<html> <head> <title>Rule 20:06:57:08 Reserves and stop-loss coverage.</title> <META NAME="Keywords" Content="Administrative Rules 20:06:57:08"> <META NAME="Description" Content="Administrative Rules 20:06:57:08 Reserves and stop-loss coverage."> <meta http-equiv=Content-Type content="text/html; charset=windows-1252"> <meta name=Generator content="Microsoft Word 15 (filtered)"> <style> <!-- /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {margin:0in; margin-bottom:.0001pt; text-align:justify; font-size:12.0pt; font-family:"Times New Roman",serif;} a:link, span.MsoHyperlink {color:blue; text-decoration:underline;} a:visited, span.MsoHyperlinkFollowed {color:purple; text-decoration:underline;} .MsoChpDefault {font-size:10.0pt;} @page WordSection1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in;} div.WordSection1 {page:WordSection1;} --> </style> </head> <body lang=EN-US link=blue vlink=purple> <div class=WordSection1> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>20:06:57:08.&nbsp;&nbsp;Reserves and stop-loss coverage.</b></p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1)&nbsp;&nbsp;A multiple employer trust shall have at all times aggregate excess stop-loss coverage providing the multiple employer trust with coverage for risks in this state with an attachment point which is not greater than:</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;120 percent of actuarially projected losses on a calendar-year basis; or</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;Five percent of annual expected claims for purposes of this section and shall provide for adjustments in the amount of that percentage as may be necessary to carry out the purposes of this section as determined by sound actuarial principles;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2)&nbsp;&nbsp;A multiple employer trust shall establish and maintain appropriate loss and loss adjustment reserves determined by sound actuarial principles;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3)&nbsp;&nbsp;A multiple employer trust shall set premiums to fund at least 100 percent of the multiple employer trust's actuarially projected losses plus all other costs of the multiple employer trust;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (4)&nbsp;&nbsp;All coverage obtained pursuant to this section shall contain a provision allowing for at least 90 days' notice to the director upon cancellation or nonrenewal of the contract;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;</p> <p class=MsoNormal>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (5)&nbsp;&nbsp;No contract or policy of per occurrence or aggregate excess insurance may be recognized in considering the ability of an applicant to fulfill its financial obligations under this section, unless such contract or policy is issued by a company that is:</p> <p class=MsoNormal>&nbsp;</p> <p class=MsoNormal>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;Licensed to transact business in this state; or</p> <p class=MsoNormal>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;Authorized to do business in this state as a reinsurer in one of the permitted methods regarding credit for reinsurance as provided in SDCL chapter <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-14">58-14.</A></p> <p class=MsoNormal>&nbsp;</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Source:</b> 40 SDR 102, effective December 3, 2013; 45 SDR 158, effective June 27, 2019.</p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>General Authority:</b> SDCL <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-14-17">58-14-17</A>, <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-18-79">58-18-79</A>, <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-18-89">58-18-89.</A></p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Law Implemented:</b> SDCL <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-18-88">58-18-88</A>, <A HREF="/statutes/DisplayStatute.aspx?Type=Statute&Statute=58-18-89">58-18-89.</A></p> <p class=MsoNormal style='margin-left:-.7pt'>&nbsp;</p> </div> </body> </html>