(3) Before the beginning of a certification year, an applicant or self-insurer shall fully
fund its loss reserve account.
(4) Loss reserve funds must only be expended to pay claims that are incurred and
submitted under the no-fault law, the financial responsibility law contained in chapter V
of the Michigan vehicle code, and these rules.
(5) Loss reserve funds must be kept in a segregated account and must not be
commingled with other funds of the applicant or self-insurer. The funds must be
physically located in this state unless otherwise approved by the director and may be
maintained in a financial institution, in an escrow account, under a trust agreement, or by
the applicant or self-insurer individually. With prior approval of the director, the loss
reserve may be commingled for applicants with net worth of more than $50,000,000.00
and sufficient liquidity.
(6) For a governmental unit that has the authority to tax, a fully funded loss reserve
consists of an amount of money that is included in the budget or reserve accounts of the
governmental unit for the fiscal year, which includes its certification year, as determined
by a qualified actuary, or as determined by a qualified employee of a casualty insurance
company, and that is sufficient to compensate claimants for all benefits that are due for
claims that are to be paid or that are anticipated to be paid during the certification year
and all benefits that are due for claims that are incurred before the certification year, but
are to be paid or are anticipated to be paid during the certification year, including all
benefits that may be due during the certification year for claims that can be anticipated or
are incurred but not reported, exclusive of that portion of any claim that is covered by
excess insurance.
History: 1993 AACS; 2018 AACS.
R 257.537 Excess insurance; conditions for compliance.
Rule 7. The director shall not recognize a contract or policy of excess insurance in
considering the ability of an applicant to fulfill its financial obligations under the no-fault
law or the financial responsibility law contained in chapter V of the Michigan vehicle
code, unless the contract or policy is in compliance with all of the following
requirements:
(a) Is issued by a casualty insurance company.
(b) Is not cancelable or nonrenewable, unless the party that desires to cancel or not
renew the policy gives written notice, by registered or certified mail, to the other party to
the policy and to the director not less than 30 days before termination of the policy.
(c) Does not contain policy coverage exceptions or exclusions, or any other policy
provisions, that are not in compliance with the no-fault law, the Michigan vehicle code,
and these rules.
(d) Does not contain a commutation clause, unless the clause provides that a
commutation does not relieve an underwriter of further liability either in respect to claims
and expenses unknown at the time of the commutation or in respect to any claim that is
apparently closed at the time of initial commutation and that is subsequently reopened by,
or through, a competent authority. The clause must, in addition, provide for both of the
following:
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