Cal. Code Regs. tit. 10 § 2645.5

Current through Register 2024 Notice Reg. No. 49, December 6, 2024

Section 2645.5 - Fixed Expenses

(a) Executive compensation in excess of the insurer's maximum permissible executive compensation shall be deducted from fixed expenses. For purposes of this computation, the following shall apply:

(1) "Executive" means the insurer's five highest-paid policymaking positions in each insurance group.

(2) "Compensation" means the total cash paid, including salary and bonus.

(3) "Maximum permissible executive compensation" means:

(A) For the highest paid executive in the group:

max comp = 1077(10^{1.4600 + 0.4060 logX})

(B) For the second-highest paid executive in the group:

max comp = 1077(10^{1.4140 + 0.3490 logX})

(C) For the third-highest paid executive in the group:

max comp = 1077(10^{1.2310 + 0.3820 logX})

(D) For the fourth-highest paid executive in the group:

max comp = 1077(10^{1.2470 + 0.3580 logX})

(E) For the fifth-highest paid executive in the group:

max comp = 1077(10^{1.2460 + 0.3420 logX})

where X is the greater of (i) the insurer's total 1989 countrywide direct earned premium for lines of business subject to Proposition 103 divided by 1,000,000 or (ii) 70.

(b) For rollback calculations, fixed expenses for each line shall be set at the lower of the quantity specified in section 2644.12, subdivision (a), or actual recorded expenses for calendar year 1989. For rollback calculations the term "maximum profit factor" in section 2644.12 means "profit factor" as defined in section 2645.6.

(c) For rollback calculations, the following table shall be used to determine the efficiency standard:

Line	Captive Writer	Direct Writer	Independ Agency
Fire	41.50%	28.83%	41.88%
Allied Lines	36.65%	29.54%	33.20%
Farmowners Multiple Peril	36.16%	36.16%	36.16%
Homeowners Multiple Peril	32.77%	24.28%	40.86%
Commercial Multiple Peril	34.02%	30.13%	39.59%
Inland Marine	32.91%	33.99%	33.10%
Financial Guaranty	15.01%	15.01%	15.01%
Medical Malpractice	18.36%	18.36%	18.36%
Earthquake	41.13%	17.35%	30.94%
Other Liability	35.01%	14.92%	28.63%
Pvt Pass Auto Liability	27.01%	19.01%	33.16%
Comml Auto Liab	33.86%	19.78%	31.63%
Pvt Pass Auto Phys Damage	27.13%	19.87%	34.49%
Comml Auto Phys Damage	31.81%	17.04%	35.97%
Aircraft	24.07%	29.22%	24.27%
Fidelity	26.84%	26.84%	26.84%
Surety	42.56%	51.77%	53.76%
Glass	39.97%	39.97%	39.97%
Burglary & Theft	27.48%	27.48%	27.48%
Boiler & Machinery	27.86%	31.76%	52.54%
Credit	44.69%	44.69%	44.69%

Cal. Code Regs. Tit. 10, § 2645.5

1. New section filed 8-13-91 as an emergency; operative 8-13-91 (Register 92, No. 3). A Certificate of Compliance must be transmitted to OAL 12-11-91 or emergency language will be repealed by operation of law on the following day.
2. New subsections (a) and (c) filed 10-8-91 as an emergency; operative 10-8-91 (Register 92, No. 13). A Certificate of Compliance must be transmitted to OAL 2-5-92 or emergency language will be repealed by operation of law on the following day.
3. Editorial correction of file and operative dates in HISTORY 2. (Register 92, No. 19).
4. New section filed 2-20-92 as an emergency; operative 2-20-92 (Register 92, No. 19). A Certificate of Compliance must be transmitted to OAL 6-19-92 or emergency language will be repealed by operation of law on the following day.
5. Certificate of Compliance as to 2-20-92 order transmitted to OAL 6-19-92 and filed 7-28-92 (Register 92, No. 31).

Note: Authority cited: Sections 1861.01 and 1861.05, Insurance Code. Reference: Sections 1861.01 and 1861.05, Insurance Code; Calfarm Insurance Company v. Deukmejian (1989) 48 Cal.3d 805.

1. New section filed 8-13-91 as an emergency; operative 8-13-91 (Register 92, No. 3). A Certificate of Compliance must be transmitted to OAL 12-11-91 or emergency language will be repealed by operation of law on the following day.
2. New subsections (a) and (c) filed 10-8-91 as an emergency; operative 10-8-91 (Register 92, No. 13). A Certificate of Compliance must be transmitted to OAL 2-5-92 or emergency language will be repealed by operation of law on the following day.
3. Editorial correction of file and operative dates in History 2. (Register 92, No. 19).
4. New section filed 2-20-92 as an emergency; operative 2-20-92 (Register 92, No. 19). A Certificate of Compliance must be transmitted to OAL 6-19-92 or emergency language will be repealed by operation of law on the following day.