2023 Laws of Puerto Rico › TITLE TWENTY-SIX - Insurance (§§ 101 — 10377) › Subtitle 1 - Insurance Generally (§§ 101 — 4513) › Chapter 12 - Rates and Rating Organizations (§§ 1201 — 1240) › § 1204 - Rate making bases

(1) Rates shall be made in accordance with the following provisions:
(a) Basic classification, manual, minimum, class rates, rating schedules or rating plans shall be made and adopted, except as to specific rates on inland marine risks individually rated, which risks are not reasonably susceptible to manual or schedule rating, and which risks, by general custom of the business, are not written according to manual rates or rating plans. Any departure from such rates shall be in accordance with schedules, rating plans, and rules filed with the Commissioner.
(b) Rates shall not be excessive, inadequate, or unfairly discriminatory.
(c) No rate shall discriminate unfairly between risks involving essentially the same hazards and expense elements or between risks in the application of like charges and credits.
(d) Consideration shall be given to the past and prospective loss experience, and when it exists, to premium and loss experience of all the insurers that use said rates in Puerto Rico, in insurance provided in individual policies, as well as in policies or multiple-line contracts, as defined by regulations, except the experience of sections or parts of said policies or multiple-line contracts with indivisible premiums and their corresponding losses, including conflagration and catastrophe hazards, if any; to all the factors that can reasonably be attributable to the class of risks; to paid commissions and to other expenses incurred in Puerto Rico in contracting the insurance; to a reasonable underwriting profit, and in the case of participating insurers, to policyholders’ dividends. The Commissioner, when he deems it convenient, may authorize that the premiums and loss experience outside of Puerto Rico be taken into consideration. In the case of fire insurance rates, consideration shall be given to the insurers’ premium and loss experience during a period of not less than the last five years for which said experience is available.
All rate filings must establish the maximum portions for commissions that the insurer must pay, as well as the portions that shall be designated to profits and other expenses incurred in the underwriting of the insurance.
The Commissioner may disapprove the filing of rates, if he considers the concession of commissions, profits or other expenses to be incurred during the underwriting of the insurance, is excessive. To these effects, the Commissioner, when he deems it proper, may fix the maximum portion of commissions to be paid for underwriting the insurance in a type or subdivision of a class of insurance.
(e) Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense provisions, or both. Such standards may measure any differences among risks that can be demonstrated to have a probable effect upon losses or expenses.
(2) The systems of expense provisions included in the rates filed by any casualty insurance rating organization for use by any insurer or group of insurers may differ from those of other insurers or group of insurers to reflect the requirements of the operating methods of any such insurer or group with respect to any kind of insurance, or with respect to any subdivision or combination thereof for which subdivision or combination separate expense provisions are applicable.
(3) No fire insurance rating organization and no fire insurer which makes and files its own rates shall make or promulgate any rate or schedule of rates which is to be applied to any risk on the condition that the whole amount of insurance on any risk or any specified part thereof shall be placed with the members of or subscribers to such rating organization or with such insurer.
History —Ins. Code § 12.040; July 23, 1974, No. 133, Part 1, p. 598, § 7; June 4, 1983, No. 89, p. 211, § 1.