within the 60-day period:
(i)    the insurer is considered insolvent; and
(ii)    the Commissioner shall institute delinquency proceedings against the insurer under Title 9, Subtitle 2 of this article.
(2)    If the deficiency exists because the Commissioner required increased loss reserves, disallowed certain assets, or reduced the value at which certain assets are carried in the insurer’s accounts, the Commissioner, on application and good cause shown, may extend for not more than an additional 60 days the period within which the insurer may cure the deficiency and file proof that it has done so.
(d)    The directors of an insurer are individually liable for losses incurred under policies that are issued by the insurer:
(1)    after expiration of the period provided for curing a deficiency of the insurer’s capital stock or surplus; and
(2)    before the deficiency is cured.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-110 - Contingent Liability of Members

(a)    (1)    Except as provided in § 3-113 of this subtitle for nonassessable policies, each member of a domestic mutual insurer other than a life insurer is contingently liable on a pro rata basis for the discharge of the liabilities of the domestic mutual insurer.
(2)    The contingent liability provided for by this subsection shall be expressly stated in each policy.
(b)    Termination of the policy of a member does not relieve the member of the contingent liability for the member’s proportion, if any, of the obligations of the domestic mutual insurer that accrued while the policy was in force.
(c)    The unrealized contingent liability of a member is not an asset of the domestic mutual insurer in determining its financial condition.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-111 - Levy of Assessment

(a)    The directors of a domestic mutual insurer shall assess its members who, at any time during the 36 months before the notice of assessment is mailed to them under § 3-112(b) of this subtitle, held policies providing for contingent liability, if:
(1)    the assets of the domestic mutual insurer at any time are less than its liabilities plus the minimum surplus required to be maintained to transact the kind of insurance being transacted by the domestic mutual insurer; and
(2)    the deficiency is not being cured from other sources.
(b)    Members assessed under this section are liable to the domestic mutual insurer for the amount assessed.
(c)    (1)    The total of assessments shall be sufficient to:
(i)    cure the deficiency; and
(ii)    provide reasonable working funds above the minimum surplus, not exceeding 5% of the domestic mutual insurer’s liabilities on the date that the deficiency was determined.
(2)    A member’s assessment may not exceed the lesser of:
(i)    one policy premium; or
(ii)    the premium for a full year.
(d)    The assessment on a policy with contingent liability shall be computed based on the premiums earned on the policy during the period to which the assessment relates.
(e)    A member may not have an offset against an assessment for which the member is liable because of a claim for an unearned premium or loss payable.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-112 - Enforcement of Contingent Liability

(a)    The determination by the domestic mutual insurer of the total assessment under § 3-111 of this subtitle and the amount of each member’s assessment is considered prima facie correct.
(b)    (1)    The domestic mutual insurer shall mail to each member, at the member’s last address of record with the domestic mutual insurer, notice of:
(i)    the amount of the assessment to be paid; and
(ii)    the period within which the assessment must be paid.
(2)    The period within which the assessment must be paid may not be less than 20 days after notice.
(c)    (1)    If a member fails to pay the assessment within the period specified in the notice, the domestic mutual insurer may bring suit to collect the assessment.
(2)    Failure of the member to receive the notice mailed in accordance with subsection (b) of this section is not a defense in an action to collect the assessment.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-113 - Issuance of Nonassessable Policies

(a)    If a domestic mutual insurer has surplus funds at least equal to the paid-in capital stock and surplus required of a domestic stock insurer that transacts like kinds of insurance business, the domestic mutual insurer, on receipt of an order of the Commissioner authorizing it to do so, may extinguish the contingent liability of its members as to all its policies in force and may issue nonassessable policies.
(b)    Subject to the requirements of this article for issuing nonassessable policies, a foreign or alien mutual insurer may issue nonassessable policies to its members in the State under its articles of incorporation and the laws of its domicile.
(c)    A mutual insurer may not issue assessable policies in the State if the mutual insurer issues nonassessable policies in the State or another jurisdiction.
(d)    A policy of a domestic mutual insurer that, under an order of the Commissioner, is without contingent liability and therefore is nonassessable by its terms is not subject to assessment for a debt or liability of the domestic mutual insurer.
(e)    The Commissioner shall revoke the authority of a mutual insurer to issue nonassessable policies if:
(1)    the assets of the mutual insurer at any time are less than the sum of its liabilities and the surplus required for that authority; or
(2)    the mutual insurer, by resolution of its board of directors approved by a majority of its members, requests that the authority be revoked.
(f)    After revocation of a mutual insurer’s authority to issue nonassessable policies, the mutual insurer may not:
(1)    issue a nonassessable policy; or
(2)    renew a policy that is renewable at the option of the mutual insurer without endorsing the policy to provide for the contingent liability of the policyholder.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-114 - Participating Policies

(a)    A domestic stock insurer or domestic mutual insurer may:
(1)    issue any or all of its policies with or without participation in profits, savings, or unabsorbed parts of premiums;
(2)    classify policies issued on a participating and nonparticipating basis; and
(3)    determine the right to participate and the extent of participation of any class of policies.
(b)    The classification of policies or determination of participation under subsection (a) of this section shall be reasonable and may not discriminate unfairly between policyholders within the same classifications.
(c)    A life insurer may issue both participating and nonparticipating policies only if the right or absence of the right to participate is reasonably related to the premium charged.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-115 - Dividends

(a)    The directors of a domestic mutual insurer periodically may apportion and pay or credit to its members dividends only out of that part of surplus funds that represents net realized savings and net realized earnings in excess of the surplus required by law to be maintained.
(b)    A dividend that is otherwise proper may be payable out of the domestic mutual insurer’s net realized savings and net realized earnings even though the domestic mutual insurer’s total surplus is then less than its total contributed surplus.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-116 - Loans to Insurers

(a)    (1)    A director, officer, or member of a stock insurer or mutual insurer or any other person may lend or advance to the stock insurer or mutual insurer any money necessary to enable it to comply with a surplus requirement or any other requirement of law.
(2)    The instrument evidencing a loan or advance under this subsection shall:
(i)    be approved as to form and content by the Commissioner; and
(ii)    contain provisions that specify that:
1.    the instrument is subordinate to policyholders, claimant and beneficiary claims, and all other classes of creditors other than surplus note holders; and
2.    interest payments and principal repayments may not be made without prior approval of the Commissioner.
(3)    A loan or advance under this subsection and any interest on it:
(i)    is payable only out of the surplus remaining after the stock insurer or mutual insurer provides for all reserves and other liabilities; and
(ii)    is not otherwise a liability or claim against the stock insurer or mutual insurer or any of its assets.
(b)    (1)    Proceeds of a loan or advance under this section shall be in the form of cash or other admitted assets having readily determinable values and liquidity satisfactory to the Commissioner.
(2)    In each annual statement, a stock insurer or mutual insurer shall report the amount of each loan or advance made under this section.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-117 - Loans to and Guarantees of Obligations of Directors and Officers

(a)    (1)    Except as provided in subsection (d) of this section, an authorized insurer or its subsidiary may not make, directly or indirectly, a loan to a director or executive officer of the authorized insurer unless the loan:
(i)    is a bona fide mortgage loan made on a principal residence of the director or executive officer; and
(ii)    is approved or ratified by the board of directors of the authorized insurer.
(2)    A director or executive officer may not accept, directly or indirectly, a loan prohibited by paragraph (1) of this subsection.
(b)    An authorized insurer may not make an advance to a director or executive officer of the authorized insurer for future services to be performed more than 1 year after the date of making the advance.
(c)    (1)    An authorized insurer or its affiliate or subsidiary may not guarantee, directly or indirectly, the financial obligation of a director or executive officer of the authorized insurer, affiliate, or subsidiary.
(2)    A guarantee made in violation of this subsection is void.
(3)    This subsection does not prohibit an insurer from making or entering into an insurance contract or surety bond that is authorized by its articles of incorporation for a director or executive officer.
(d)    This section does not prohibit a life insurer from making a policy loan to a director or executive officer of the life insurer on a policy or contract of the life insurer in an amount not exceeding the loan value of the policy or contract.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-118 - Agreements to Pay Expenses of Management

A domestic stock insurer or domestic mutual insurer may not enter into an agreement in which a person agrees to pay all or part of the expenses of management of the domestic stock insurer or domestic mutual insurer in consideration of an agreement to pay to the person commissions on premiums due the domestic stock insurer or domestic mutual insurer or any other compensation for the person’s services.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-120 - Conversion of Stock Insurer to Mutual Insurer

(a)    This section does not apply to mutualization under a court order in connection with the rehabilitation or reorganization of an insurer under Title 9, Subtitle 2 of this article.
(b)    A domestic stock insurer, other than a title insurer, may become a mutual insurer under a plan and procedure that is approved by the Commissioner after a hearing.
(c)    The Commissioner may not approve a plan or procedure for mutualization unless:
(1)    the plan or procedure is equitable to stockholders and policyholders;
(2)    the plan is subject to approval by vote of the holders of at least three-fourths of the insurer’s outstanding capital stock with voting rights and by vote of at least two-thirds of the insurer’s policyholders who vote on the plan in person, by proxy, or by mail under the notice and procedure approved by the Commissioner;
(3)    for a life insurer, the right to vote under item (2) of this subsection is limited to holders of policies, other than term or group policies, that have been in force for more than 1 year;
(4)    mutualization will result in retirement of shares of the insurer’s capital stock at a price not exceeding the fair market value of the stock as determined by competent disinterested appraisers;
(5)    the plan provides for the purchase of the stock of an objecting stockholder in the same manner and subject to the same applicable conditions provided by Title 3, Subtitle 2 of the Corporations and Associations Article for the rights of objecting stockholders with respect to consolidation or merger of corporations;
(6)    the plan provides for definite conditions to be fulfilled by a designated early date on which the mutualization will be considered effective; and
(7)    the mutualization leaves the insurer with surplus funds that are reasonably adequate for the security of its policyholders and to enable the insurer to continue successfully in business in the states where it is then authorized to transact insurance business for the kinds of insurance included in its certificates of authority in those states.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-122 - Consolidations, Mergers, and Share Exchanges of Stock Insurers

(a)    Except as otherwise provided in this section, the provisions of the Corporations and Associations Article on the consolidation, merger, and share exchange of stock corporations apply to the consolidations, mergers, and share exchanges of domestic stock insurers and domestic and foreign stock insurers.
(b)    The articles of consolidation, merger, or share exchange of stock insurers must be submitted to the Commissioner for examination and approval before the articles may be accepted for record by the Department of Assessments and Taxation.
(c)    (1)    Before approval of the articles of consolidation or merger, the Commissioner shall examine and review the affairs of the stock insurers involved in the consolidation or merger as the Commissioner finds necessary or desirable.
(2)    The Commissioner may hold a hearing on the proposed consolidation or merger after giving the notice that the Commissioner considers appropriate.
(d)    The Commissioner shall approve the articles of consolidation or merger by written endorsement on them before they become operative if the Commissioner finds that:
(1)    the articles comply with the Code; and
(2)    the policyholders in the successor stock insurer are protected through adequate reserves and assets for losses and claims then anticipated.
(e)    The successor stock insurer shall bear all expenses in connection with proceedings conducted by the Commissioner under this section.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-123.1 - Mutual Insurers Forming a Business Combination

(a)    Unless otherwise prohibited under this article and subject to the prior approval of the Commissioner, one or more mutual insurers organized under the laws of any state may form a business combination with one or more domestic mutual insurers for the purpose of purchasing reinsurance or other financial services.
(b)    (1)    Mutual insurers forming a business combination under this section shall enter into a written agreement that prescribes the terms and conditions of the business combination.
(2)    The agreement shall be approved by the vote of the majority of the board of directors of each mutual insurer.
(c)    The Commissioner may adopt regulations concerning the formation of business combinations under this section.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-124 - Bulk Reinsurance -- Stock Insurers

(a)    A domestic stock insurer may reinsure with another insurer all or substantially all of its insurance in force or a major class of its insurance in force by an agreement of bulk reinsurance.
(b)    (1)    An agreement of bulk reinsurance is not effective unless it is filed with and approved by the Commissioner.
(2)    The Commissioner shall approve the agreement within a reasonable time after it is filed unless the Commissioner finds that the agreement:
(i)    is inequitable to the stockholders of the domestic stock insurer; or
(ii)    would substantially reduce the protection of or service to the policyholders of the domestic stock insurer.
(3)    If the Commissioner does not approve the agreement, the Commissioner shall notify the domestic stock insurer in writing of the disapproval and specify the reasons for disapproval.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-125 - Bulk Reinsurance -- Mutual Insurers

(a)    After compliance with this section, a domestic mutual insurer may reinsure with a stock insurer or mutual insurer all or substantially all of its insurance in force or a major class of its insurance in force by an agreement of bulk reinsurance.
(b)    (1)    An agreement of bulk reinsurance is not effective unless it is filed with and approved by the Commissioner in writing after a hearing.
(2)    The Commissioner shall approve the agreement within a reasonable time after it is filed if the Commissioner finds that the agreement:
(i)    is equitable to each domestic insurer involved; and
(ii)    would not reduce substantially the protection of or service to the policyholders of each domestic insurer involved.
(3)    If the Commissioner does not approve the agreement, the Commissioner shall notify each insurer involved in writing of the disapproval and specify the reasons for disapproval.
(c)    (1)    In accordance with reasonable notice and procedure approved by the Commissioner, the plan and agreement for bulk reinsurance must be approved by vote of at least two-thirds of each domestic mutual insurer’s members who vote on the agreement at meetings of the members called for that purpose.
(2)    For a life insurer, the right to vote may be limited to members with policies, other than term or group policies, that have been in force for more than 1 year.
(d)    (1)    If the agreement is for reinsurance of a mutual insurer in a stock insurer, the agreement must provide for payment in cash to each member of the insurer who is entitled to payment as on conversion of a mutual insurer to a stock insurer under § 3-121 of this subtitle.
(2)    Each member shall be paid the member’s equity in the insurance that is reinsured as determined under a fair formula approved by the Commissioner.
(3)    Each member’s equity shall be based on the member’s equity in the reserves, assets, whether or not admitted assets, and surplus, if any, of the mutual insurer to be taken over by the stock insurer.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-126 - Changes in Domicile of Insurers

(a)    (1)    A foreign insurer authorized to engage in the insurance business in the State may become a domestic insurer by:
(i)    complying with all requirements of the law relating to the formation and organization of a domestic insurer; and
(ii)    designating its principal place of business in the State.
(2)    On becoming a domestic insurer, the insurer:
(i)    is entitled to the certificates and licenses to transact insurance business in this State that are issued to domestic insurers;
(ii)    shall be recognized in all respects as an insurer formed under the laws of this State as of the date of authorization as an insurer in its original domiciliary state; and
(iii)    is subject to the authority and jurisdiction of the State.
(b)    (1)    When a foreign insurer authorized to engage in the insurance business in this State transfers its corporate domicile to this State or another state by merger, consolidation, or other lawful method, the certificate of authority, appointments of agents, rates, and other issues that are subject to the Commissioner’s approval and that are in existence at the time of the transfer remain in effect after the transfer if the insurer at all times remains qualified to engage in the insurance business in this State.
(2)    All outstanding policies of a transferring insurer remain in effect and need not be endorsed with the new name of the insurer or the new domiciliary and location of the insurer unless the Commissioner so orders.
(3)    A transferring insurer:
(i)    may file new policy forms with the Commissioner on or before the effective date of the transfer; or
(ii)    if allowed by and under conditions approved by the Commissioner, may use any existing policy form previously filed with the Commissioner with appropriate endorsements.
(4)    A foreign insurer that transfers its domicile to another state shall:
(i)    notify the Commissioner of the details of the proposed transfer; and
(ii)    file promptly with the Commissioner any resulting amendments to corporate documents and other items on file with the Commissioner.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-127 - Sale of Securities

(a)    (1)    In this section the following words have the meanings indicated.
(2)    “Offer to sell” has the meaning stated in the Maryland Securities Act.
(3)    “Register” means to register securities with the Division of Securities in the Office of the Attorney General in accordance with §§ 11–502 and 11–504 of the Corporations and Associations Article.
(4)    “Sale” has the meaning stated in the Maryland Securities Act.
(b)    (1)    The filing requirements of subsections (c) and (d) of this section apply to a person that engages in, proposes to engage in, or assists in the promotion or formation of:
(i)    a domestic insurer;
(ii)    an insurance holding corporation; or
(iii)    a corporation that finances:
1.    a domestic insurer or the production of its business; or
2.    an insurance holding corporation or the production of its business.
(2)    This section does not apply to a person that is or will be an affiliate of an authorized insurer that is a member of an insurance holding company registered with the Commissioner under § 7–601 of this article.
(c)    Within 5 days after a registration is filed with the Division of Securities, a person that is required to register a proposed sale or offer to sell securities under the Maryland Securities Act shall file with the Commissioner a copy of that registration.
(d)    At least 30 days before the proposed sale or offer to sell securities, a person that is exempt under § 11–602(9) and (10) of the Corporations and Associations Article from the registration requirements of §§ 11–502 and 11–504 of the Corporations and Associations Article shall file with the Commissioner the information otherwise required by § 11–502 or § 11–504 of the Corporations and Associations Article.
(e)    (1)    If the Commissioner determines that a person has engaged in or is about to engage in an act or practice that violates this section, the Commissioner, without notice and before a hearing, may issue and cause to be served on the person an order to cease and desist from engaging in the acts for which filing is required under this section.
(2)    (i)    Unless postponed by mutual consent of the parties, the Commissioner shall hold a hearing within 30 days after the date of the order.
(ii)    The Commissioner shall provide notice of the hearing to each party.
(f)    The Commissioner has the enforcement powers listed in §§ 2–201 and 2–203 of this article.
(g)    (1)    In addition to any penalty otherwise applicable under this article, the Commissioner may impose a civil penalty not exceeding $500 for each violation of this section.
(2)    Each day a violation of this section continues is a separate violation.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 1 - Stock Insurers and Mutual Insurers › Section 3-128 - Solicitations in Other States

(a)    In this section, “reciprocating state” means a state under the laws of which a prohibition on solicitation similar to that imposed against domestic insurers under this section is imposed on and enforced against insurers domiciled in that state.
(b)    A domestic insurer may not knowingly solicit insurance business in a reciprocating state in which the domestic insurer is not licensed as an authorized insurer.
(c)    This section does not prohibit advertising through publication or by radio, television, or other broadcasts originating outside the reciprocating state if:
(1)    the insurer is licensed to engage in the insurance business in a majority of the states in which the advertising is disseminated; and
(2)    the advertising is not specifically directed to residents of the reciprocating state.
(d)    This section does not prohibit:
(1)    insurance covering persons or risks located in a reciprocating state under contracts solicited and issued in states in which the insurer is then licensed; or
(2)    insurance effectuated by the insurer as an unauthorized insurer under the laws of the reciprocating state.
(e)    If the Commissioner finds, after a hearing, that a domestic insurer has violated this section, the Commissioner shall suspend or revoke the certificate of authority of the domestic insurer.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-203 - Qualifications of Reciprocal Insurers

(a)    A reciprocal insurer may be authorized to engage in the insurance business if the reciprocal insurer meets the requirements of this section and is otherwise in compliance with the applicable provisions of this article.
(b)    To write assessable policies, a reciprocal insurer must have surplus funds of not less than:
(1)    $375,000 for one kind of insurance business; and
(2)    $750,000 for two or more kinds of insurance business.
(c)    To write nonassessable policies, a reciprocal insurer must:
(1)    have surplus funds of not less than:
(i)    $750,000 for one kind of insurance business; and
(ii)    $1,500,000 for two or more kinds of insurance business; and
(2)    comply with the deposit requirements of § 4-106 of this article.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-204 - Organization and Application for Certificate of Authority

(a)    Twenty-five or more persons domiciled in the State may organize a domestic reciprocal insurer and may apply to the Commissioner for a certificate of authority to engage in the insurance business as a reciprocal insurer.
(b)    The proposed attorney in fact of the reciprocal insurer shall fulfill the requirements of and shall execute, verify under oath, and file with the Commissioner when applying for a certificate of authority, a declaration that includes:
(1)    the name of the reciprocal insurer;
(2)    the location of the reciprocal insurer’s principal office and of any other office from which policies will be issued;
(3)    each kind of insurance business in which the reciprocal insurer intends to engage;
(4)    the appointment of the Commissioner as agent for service of process in accordance with § 4-107 of this article;
(5)    the name and address of each original subscriber;
(6)    the appointment of the proposed attorney in fact and a copy of the power of attorney;
(7)    the name and address of each officer and each director of the attorney in fact, if the attorney in fact is a corporation, or of each member of the attorney in fact, if the attorney in fact is a firm;
(8)    the powers of the subscribers’ advisory committee;
(9)    the name and term of office of each member of the subscribers’ advisory committee;
(10)    a statement that, after deducting any sum payable to the attorney in fact, all money paid to the reciprocal insurer shall be held in the name of the reciprocal insurer for the purposes stated in the subscribers' agreement;
(11)    a copy of the subscribers' agreement;
(12)    a statement that:
(i)    each original subscriber has applied in good faith for insurance of a kind in which the reciprocal insurer intends to engage; and
(ii)    the reciprocal insurer has received from each original subscriber the full premium or premium deposit required for the policy applied for, for a term of not less than 6 months, at a rate that has been filed with and approved as adequate by the Commissioner;
(13)    a statement of the financial condition of the reciprocal insurer, a schedule of its assets, and a statement that the surplus required by § 3-203 of this subtitle is available; and
(14)    a copy of each policy, endorsement, and application form that the reciprocal insurer proposes to issue or use.
(c)    When applying for a certificate of authority, the proposed attorney in fact shall pay to the Commissioner the applicable fee required by § 2-112 of this article.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-205 - Bond of Attorney in Fact

(a)    (1)    When filing the declaration required by § 3-204 of this subtitle, the attorney in fact of a domestic reciprocal insurer shall file with the Commissioner a bond that:
(i)    is in favor of the State for the benefit of all persons damaged as a result of a breach of the conditions of the bond by the attorney in fact;
(ii)    is in the penal sum of $100,000;
(iii)    is aggregate in form;
(iv)    is executed by the attorney in fact and an authorized corporate surety insurer; and
(v)    is conditioned that the attorney in fact:
1.    will account faithfully for all money and other property of the reciprocal insurer that comes into the possession of the attorney in fact; and
2.    will not withdraw or appropriate for the use of the attorney in fact from the funds of the reciprocal insurer, any money or property to which the attorney in fact is not entitled under the power of attorney.
(2)    The bond is subject to the approval of the Commissioner.
(b)    (1)    An action on the bond of the attorney in fact may be brought at any time by:
(i)    one or more subscribers who suffer loss through a violation of the conditions of the bond; or
(ii)    a receiver or liquidator of the reciprocal insurer.
(2)    Any amount recovered in the action shall be deposited in the funds of the reciprocal insurer.
(3)    The total liability of the surety insurer under the bond may not exceed the penal sum of the bond.
(c)    The bond shall provide that the surety insurer may not cancel the bond unless the surety insurer gives written notice of cancellation to the attorney in fact and the Commissioner at least 30 days before canceling the bond.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-206 - Issuance of Certificate of Authority

After payment of the applicable fee required by § 2-112 of this article, the Commissioner shall issue to the attorney in fact of each reciprocal insurer that meets the requirements of this subtitle a certificate of authority in the name of the reciprocal insurer.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-207 - Scope of Certificate of Authority

(a)    A certificate of authority authorizes a reciprocal insurer to engage in one kind or a combination of kinds of insurance business, except for life insurance and health insurance other than as supplementary coverage in policies of liability insurance.
(b)    A certificate of authority authorizes a reciprocal insurer to purchase reinsurance and grant reinsurance as to any kind of insurance business in which the reciprocal insurer is authorized to engage.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-208 - Denials, Suspensions, and Revocations

In addition to any other grounds for denial, suspension, or revocation of a certificate of authority, the Commissioner may deny, suspend, or revoke a certificate of authority if the attorney in fact of a reciprocal insurer fails to comply with any provision of this article.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-209 - Business Name; Authority to Sue

A reciprocal insurer:
(1)    shall have and use a business name that includes the word “reciprocal”, “interinsurer”, “interinsurance”, “exchange”, “underwriters”, or “underwriting”; and
(2)    may sue and be sued in its own name.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-210 - Annual Statement

The annual statement of a reciprocal insurer shall:
(1)    be made and filed by the attorney in fact of the reciprocal insurer; and
(2)    be supplemented by any additional information required by the Commissioner about the affairs and transactions of the attorney in fact as they relate to the reciprocal insurer.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-211 - Financial Condition of Reciprocal Insurer

(a)    The Commissioner shall determine the financial condition of a reciprocal insurer in accordance with this section.
(b)    (1)    The surplus deposits of subscribers shall be allowed as assets, except that any premium deposits that are delinquent for 90 days or more shall be charged first against the surplus deposits.
(2)    Premium deposits that are delinquent for less than 90 days shall be allowed as assets.
(3)    An assessment levied on subscribers, but not collected, may not be allowed as an asset.
(4)    The contingent liability of subscribers may not be allowed as an asset.
(c)    (1)    The Commissioner shall charge as liabilities the same reserves as are required of incorporated insurers that issue nonassessable policies on a reserve basis.
(2)    The surplus deposits of subscribers may not be charged as a liability.
(d)    The computation of reserves shall be based on premium deposits other than membership fees.
(e)    At any time, the Commissioner may require the attorney in fact of a reciprocal insurer to submit an affidavit that shows the amount of annual savings, not already credited to subscribers, that are due but not paid.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-212 - Attorney in Fact; Power of Attorney

(a)    The attorney in fact of a reciprocal insurer may be an individual, firm, or corporation.
(b)    The attorney in fact of a foreign or alien reciprocal insurer that is authorized to engage in the insurance business in the State is not considered to be doing business in the State within the meaning of any law of the State that applies to foreign firms or corporations merely because the attorney in fact performs its duties as attorney in fact with respect to the reciprocal insurer's transactions in the State.
(c)    The attorney in fact of a reciprocal insurer has the rights and powers provided in the power of attorney given the attorney in fact by the subscribers.
(d)    The terms of a power of attorney or agreement collateral to the power of attorney must be reasonable and equitable.
(e)    The power of attorney must state:
(1)    the powers of the attorney in fact;
(2)    that the attorney in fact is authorized to accept service of process on behalf of the reciprocal insurer in an action against the reciprocal insurer on contracts exchanged;
(3)    the general services to be performed by the attorney in fact;
(4)    the maximum amount to be deducted from advance premiums or deposits to be paid to the attorney in fact and the general items of expense in addition to losses, to be paid by the reciprocal insurer; and
(5)    except as to nonassessable policies, a provision for a contingent several liability of each subscriber in the amount specified in § 3-216 of this subtitle.
(f)    The power of attorney may:
(1)    provide for the right of substitution of the attorney in fact and revocation of the power of attorney;
(2)    restrict the exercise of the power of attorney as agreed by the subscribers;
(3)    provide for the exercise of any right reserved to the subscribers directly or through their advisory committee; and
(4)    contain any other lawful provisions considered advisable.
(g)    For a domestic reciprocal insurer, a power of attorney or agreement collateral to the power of attorney is not effective and may not be used until approved by the Commissioner.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-213 - Subscribers

(a)    An individual, partnership, or corporation of the State may make application, enter into agreement for, hold policies or contracts in or with, and be a subscriber of a domestic, foreign, or alien reciprocal insurer.
(b)    (1)    In addition to the powers specified in its articles of incorporation, a corporation organized under the laws of the State has full power as a subscriber to exchange insurance contracts through a domestic, foreign, or alien reciprocal insurer.
(2)    The right to exchange insurance contracts through a reciprocal insurer is:
(i)    incidental to the purposes for which the corporation is organized; and
(ii)    as fully granted as the powers expressly conferred on the corporation.
(c)    Governments, governmental units, states, political subdivisions of states, boards, associations, estates, trustees, and fiduciaries may exchange reciprocal insurance contracts with each other and with individuals, partnerships, and corporations to the same extent that individuals, partnerships, and corporations may exchange reciprocal insurance contracts.
(d)    An officer, representative, trustee, receiver, or legal representative of a subscriber shall be recognized as acting for or on behalf of the subscriber for the purpose of a reciprocal insurance contract and in that capacity is not personally liable on the reciprocal insurance contract.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-214 - Subscribers' Advisory Committee

(a)    The advisory committee of a domestic reciprocal insurer that exercises the subscribers' rights shall be chosen under rules that the subscribers adopt.
(b)    Not less than two-thirds of the advisory committee shall be subscribers other than the attorney in fact of the reciprocal insurer or a person employed by, representing, or having a financial interest in the attorney in fact.
(c)    The advisory committee shall:
(1)    supervise the finances of the reciprocal insurer;
(2)    supervise the operations of the reciprocal insurer to ensure compliance with the subscribers' agreement and power of attorney;
(3)    procure the audit of the accounts and records of the reciprocal insurer and of the attorney in fact at the expense of the reciprocal insurer; and
(4)    have any additional powers and functions as conferred by the subscribers’ agreement.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-215 - Modification of Subscribers' Agreement or Power of Attorney

(a)    Modification of the terms of the subscribers' agreement or power of attorney of a domestic reciprocal insurer shall be made jointly by the attorney in fact of the reciprocal insurer and the subscribers' advisory committee.
(b)    A modification described in subsection (a) of this section is not effective retroactively and does not apply to an insurance contract issued before the modification.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-216 - Liability of Subscribers

(a)    (1)    Except as to a nonassessable policy, each subscriber has a contingent assessment liability, in the amount stated in the power of attorney or subscriber’s agreement, for payment of losses and expenses incurred while the subscriber's policy is in force.
(2)    The liability of each subscriber, other than as to a nonassessable policy, for the obligations of the reciprocal insurer is individual, several, and proportionate and is not joint.
(b)    (1)    The contingent liability of each subscriber shall be at the rate of not less than one additional annual premium or premium deposit stated in the policy but not more than 10 times the annual premium or premium deposit.
(2)    The maximum total contingent liability shall be calculated as set forth in § 3-217(e) of this subtitle.
(c)    Each assessable policy issued by a reciprocal insurer shall contain a statement of the contingent liability.
2023 Maryland Statutes › Insurance › Title 3 - Kinds of Insurers › Subtitle 2 - Reciprocal Insurers › Section 3-217 - Assessments

(a)    Assessments periodically may be levied on the subscribers of a domestic reciprocal insurer liable for assessments, as allowed by the terms of the subscribers’ policies, by:
(1)    the attorney in fact of the reciprocal insurer, after approval by the subscribers’ advisory committee and the Commissioner; or
(2)    the Commissioner, in liquidation of the reciprocal insurer.
(b)    (1)    Subject to paragraph (3) of this subsection, each subscriber's share of a deficiency for which an assessment is made shall be calculated by multiplying:
(i)    the premium earned on the subscriber's policy during the period covered by the assessment; by
(ii)    the ratio of the total deficiency to the total premiums earned during that period on all policies subject to the assessment.
(2)    For purposes of calculating the earned premium under this section:
(i)    the gross premium received by the reciprocal insurer for the policy shall be used as a base; and
(ii)    deductions may be taken from the gross premium only for charges that do not recur on the renewal or extension of the policy.
(3)    Each subscriber's share of a deficiency may not exceed the subscriber's total contingent liability under subsection (e) of this section.
(c)    A subscriber may not have an offset against an assessment for which the subscriber is liable because of a claim for an unearned premium or loss payable.
(d)    Each subscriber of a domestic reciprocal insurer with contingent liability is liable for and shall pay the subscriber’s share of an assessment as calculated and limited in accordance with this subtitle if, while the subscriber’s policy is in force or within 3 years after its termination:
(1)    the subscriber is notified by the attorney in fact of the reciprocal insurer or the Commissioner of the intent to levy the assessment; or
(2)    an order is issued that directs the reciprocal insurer to show cause why a receiver, conservator, rehabilitator, or liquidator of the reciprocal insurer should not be appointed.
(e)    One policy or a subscriber to one policy may not be assessed or charged with a total contingent liability for obligations incurred by a domestic reciprocal insurer in 1 calendar year, in excess of the amount set forth in the power of attorney or subscribers’ agreement calculated solely on the premium earned on the policy during that year.