The Office of General Counsel issued the following informal opinion on April 27, 2000 representing the position of the Department.

Assessment Cooperative Insurers’ Use of Loss-Free Credits

Question Presented

May loss-free credits be applied to insurance premiums charged by assessment cooperative insurers?


There is no statutory bar to the application of loss-free credits by assessment cooperative insurers.


Several assessment cooperative insurers received notification from the Property Bureau of the State of New York Insurance Department ("Department") that loss-free credits may not be applied to renewal premiums as prohibited by N.Y. Ins. Law Section 6615 (a) (McKinney 1985 and Supp. 1999-2000). The insurers disagree with the position taken by the Property Bureau because they believes that Section 6615 (a) does not apply to policy premiums, but rather to "special assessments"


Premiums issued by assessment cooperative insurers take the form of assessments. "Such assessment shall be sufficient to provide for the payment of losses, expenses, and other obligations, incurred, or likely to be incurred during the fiscal year for which the assessment is levied." N.Y. Ins. Law Section 6615 (a) (McKinney 1985 and Supp. 1999-2000). Thus, Section 6615 (a) does apply to the collection of ordinary premiums. The levying of "special assessments" is treated by N.Y. Ins. Law Section 6616 (McKinney 1985 and Supp. 1999-2000).

There is no statutory bar to the use of premium credits by an assessment cooperative insurer provided that the premiums charged reflect the actual or anticipated "losses, expenses and other obligations" denoted in Section 6615 (a). Thus, credits may be applied to the extent that the use thereof does not cause or contribute to the financial instability or insolvency of an insurer. Additionally, credits must be applied fairly and consistently to all members of the same class, and their use may not be discriminatory. "If issuing policies on more than one class of property, rates of assessment shall be in proportion to the several amounts of insurance held by each member and on the basis of classifications adopted by its board of directors to express the relative hazards of the properties insured." N.Y. Ins. Law Section 6615 (a)(3) (McKinney 1985 and Supp. 1999-2000).

For further information, contact Attorney Sally A. Geisel at the Department’s New York City Office.