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.  
(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  
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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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;