Cal. Code Regs. tit. 10 § 2510.18
A mortgage guaranty insurer is entitled to receive the full premium agreed upon under the pool insurance policy. Upon achieving the aggregate ceiling of loss under the policy, the insurance coverage terminates automatically. The mortgage guaranty insurer is then entitled to accelerate and call for the balance of the premium if the aggregate ceiling of loss is reached prior to the twelfth (12th) contract year of such insurance policy. Assuming that the premium for the policy has been prepaid for a twelve (12) year period, the premium is then adjusted by the premium actually paid under the policy. The resulting balance then must be reduced to the present value by applying a reasonable rate of interest. The following steps are used in the additional premium calculation:
Termination at End of Contract Year | Cumulative Earned Factor | |||
| 1 | .044 | |||
| 2 | .195 | |||
| 3 | .360 | |||
| 4 | .506 | |||
| 5 | .630 | |||
| 6 | .735 | |||
| 7 | .823 | |||
| 8 | .890 | |||
| 9 | .938 | |||
| 10 | .970 | |||
| 11 | .989 | |||
| 12 | 1.000 | |||
| (Total premium earned | (Total expected | (Cumulative | ||
| between inception and termination) | = | premium from subsection (a) of this Section) | x | earned factor) |
If this step results in a negative figure, this subsection is to be disregarded.
| (c) | Initial additional premium = | (Earned premium under subsection (b) of this Section less premium already paid) | ||
| (d) | Additional premium due | (Total premium from x | 1 | |
| (1 + i)n | ||||
| mortgage guaranty insurer = | subsection (c) of this Section) | |||
| whereby: | ||||
| i = annual rate of interest. | ||||
| n = years from termination to end of assumed 12 year period. | ||||
Cal. Code Regs. Tit. 10, § 2510.18