(a) (1) To the extent necessary to secure funds for the association for payment of the administrative expenses of the association, covered claims of insolvent insurers, and for payment of reasonable costs of adjusting the claims, the association shall collect premium payments from its member insurers sufficient to discharge its obligations.

(2) The association shall allocate its claim payments and costs, incurred or estimated to be incurred, to one or more of the following categories:

(A) Workers’ compensation claims.

(B) Homeowners’ claims and automobile claims, including all of the following:

(i) Automobile material damage.

(ii) Automobile liability (both personal injury and death and property damage).

(iii) Medical payments.

(iv) Uninsured motorist claims.

(C) Claims other than workers’ compensation, homeowners’, and automobile, as defined above.

(3) Separate premium payments shall be required for each category.

(4) The premium payments for each category shall be used to pay the claims and costs allocated to that category.

(b) (1) The rate of premium charged shall be a uniform percentage of net direct written premium in the preceding calendar year applicable to that category.

(2) The rate of premium charges to each member insurer in the appropriate categories shall be based on the net direct written premium of each member insurer as shown in the latest year’s annual financial statement on file with the commissioner.

(c) (1) For purposes of this section, “net direct written premiums” means the amount of gross premiums, less return premiums, received in that calendar year upon business done in this state, other than premiums received for reinsurance.

(2) In cases of a dispute as to the amount of the net direct written premium between the association and one of its member insurers, the written decision of the commissioner shall be final.

(d) In charging premiums to member insurers, the association shall adjust, if necessary, the net direct written premiums shown on a member insurer’s annual statement by excluding any premiums written for any lines of insurance or types of coverage not covered by this article under paragraph (3) of subdivision (c) of Section 1063.1.

(e) (1) The premium charged to any member insurer for any of the three categories or a category established by the association shall not be more than 2 percent of the net direct written premium unless there are bonds outstanding that were issued pursuant to Article 14.25 (commencing with Section 1063.50) or Article 14.26 (commencing with Section 1063.70).

(2) If bonds issued pursuant to either article are outstanding, the premium charged to a member insurer for the category for which the bond proceeds are being used to pay claims and expenses shall not be more than 1 percent of the net direct written premium for that category.

(f) (1) The association may exempt or defer, in whole or in part, the premium charge of any member insurer, if the premium charge would cause the member insurer’s financial statement to reflect an amount of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. However, during the period of deferment, no dividends shall be paid to shareholders or policyholders by the company whose premium charge was deferred.

(2) Deferred premium charges shall be paid when the payment will not reduce capital or surplus below required minimums.

(g) After all covered claims of insolvent insurers and expenses of administration have been paid, any unused premiums and any reimbursements or claims dividends from liquidators remaining in any category shall be retained by the association and applied to reduce future premium charges in the appropriate category.

(h) The commissioner may suspend or revoke the certificate of authority to transact business in this state of a member insurer that fails to pay a premium when due and after demand has been made.

(i) Interest at a rate equal to the current federal reserve discount rate plus 21/2 percent per annum shall be added to the premium of any member insurer that fails to submit the premium requested by the association within 30 days after the mailing request. However, in no event shall the interest rate exceed the legal maximum.

(j) This section shall apply only to premium charges paid on or after January 1, 2017.

(Added by Stats. 2016, Ch. 137, Sec. 3. (AB 2710) Effective January 1, 2017.)