N.J. Admin. Code § 11:1-5.1

Current through Register Vol. 56, No. 11, June 3, 2024

Section 11:1-5.1 - FAIR Plan surcharge

(a) In accordance with 17:37A-21, the Commissioner shall, on or before April 1, determine the net value of the New Jersey Insurance Development Fund (Fund), as of the immediately preceding December 31. Upon finding that the net value of the Fund is less than five percent of the premiums written on basic property insurance, as that term is defined in 17:37A-2, in this State for the calendar year immediately preceding, the Commissioner shall, pursuant to 17:37A-20 and 21, prescribe by Order the amount of the policy premium surcharge, which, pursuant to 17:37A-19, authorized property insurers are obligated to collect from the insured under any policy of basic property insurance. The amount of the surcharge shall be established by the Commissioner in the Order, but the aggregate amount of the surcharge shall not exceed five percent of the premiums written on basic property insurance in this State in the most recent calendar year. Upon determining that the net value of the Fund equals or exceeds five percent of the premiums written on basic property insurance in this State for the calendar year immediately preceding, the Commissioner shall order that the imposition and collection of the surcharge be terminated.

1. Any Order issued by the Commissioner shall set forth the Commissioner's findings of fact with respect to his or her determination of the net value of the Fund and the amount of the surcharge.

i. The Commissioner shall establish the amount of any surcharge, so as to replenish the Fund to a level equal to five percent of the premiums written on basic property insurance in this State within a reasonable time.

2. The essential terms of the Order shall be published in the New Jersey Register.

(b) Application of the surcharge when ordered by the Commissioner shall be as follows:

1. The surcharge shall be imposed in an amount prescribed in an Order of the Commissioner on premiums of the following policies and endorsements effective on or after the date fixed by the Commissioner in his or her Order.

i. All fire, extended coverage and other allied lines coverage (property damage and time element) written under the fire policy.

ii. All burglary and theft policies.

iii. Commercial multiple peril policies. For the purpose of this computation, insurers shall utilize the premium as reported for commercial multiple peril (non-liability portion) in the Exhibit of Premiums and Losses in the annual statement filed pursuant to 17:23-1.

iv. Policies issued under the homeowners policy program. For the purpose of this computation, 85 percent of the homeowners premium shall constitute the premium subject to surcharge, except that on individual risks where such percentage appears unreasonable, a company may use actual division by line provided the company maintains a separate record on those risks.

2. The surcharge shall apply to all new and renewal policies effective on or after the date fixed by the Commissioner in his or her Order and to the additional premiums on all endorsements effective on or after that date.

3. Policies written for a term longer than one year with an effective date on or after the date fixed by the Commissioner in his or her Order shall be surcharged in accordance with this section.

4. Return of the surcharge is permitted on policy activity, such as endorsement decreasing premium and cancellations effective on or after the date fixed by the Commissioner in his or her Order.

5. For policies with an effective date on or after the date fixed by the Commissioner in his or her Order, which are subject to audit, the surcharge shall be based on the audited premium.

6. The surcharge shall be charged in full. Insurers may round the amount of the surcharge to the nearest whole dollar.

7. Commissions and premium taxes shall not be payable on the surcharged amount and the insurer is prohibited from absorbing such surcharge as an inducement for insurance or for any other reason.

(c) The surcharge shall be collected by each insurer and paid over to the State Treasurer of New Jersey not later than March 1 and September 1 of each year.

(d) On bills for premiums, the surcharge shall be a separate charge to the insured in addition to the premium to be paid, shall be shown separately from any Guaranty Association charge and shall be identified as "IDF Surcharge" or such other designation as the Commissioner may advise insurers is acceptable.

N.J. Admin. Code § 11:1-5.1

New Rule, R.1977 d.231, effective 7/1/1977.
See: 9 N.J.R. 278(f), 9 N.J.R. 371(b).
Amended by R.1978 d.78, effective 3/2/1978.
See: 10 N.J.R. 67(a), 10 N.J.R. 165(a).
Amended by R.1984 d.426, effective 10/1/1984.
See: 16 N.J.R. 1689(a), 16 N.J.R. 2677(a).
This section was originally codified as 11:1-5.4. Section substantially amended.
Public Notice: Recertification to the Legislature of the need for continuation of the notice of cancellation and nonrenewal requirement applicable to fire and casualty insurance policies, excluding accident and health policies for the fiscal year commencing July 1, 1985.
See: 17 N.J.R. 1939(a).
Amended by R.1989 d.478, effective 9/5/1989.
See: 21 N.J.R. 1816(a), 21 N.J.R. 2796(a).
Provisions for surcharge and for payments to the New Jersey Insurance Development Fund deleted and replaced with references to orders of the Commissioner of Insurance.
Amended by R.2001 d.75, effective 3/5/2001.
See: 32 N.J.R. 4184(a), 33 N.J.R. 794(a).
Amended by R.2009 d.363, effective 12/7/2009.
See: 40 N.J.R. 6733(a), 41 N.J.R. 4452(a).
Rewrote (a); in (b), substituted "Order" for "order" throughout; in the introductory paragraph of (b) and in (b)1, deleted "of Banking and Insurance" following "Commissioner"; in the introductory paragraph of (b), inserted "the" preceding "surcharge" and substituted "ordered" for "imposed"; in the introductory paragraph of (b)1, substituted "The" for "A"; rewrote (b)1iii; in (b)2 and (b)6, deleted ", if deemed necessary by the Commissioner of Banking and Insurance," following the first occurrence of "surcharge"; in (b)3, substituted "surcharged" for "charged, if deemed necessary by the Commissioner of Banking and Insurance,"; in (b)4 and (b)5, deleted ", if any is charged by order of the Commissioner of Banking and Insurance," following "surcharge"; in (b)4, inserted a comma following "activity" and inserted "on or after"; in (b)6, substituted "Insurers may round the amount of the surcharge" for "Rounding" and deleted "is not permitted" following "dollar"; in (b)7, substituted "Commissions" for "If a surcharge is deemed necessary by the Commissioner of Banking and Insurance, commissions" and "on the surcharged amount" for "thereon"; in (c), substituted "The" for "If a surcharge is deemed necessary by the Commissioner of Banking and Insurance, the" and deleted a comma following "New Jersey"; and rewrote (d).