(a) The department may issue a certificate authorizing the reciprocal to reduce or extinguish the contingent assessment liability of subscribers under its policies then in force in this state, and to omit provisions imposing contingent assessment liability in all policies delivered or issued for delivery in this state for as long as the two million dollar ($2,000,000) surplus requirement of this chapter remains unimpaired. The certificate shall be issued if:

(1) A reciprocal has surplus to policyholders of at least two million dollars ($2,000,000); and

(2) An application of the attorney for extinguishment has been approved by the board of directors.

(b) Upon impairment of the surplus to policyholders, the department shall revoke the certificate. After revocation, the reciprocal shall not issue or renew any policy without providing for the contingent assessment liability of subscribers.

(c) The department shall not authorize a domestic reciprocal to extinguish the contingent assessment liability of any of its subscribers or in any of its policies to be issued, unless it has the required surplus to policyholders and extinguishes the contingent assessment liability of all of its subscribers and in all policies to be issued for all classes of insurance written by it. However, if required by the laws of another state in which the domestic reciprocal is transacting the business of insurance as a licensed insurer, it may issue policies providing for the contingent assessment liability of its subscribers acquiring policies in that state and need not extinguish the contingent assessment liability applicable to policies already in force in that state.