AS Title 21, Chapter 75: Reciprocal and Cooperative Insurers

Article 1. Reciprocal Insurers. Chapter 75. Reciprocal and Cooperative Insurers. Sec. 21.75.010. Applicability. (a) All authorized reciprocal insurers shall be governed by those sections of this chapter not expressly made applicable to domestic reciprocals. (b) Existing authorized reciprocal insurers shall, after July 1, 1966, comply with the provisions of this chapter, and shall make amendments to their subscribers' agreement, power of attorney, policies, and other documents and accounts and perform other acts that may be required for compliance. Sec. 21.75.020. Insuring powers of reciprocals. (a) Except as provided in (c) of this section, a reciprocal insurer may, upon qualifying as provided for by this title, transact any kind or kinds of insurance defined by this title, other than life or title insurances. (b) The insurer may purchase reinsurance, and may grant reinsurance as to any kind of insurance it is authorized to transact. (c) The director shall establish by regulation the type of marine insurance that a reciprocal insurer may provide. Sec. 21.75.030. Name, suits. (a) A reciprocal insurer shall (1) have and use a business name; the name must include the word “reciprocal” or “interinsurer” or “exchange” or “underwriters” or “underwriting” or “association”; (2) sue and be sued in its own name. (b) In addition to the requirements of (a) of this section, a cooperative insurer organized under AS 21.75.300 — 21.75.330 shall include the word “cooperative” in its name. Sec. 21.75.040. Attorney-in-fact. (a) [Repealed, § 223 ch 67 SLA 1992.] (b) The attorney-in-fact of a foreign or alien reciprocal insurer, that is authorized to transact insurance in this state, may not, by virtue of discharge of its duties as the attorney-in-fact with respect to the insurer's transactions in this state, be considered to be doing business in this state within the meaning of a law of this state applying to foreign firms or corporations. Sec. 21.75.045. Licensing of attorneys-in-fact. (a) A person may not act in the capacity of attorney-in-fact for a subscriber regarding a subject that is resident, located, or to be performed in this state or for a reciprocal insurer licensed to do business in this state unless the person is licensed under this chapter. The director may adopt regulations that establish qualifications for being licensed as an attorney-in-fact. The attorney-in-fact for a reciprocal insurer is exempt from licensing under this title if the attorney-in-fact (1) is a wholly-owned subsidiary of the reciprocal; and (2) does not act as attorney-in-fact for another unaffiliated reciprocal insurer. (b) The director may not issue or renew a license under this chapter to a person, or to be exercised by a person, found by the director to be untrustworthy, incompetent, financially irresponsible, or who has not established to the satisfaction of the director that the person is qualified under this chapter. (c) To qualify for issuance or renewal of a license under this chapter, an applicant or licensee shall comply with this title and (1) be a trustworthy person; (2) have active working experience in administrative functions that, in the director's opinion, exhibits the ability to competently perform the administrative functions of an attorney-in-fact; (3) not have committed an act that is a cause for denial, nonrenewal, suspension, or revocation of a license in this state or another jurisdiction; (4) have and maintain a lawfully established place of business physically accessible to the public where the attorney-in-fact principally conducts transactions under the license in this state, or if for a foreign reciprocal, in the state of domicile; (5) disclose to the director all officers, directors, partners, principals, or managers and whether or not they are licensed in this state or another jurisdiction; (6) designate an officer, partner, or principal responsible for the firm's compliance with the insurance statutes and regulations of this state; (7) provide certified financial statements for the prior two years prepared by an independent certified public accountant that establish that the applicant is solvent, that the applicant's system of accounting, internal control, and procedure is operating effectively to provide reasonable assurance that money is promptly accounted for and paid to the person entitled to the money, and any other information that the director may require to review the current financial condition of the applicant; (8) provide to the director documents necessary to verify statements contained in or in connection with the application; and (9) notify the director within 30 days in writing by certified mail of a change in officer, director, partner, principal, or manager; place of business; mailing address; telephone number; suspension or revocation of an insurance license by another state or jurisdiction; or a conviction of a misdemeanor or felony of the attorney-in-fact, its officers, directors, partners, owners, or employees. (d) The director may adopt regulations establishing education requirements, experience requirements, or examination requirements for applicants or licensees under this chapter. (e) The director may require that an attorney-in-fact maintain an errors and omissions insurance policy acceptable to the director. (f) If the director finds that the applicant or licensee is qualified and that application, license, or renewal fees set under AS 21.06.250 have been paid, the director may issue or renew the license. (g) A license issued under this chapter shall be renewed each year by the attorney-in-fact when the annual statement is filed under AS 21.75.130 . (h) An attorney-in-fact shall be subject to hearings and orders on violations; denial, nonrenewal, suspension, or revocation of license; penalties; and surrender of a license under the procedures of AS 21.27.405 — 21.27.460. Sec. 21.75.050. Surplus funds required. (a) A domestic reciprocal insurer formed in accordance with the provisions of this chapter shall have and maintain a surplus no less than an amount equal to the total of the capital and one-half of the surplus that would be required of a domestic stock insurer writing the same lines for which the reciprocal insurer seeks to be authorized. (b) A foreign reciprocal insurer shall have and maintain a surplus no less than an amount equal to the total capital and surplus that would be required of a domestic stock insurer writing the same lines for which the reciprocal seeks to be authorized. (c) A domestic reciprocal insurer formed under this chapter by and insuring only 10 or more municipalities shall (1) comply with (a) of this section or post a bond for an amount equal to the capital that would be required of a domestic stock insurer writing the same lines of insurance for which the reciprocal insurer seeks to be authorized; and (2) maintain a surplus of $250,000 in admitted assets or a surplus sufficient to operate the reciprocal insurer for one year, whichever is greater. (d) Notwithstanding (a) and (c) of this section, or AS 21.09.080 , domestic reciprocal insurers duly licensed and capitalized on December 31, 1984, shall have and maintain the capital and surplus required at the date of their original license. (e) Notwithstanding (a) — (c) of this section, the director shall establish by regulation the level of surplus to be maintained by a reciprocal insurer providing marine insurance. Sec. 21.75.055. Surplus funds for cooperative insurers. A cooperative insurer organized under AS 21.75.300 — 21.75.330, if it has otherwise complied with the applicable provisions of this chapter, may be authorized to transact insurance if it has and maintains surplus funds equal to one-half of the capital required for a domestic reciprocal insurer under AS 21.75.050 (a) and such additional surplus as the director considers sufficient. Sec. 21.75.060. Organization of reciprocal insurer. (a) Ten or more persons domiciled in this state may organize a domestic reciprocal insurer and make application to the director for a certificate of authority to transact insurance. (b) The proposed attorney-in-fact shall fulfill the requirements of and shall execute and file with the director when applying for a certificate of authority, a declaration setting out (1) the name of the insurer; (2) the location of the insurer's principal office, which shall be the same as that of the attorney-in-fact and shall be maintained in this state, and the mailing address, electronic mailing address, and telephone numbers; (3) the kinds of insurance proposed to be transacted; (4) the names and addresses of the original subscribers; (5) the designation and appointment of the proposed attorney-in-fact and a copy of the power of attorney; (6) the names and addresses of the officers and directors of the attorney-in-fact, if a corporation, or its members, if a firm; (7) the powers of the subscribers' advisory committee, and the names and terms of office of the members; (8) that all money paid to the reciprocal insurer shall, after deducting any sum payable to the attorney-in-fact, be held in the name of the insurer and for the purposes specified in the subscribers' agreement; (9) a copy of the subscribers' agreement; (10) a statement that each of the original subscribers has in good faith applied for insurance of a kind proposed to be transacted and that the insurer has received from each subscriber the full premium or premium deposit required for the policy applied for, for a term of not less than six months at an adequate rate filed with and approved by the director; (11) a statement of the financial condition of the insurer, a schedule of its assets, and a statement that the surplus as required by AS 21.75.050 is on hand; (12) a copy of each policy, endorsement, and application form it then proposes to issue or use. (c) The declaration shall be acknowledged by the attorney-in-fact in the manner required for the acknowledgment of deeds. (d) The director may provide financial and technical assistance to persons who wish to establish a reciprocal insurer to provide marine insurance under this chapter. (e) The areas the director may assist the person with under (d) of this section include (1) preparing the documentation necessary to form the reciprocal insurer; (2) obtaining reinsurers for the reciprocal insurer; (3) preparing subscriber rules and management procedures for the reciprocal insurer; (4) financing the formation expenses of the reciprocal insurer; (5) managing the reciprocal insurer. Sec. 21.75.070. Certificate of authority. (a) The certificate of authority of a reciprocal insurer shall be issued to its attorney-in-fact in the name of the insurer. (b) The director may refuse, suspend, or revoke the certificate of authority, in addition to other grounds, for failure of the attorney-in-fact to comply with a provision of this title. Sec. 21.75.080. Authority of attorney-in-fact. (a) A subscriber's agreement providing for an advisory committee consistent with AS 21.75.170 shall be executed by each subscriber and shall grant authority to the attorney-in-fact to manage the affairs of the reciprocal insurer. (b) The duties of the attorney-in-fact shall be specified in the subscriber's agreement. The agreement shall be approved by the director and amendments shall be approved by the director and the advisory committee. The agreement must, at a minimum, provide that (1) the attorney-in-fact shall provide written notice of and make the necessary arrangements for the election, in person or by proxy, of the members of the advisory committee; the cost of notice, ballot, or proxy for a meeting and the cost of a meeting that may be called for an election shall be paid by the reciprocal insurer; (2) the attorney-in-fact shall provide written notice to the members of the advisory committee of not less than 10 business days for a regular meeting or a special meeting called under AS 21.75.170 (e); the cost of notice shall be paid by the reciprocal insurer; (3) the advisory committee may, upon majority vote of its members at a regular or special meeting and upon written notice of the vote to the director and the attorney-in-fact, recommend termination of the attorney-in-fact for a stated cause and the appointment of a new attorney-in-fact; (4) termination of the attorney-in-fact shall require the approval of a two-thirds majority of the subscribers present in person or by proxy at a meeting called for that purpose; the attorney-in-fact shall provide written notice to all subscribers by certified mail not less than 30 days before the meeting; the notice must include the recommendation of termination and replacement drafted by the advisory committee and other appropriate documents drafted by the attorney-in-fact; a copy of all documents mailed and certification of mailing to all subscribers must be provided to all members of the advisory committee; the cost of notice and proxy for the meeting shall be paid by the reciprocal insurer; at least 25 percent of all subscribers shall constitute a quorum for reciprocal insurers with less than 10,000 subscribers; 2,500 subscribers or five percent of all subscribers, whichever is greater, shall constitute a quorum for all other reciprocals; (5) the assets of the reciprocal insurer and its subscribers shall be invested under AS 21.21 ; investment guidelines shall be approved by the advisory committee and shall be properly accounted for on the financial records of the reciprocal insurer as being held for or on behalf of the subscribers; the cash assets of the reciprocal insurer and its subscribers not otherwise invested in short-term securities, covering policy obligations arising out of policies issued, or issued for delivery in the United States shall be held in one or more appropriately identified accounts in banks that are members of the Federal Reserve System; these accounts shall be drawn on by the attorney-in-fact or by employees or representatives of the reciprocal insurer authorized by the attorney-in-fact for payments on behalf of the reciprocal insurer; (6) if the attorney-in-fact is acting for more than one reciprocal insurer, separate records and accounts shall be maintained for each reciprocal; (7) the attorney-in-fact may not assign responsibilities detailed in the subscriber's agreement in whole or in part without prior approval of the advisory committee and the director; (8) the attorney-in-fact shall (A) establish and maintain underwriting procedures and manuals that state the rates and conditions for the acceptance or rejection of risks; (B) make a report to the advisory committee at each regular meeting of the committee on the financial condition of the reciprocal insurer and all material transactions entered into during the period since the last meeting; (C) annually provide to each member of the advisory committee (i) on or before March 2, a copy of the reciprocal insurer's annual statement and the accompanying statement of actuarial opinion filed with the director under AS 21.75.130 ; and (ii) on or before June 1, a copy of a statement prepared by an independent certified public accountant addressing the financial condition and solvency of the attorney-in-fact; (D) maintain a financially solvent condition; (9) the forms, amounts, and formulas of compensation the attorney-in-fact will receive for services rendered are specified; (10) the books, accounts, and records of the reciprocal insurer, its subscribers, and the attorney-in-fact are maintained to clearly and accurately disclose the nature and details of each transaction, including all notes, workpapers, documents, and similar material in sufficient detail that relevant events, dates, and persons participating can be identified and information necessary to determine that the compensation received by or owing to the attorney-in-fact conforms to the subscriber's agreement; the books, accounts, and records of the reciprocal insurer are the sole property of the reciprocal insurer; (11) if the subscriber's agreement provides that any of the attorney-in-fact's compensation is contingent upon the reciprocal insurer's profits, that compensation may not be determined and paid until at least five years after the premiums on casualty insurance are earned, at least one year after the premiums are earned on any other kind of insurance, and not until the adequacy of loss reserves on the remaining claims, known and unknown, have been verified under (8) of this subsection; and (12) the attorney-in-fact shall conduct the affairs of the reciprocal insurer as required under this title. (c) Unless subject to AS 21.22 , a material transaction between the reciprocal insurer, its subscribers, the attorney-in-fact, and an affiliate of the attorney-in-fact may not be entered into unless it has been filed with the director of the reciprocal insurer's state of domicile, if accredited by the National Association of Insurance Commissioners, or with the director of this state, if not accredited, at least 30 days before its effective date and the director of the accredited state has not disapproved it; however, a transaction involving five percent or more of admitted assets is subject to prior approval of the director of the reciprocal insurer's state of domicile and the transaction must meet the following standards: (1) the terms shall be fair and equitable; (2) charges or fees for services performed shall be reasonable; (3) expenses incurred and payments received shall be allocated to the reciprocal insurer on an equitable basis in conformity with statutory insurance accounting practices being consistently applied; and (4) the books, accounts, and records of each party shall be maintained to disclose clearly and accurately the precise nature and details of the transaction, including accounting information that is necessary to support the reasonableness of the charges or fees to the respective parties. (d) A subscriber's agreement containing the duties of the attorney-in-fact shall be provided by the attorney-in-fact to all subscribers. Renewing subscribers shall be informed that their failure to return a signed rejection of the subscriber's agreement within 30 days after the renewal date will be considered acceptance of the subscriber's agreement. Sec. 21.75.090. Modifications. Modifications of the terms of the subscribers' agreement or of the power of attorney of a domestic reciprocal insurer shall be made jointly by the attorney-in-fact and the subscribers' advisory committee. A modification may not be effective retroactively, or apply to an insurance contract issued before the modification. Sec. 21.75.100. Attorney-in-fact's bond. (a) Concurrently with the filing of the declaration provided in AS 21.75.060 , the attorney-in-fact of a domestic reciprocal insurer shall file with the director a bond in favor of this state for the benefit of all persons damaged as a result of a breach by the attorney-in-fact of the conditions of the bond as set out in (b) of this section. The bond shall be executed by the attorney-in-fact and by an authorized corporate surety, shall meet the requirements established under AS 21.27.190 , and shall be subject to the director's approval. (b) The bond shall be in the sum of $100,000, aggregate in form, conditioned that the attorney-in-fact will faithfully account for all money and other property of the insurer coming into the hands of the attorney-in-fact and that the attorney-in-fact will not withdraw or appropriate to personal use from the funds of the insurer, money or property to which the attorney-in-fact is not entitled under the subscriber's agreement. (c) [Repealed, § 223 ch 67 SLA 1992.] (d) The director may require the attorney-in-fact, unless wholly owned by the reciprocal insurer, to maintain an errors and omissions policy issued by an admitted insurer acceptable to the director providing coverage in an amount and issued by an insurer approved by the director. This requirement is satisfied if the attorney-in-fact maintains an errors and omissions policy to satisfy the laws of another state in an amount approved by the director. Sec. 21.75.110. Action on bond. Action on the attorney-in-fact's bond or to recover against a deposit made in lieu of the bond may be brought at any time by one or more subscribers suffering loss through a violation of its conditions, or by a receiver or liquidator of the insurer. Amounts recovered on the bond shall be deposited in and become part of the insurer's funds. The total aggregate liability of the surety shall be limited to the amount of the penalty of the bond. Sec. 21.75.115. Examination of an attorney-in-fact. An attorney-in-fact of a reciprocal insurer is subject to examination by order of the director under AS 21.06.120 and 21.06.140 — 21.06.160 for the purpose of determining compliance with this title relating to the operations of the reciprocal insurer or its attorney-in-fact that the director determines cannot be obtained by examination of the reciprocal insurer. The cost of the examination shall be paid by the attorney-in-fact. Sec. 21.75.120. Service of process. (a) Legal process shall be served upon a domestic reciprocal insurer by serving the insurer's attorney-in-fact at the principal offices of the attorney-in-fact or by serving the director as the insurer's process agent under AS 21.09.180 and 21.09.190. (b) A judgment based upon legal process so served shall be binding upon each of the insurer's subscribers as their respective interests may appear but in an amount not exceeding their respective contingent liabilities, if any, the same as though personal service of process was had upon each subscriber. Sec. 21.75.130. Annual statement. (a) The annual statement of a reciprocal insurer shall be made by its attorney-in-fact and filed with the director, as provided in AS 21.09.200 . (b) The statement shall be supplemented by information that may be required by the director relative to the affairs and transactions of the attorney-in-fact insofar as they relate to the reciprocal insurer. Sec. 21.75.135. Quarterly statements. (a) The director may require a reciprocal insurer's attorney-in-fact to file a quarterly financial statement as provided in AS 21.09.205 . (b) A statement required under (a) of this section shall be supplemented by information that may be required by the director relative to the affairs and transactions of the attorney-in-fact that relate to the reciprocal insurer. Sec. 21.75.140. Contributions to insurer. The attorney-in-fact or other parties may advance to a domestic reciprocal insurer upon reasonable terms the funds it may require from time to time in its operations. Sums advanced may not be treated as a liability of the insurer, and, except upon liquidation of the insurer, may not be withdrawn or repaid except out of the insurer's realized earned surplus in excess of its minimum required surplus. A withdrawal or repayment may not be made without the advance approval of the director. This section does not apply to bank loans or to loans for which security is given. Sec. 21.75.150. Determination of financial condition. In determining the financial condition of a reciprocal insurer the director shall apply the following rules: (1) the same reserves as are required of incorporated insurers issuing nonassessable policies on a reserve basis shall be charged as liabilities; (2) the surplus deposits of subscribers shall be allowed as assets, except the premium deposits delinquent for 90 days shall first be charged against the surplus deposit; (3) the surplus deposits of subscribers may not be charged as a liability; (4) all premium deposits delinquent less than 90 days shall be allowed as assets; (5) an assessment levied upon subscribers, and not collected, may not be allowed as an asset; (6) the contingent liability of subscribers may not be allowed as an asset; (7) the computation of reserves shall be based upon premium deposits other than membership fees and without deductions for expenses and the compensation of the attorney-in-fact. Sec. 21.75.160. Who may be subscribers. Individuals, partnerships, and corporations of this state may make application, enter into agreement for, and hold policies or contracts in or with and be a subscriber of a domestic, foreign, or alien reciprocal insurer. A corporation now or hereafter organized under the laws of this state shall, in addition to the rights, powers, and franchises specified in its articles of incorporation, have full power and authority as a subscriber to exchange insurance contracts through the reciprocal insurer. The right to exchange the contracts is incidental to the purposes for which the corporations are organized and to be as fully granted as the rights and powers expressly conferred upon the corporations. Government or governmental agencies, state or political subdivisions, boards, associations, estates, trustees, or fiduciaries are authorized to exchange nonassessable reciprocal interinsurance contracts with each other and with individuals, partnerships, and corporations to the same extent that individuals, partnerships, and corporations are authorized to exchange reciprocal interinsurance contracts. An officer, representative, trustee, receiver, or legal representative of a subscriber shall be recognized as acting for or on its behalf for the purpose of the contract but shall be personally liable upon the contract by reason of acting in the representative capacity. Sec. 21.75.170. Subscriber's advisory committee. (a) The subscriber's advisory committee shall meet at least annually and shall consist of not less than nine individuals elected by the subscribers, at least two-thirds of whom are subscribers or officers or directors of subscriber corporations and, except for a reciprocal insurer that wholly owns its attorney-in-fact, not more than one-third of whom may be (1) the attorney-in-fact or an employee, officer, director, affiliate, or a person having a financial interest in the attorney-in-fact; or (2) a person representing the attorney-in-fact or an employee, officer, director, affiliate, or other person having a financial interest in the attorney-in-fact; a person shall be treated as having a financial interest in the attorney-in-fact if the person (A) owns, directly or indirectly, more than one percent of the outstanding stock in the attorney-in-fact; (B) has an outstanding loan from the attorney-in-fact; or (C) earns a commission or other compensation as a producer for the reciprocal insurer. (b) A member of the subscriber's advisory committee may be elected to a term of office of not less than one year nor more than four years. A member may be reelected for an unlimited number of terms. Terms of office may be staggered to provide for continuity. (c) The chair of the committee shall be elected by the members of the committee and the committee shall adopt rules consistent with the purposes of the committee. (d) The attorney-in-fact shall appoint a secretary. (e) Special meetings of the committee may be called by the attorney-in-fact, the chair of the committee, three members of the committee, or a signed petition of at least one percent of the subscribers or three individual subscribers, whichever is greater, as of the most recent annual report of the reciprocal insurer. (f) The committee shall (1) supervise the finances of the reciprocal insurer; (2) supervise the reciprocal insurer's operations to assure conformity with the subscriber's agreement; (3) procure the audit of the accounts and records of the reciprocal insurer and of the attorney-in-fact at the expense of the reciprocal insurer; and (4) have additional powers and functions that may be conferred by the subscriber's agreement. (g) Notwithstanding (a) of this section, a domestic reciprocal insurer transacting all of its insurance activities on a subject resident, located, or to be performed in this state may, with the prior written approval of the director, have a subscriber's advisory committee that consists of not less than five individuals who are elected by the subscribers, and who otherwise meet the requirements of (a) of this section. Sec. 21.75.180. Subscribers' liability. (a) The liability of each subscriber, other than as to a nonassessable policy, for the obligations of the reciprocal insurer shall be an individual, several, and proportionate liability, and not joint. (b) Except as to a nonassessable policy each subscriber shall have a contingent assessment liability, in the amount provided for in the power of attorney or in the subscribers' agreement, for payment of actual losses and expenses incurred while the subscriber's policy was in force. The contingent liability may be at the rate of not less than one or more than ten times the premium deposit stated in the policy, and the maximum aggregate shall be computed in the manner set out in AS 21.75.190 . (c) Each assessable policy issued by the insurer must contain a statement of the contingent liability. Sec. 21.75.190. Subscribers' liability on judgment. (a) An action may not lie against a subscriber upon an obligation claimed against the insurer until a final judgment has been obtained against the insurer and remains unsatisfied for 30 days. (b) The judgment shall be binding upon each subscriber only in the proportion which the subscriber's interest may appear and in an amount not exceeding the contingent liability of the subscriber, if any. Sec. 21.75.200. Assessments. (a) Assessments may from time to time be levied upon subscribers of a domestic reciprocal insurer liable under the terms of their policies by the attorney-in-fact upon approval in advance by the subscribers' advisory committee and the director; or by the director in liquidation of the insurer. (b) Each subscriber's share of a deficiency for which an assessment is made, but not exceeding the aggregate contingent liability of the subscriber as stated in accordance with AS 21.75.180 , shall be computed by applying to the premium earned on the subscriber's policy or policies during the period to be covered by the assessment, the ratio of the total deficiency to the total premiums earned during the period upon all policies subject to the assessment. (c) In computing the earned premiums for the purposes of this section, the gross premium received by the insurer for the policy shall be used as a base, deducting only charges not recurring upon the renewal or extension of the policy. (d) A subscriber may not have an offset against an assessment for which the subscriber is liable, on account of a claim for unearned premium or losses payable. Sec. 21.75.210. Time limit for assessments. A subscriber of a domestic reciprocal insurer having contingent liability is liable for and shall pay the subscriber's share of any assessment, as computed and limited under this chapter, if (1) while the subscriber's policy is in force or within one year after its termination, the subscriber is notified by either the attorney-in-fact or the director of an intention to levy the assessment; or (2) an order to show cause why a receiver, conservator, rehabilitator, or liquidator of the insurer should not be appointed is issued while the subscriber's policy is in force or within one year after its termination. Sec. 21.75.220. Aggregate liability. A single policy or subscriber as to the policy may not be assessed or charged with an aggregate of contingent liability as to obligations incurred by a domestic reciprocal insurer in any one calendar year, in excess of the amount provided for in the power of attorney or in the subscribers' agreement, computed solely upon premium earned on the policy during that year. Sec. 21.75.230. Nonassessable policies. (a) If a reciprocal insurer has a surplus of assets over all liabilities at least equal to the minimum capital and surplus required of a domestic stock insurer authorized to transact like kinds of insurance, upon application of the attorney-in-fact and as approved by the subscribers' advisory committee, the director shall issue a certificate authorizing the insurer to extinguish the contingent liability of subscribers under its policies then in force in this state, and to omit provisions imposing contingent liability in all policies delivered or issued for delivery in this state for as long as all the surplus remains unimpaired. (b) Upon impairment of the surplus, the director shall immediately revoke the certificate. The revocation shall not render subject to contingent liability a policy then in force and for the remainder of the period for which the premium has theretofore been paid; but after the revocation a policy may not be issued or renewed without providing for contingent assessment liability of the subscriber. (c) The director may not authorize a domestic reciprocal insurer to extinguish the contingent liability of any of its subscribers or in any of its policies to be issued, unless it qualifies to and does extinguish the liability of all its subscribers and in all the policies for all kinds of insurance transacted by it. Except, that if required by the laws of another state in which the insurer is transacting insurance as an authorized insurer, the insurer may issue policies providing for the contingent liability of those subscribers which may acquire the policies in that state, and need not extinguish the contingent liability applicable to policies theretofore in force in that state. (d) Notwithstanding (a) — (c) of this section, a reciprocal insurer that provides marine insurance may issue policies that are nonassessable. Sec. 21.75.240. Distribution of savings. A reciprocal insurer may from time to time return to its subscribers any unused premiums, savings, or credits accruing to their accounts. The distribution may not unfairly discriminate between classes of risks, or policies, or between subscribers, but this does not prevent retrospective rating, or distribution on a retrospective plan, or distribution varying as to classes of subscribers based on the experience of the subscribers. Sec. 21.75.250. Subscribers' share in assets. Upon the liquidation of a domestic reciprocal insurer, its assets remaining after discharge of its indebtedness and policy obligations, the return of contributions of the attorney-in-fact or other persons to its surplus made as provided in AS 21.75.140 , and the return of an unused premium, savings, or credits then standing on subscribers' account, shall be distributed to its subscribers who were subscribers within the 12 months before the last termination of its certificate of authority, according to a reasonable formula that the director may approve. Sec. 21.75.260. Merger or conversion. (a) A domestic reciprocal insurer, upon affirmative vote of not less than two-thirds of its subscribers who vote on the merger after due notice and the approval of the director of the terms therefor, may merge with another reciprocal insurer or be converted to a stock or mutual insurer. (b) The stock or mutual insurer is subject to the same capital or surplus requirements and has the same rights as a like domestic insurer transacting like kinds of insurance. (c) The director may not approve a plan for a merger or conversion which is inequitable to subscribers, or which, if for conversion to a stock insurer, does not give each subscriber preferential right to acquire stock of the proposed insurer proportionate to the subscriber's interest in the reciprocal insurer as determined in accordance with AS 21.75.250 and a reasonable length of time within which to exercise the right. Sec. 21.75.270. Financial impairment; determination of insolvency. (a) If the assets of a reciprocal insurer are at any time insufficient to discharge its liabilities, other than a liability on account of funds contributed by the attorney-in-fact or others, and to maintain the required surplus, its attorney-in-fact shall immediately make up the deficiency or levy an assessment upon the subscribers for the amount needed to make up the deficiency; but subject to the limitation set out in the subscriber's agreement. (b) If the attorney-in-fact fails to make up the deficiency or to make the assessment within 30 days after the director orders the attorney-in-fact to do so, or if the deficiency is not fully made up within 60 days after the date the assessment was made, the insurer shall be considered insolvent and shall be proceeded against as authorized by this title. (c) If liquidation of an insurer is ordered, an assessment shall be levied upon the subscriber for an amount, subject to limits as provided by this chapter, that the director determines to be necessary to discharge all liabilities of the insurer, exclusive of any funds contributed by the attorney-in-fact or other persons, but including the reasonable cost of the liquidation. (d) If liquidation of a domestic reciprocal insurer is ordered, the receiver appointed under the order has a right to recover on behalf of the reciprocal insurer a payment in the form of a bonus, termination settlement, or extraordinary lump-sum compensation adjustment made by the reciprocal insurer or its subscribers to the attorney-in-fact if the distribution or payment is made during the 12 months preceding the order of liquidation, unless it can be shown that the payment was lawful and reasonable and that the reciprocal insurer did not know and, using due diligence, could not have known that the distribution might adversely affect the ability of the reciprocal insurer to fulfill its subscriber's contractual obligation. Sec. 21.75.280. [Renumbered as AS 21.75.900 (2).] Sec. 21.75.290. [Renumbered as AS 21.75.900 (3).] Article 2. Cooperative Insurance Coverage. Sec. 21.75.300. Cooperative insurance. (a) The director shall, by regulation, provide a general plan for the implementation of cooperative insurance coverage limited to the risks defined in AS 21.75.330 . (b) The regulations adopted under (a) of this section must include (1) procedures whereby not less than the number of persons required by AS 21.75.060 (a) to organize a domestic reciprocal insurer may petition the director to initiate formation of a cooperative insurer; (2) provision whereby the director may obtain information required to be provided by AS 21.75.060 (b) to implement organization of a domestic reciprocal insurer; (3) provision under which the petitioners shall describe the territory within which the plan of cooperative insurance shall operate; (4) provision by which the director may obtain any additional information that the director considers reasonably necessary to determine whether the total amount initially at risk and its distribution permit a sound cooperative insurance operation; (5) provision whereby the director, after indicating an intention to issue a certificate of authority to a cooperative insurer under AS 21.75.300 — 21.75.330, shall provide public notice for a period of not less than 30 days to provide nonsubscribing residents within the territory or adjacent geographical area an opportunity to subscribe to the plan of insurance; and (6) provision by which, after the issuance of a certificate of authority, the cooperative insurer may receive applications from nonsubscribing residents of the territory or adjacent geographical area for inclusion within the insurer unless the application of the nonsubscribing resident is rejected by a majority vote of the members of the subscribers' advisory committee of the cooperative insurer. Sec. 21.75.310. Certificate of authority of cooperative insurer. If the director is satisfied that the plan of insurance and other information provided by petitioners under AS 21.75.300 permits a sound insurance operation and complies with all other applicable requirements for a certificate of authority, the director shall issue a certificate of authority to the insurer. Sec. 21.75.320. Applicable provisions of law. Except as otherwise specifically provided, the provisions of AS 21.75.010 — 21.75.270 and 21.75.900(2) and (3) are applicable to cooperative insurers. Sec. 21.75.330. Coverage. (a) A cooperative insurer organized under AS 21.75.300 is authorized to transact only property insurance, limited to physical damage of (1) licensed private passenger motor vehicles; (2) single-family residences, and related structures; (3) multiple dwellings of not more than four-family units if at least one unit is owner-occupied, and related structures; (4) mobile homes; (5) commercial structures of not more than $100,000 value. (b) Cooperative insurance coverage is limited to risks located or principally garaged within a geographic radius determined by the director to be within the ability of the insureds to control and have an influence over the level of loss. Sec. 21.75.340. Definitions. [Repealed, § 62 ch 21 SLA 1991.] Article 3. General Provisions. Sec. 21.75.900. Definition. In this chapter, (1) “material transaction” means a transaction, other than a claim payment, involving more than one-half of one percent of the reciprocal insurer's admitted assets as of December 31 of the prior year; (2) “reciprocal insurance” is that resulting from an interexchange among persons, known as “subscribers,” of reciprocal agreements of indemnity, the interexchange being effectuated through an “attorney-in-fact” common to all such persons; (3) “reciprocal insurer” means an unincorporated aggregation of subscribers operating individually and collectively through an attorney-in-fact to provide reciprocal insurance among themselves.