DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES  
INSURANCE BUREAU  
PROPERTY AND CASUALTY INSURANCE COMPANY RESERVES  
(By authority conferred on the commissioner of insurance by sections 810, 815, and 815a  
of Act No. 218 of the Public Acts of 1956, as amended, being SS500.810, 500.815, and  
500.815a of the Michigan Compiled Laws)  
R 500.1231 Property and casualty insurers; case basis and bulk loss reserves.  
Rule 1. All property and casualty insurers, including mortgage and land contract guaranty  
insurers, shall compute and maintain adequate case basis and bulk loss reserves. The method  
used to determine the loss reserve shall accurately reflect loss frequency and loss  
severity and shall include components for claims reported and unpaid and for claims  
incurred but not reported.  
History: 1982 AACS.  
R 500.1232 Mortgage and land contract quaranty insurers; unearned premium  
reserves.  
Rule 2. (1) The unearned premium reserve for premiums paid in advance on mortgage and  
land contract quaranty insurance policies covering a risk period of more than 1 year shall be  
calculated based upon the annual unearned premium factor specified in table 1.  
(2) On premiums paid in advance for coverage period in excess of 15 years, the  
unearned portion of the premium during the first 15 years of coverage shall be the premium  
collected minus an amount equal to the premium that would have been earned had the  
applicable premiums for 15 years' coverage been received. The premium remaining after 15  
years shall be released from the unearned premium reserve pro rata over the remaining term of  
coverage.  
History: 1982 AACS.  
R 500.1233 Mortgage and land contract guaranty insurers; contingency loss  
reserves.  
Rule 3. (1) Mortgage and land contract guaranty insurers shall establish and maintain a  
contingency loss reserve for the purpose of protecting insureds against the effect of adverse  
economic cycles and to permit mortgage guaranty insurers to comply with section 832(e) of  
the internal revenue code of 1954, as amended.  
(2) The annual contribution to the contingency reserve shall be 50% of the earned  
premium reported in the fire and casualty annual statement.  
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(3) The contingency reserve shall be maintained for 120 months. That portion of the  
contingency reserve established and maintained for more than 120 months shall be released  
and shall no longer constitute part of the contingency reserve.  
(4) The total contingency reserve shall be reported as  
a
liability in the financial  
statement. The change in contingency reserve for the year shall be reported in the  
financial statement as a deduction from underwriting income. Appropriate entries shall be  
made in the underwriting and investment exhibit--statement of income of the financial  
statement of the insurer.  
History: 1982 AACS.  
R 500.1234 Table 1.  
Rule 4. Table 1 reads as follows:  
Figure for 500.1234  
History: 1982 AACS.  
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