2023 Laws of Puerto Rico › TITLE TWENTY-SIX - Insurance (§§ 101 — 10377) › Subtitle 1 - Insurance Generally (§§ 101 — 4513) › Chapter 23 - Mortgage Loans Insurance (§§ 2301 — 2307) › § 2302 - Capital, surplus and contingencies; requirements

(1) An insurer may not be authorized to transact a mortgage loans insurance business unless he owns and maintains a paid-in capital of not less than one million dollars ($1,000,000) and a paid-in surplus of not less than one million dollars ($1,000,000).
(2) In addition to the capital and surplus required in this section, each insurer of mortgage loans shall establish a contingency reserve equal to fifty percent (50%) of the premiums earned after establishing the reserve for unearned premiums. This amount shall be segregated from the surplus. The premiums shall be considered earned for the period of coverage in accordance with the formula of “the sum of the digits” and may be computed to the nearest complete calendar month. Contributions to the reserve for contingencies shall be maintained for a period of one hundred twenty (120) months, except that, with the approval of the Commissioner, the insurer may make withdrawals in any year in which the real losses exceed thirty-five percent (35%) of the premiums earned during that year. The Commissioner shall through regulations determine when the insurer may make such withdrawals. If withdrawals are authorized, contributions to the reserve shall be withdrawn in the same chronological order which they came in.
The insurer shall maintain fifty percent (50%) of the minimum capital required by this chapter or fifty percent (50%) of the reserve for contingencies, whichever is greater, on businesses in Puerto Rico and shall invest same only in such investments as are eligible under § 316(2) of this title.
The reserve for business contingencies in Puerto Rico shall be, among other reasonable purposes of protection of the insured, for the protection of all the policyholders of the insurer in Puerto Rico.
(3) Whenever the laws or regulations of the state of domicile of a foreign insurer require a reserve of unearned premiums or for contingencies greater than that established in this section, it shall be considered that the insurer meets the requirements of reserves of unearned premiums and for contingencies herein established.
(4) A mortgage loans insurer shall not have in force at any time, a total obligation on the bulk of his insurance policies which exceeds twenty-five (25) times his surplus with regard to policyholders. Said obligation shall be computed on the basis of thirty percent (30%) of the outstanding balance of the bulk of the insured loans. If any insurer has in force at a given time a total obligation exceeding twenty-five (25) times his surplus with regard to policyholders, he shall cease transacting new business until his total obligation does not exceed said limit. In computing the total obligation, the amortization may be estimated based on the average of the term and rate of interest of the loans in the portfolio of the insurer.
(5) A mortgage loans insurer may not declare a dividend in cash except from the undistributed profits remaining over and above the entirety of the paid-in capital, paid-in surplus and contingency reserve.
History —Ins. Code, added as § 23.020 on Mar. 11, 1976, No. 12, p. 27, § 1; Jan. 19, 1998, No. 31, § 1.