Arkansas Code Title 23. Public Utilities and Regulated Industries § 23-69-124. Contingent liability--Nonlife members

(a)(1) Each member of a domestic mutual insurer other than a life insurer shall, except as otherwise hereinafter provided with respect to nonassessable policies, have a contingent liability, pro rata and not one for another, for the discharge of its obligations, which contingent liability shall be expressed in the policy and be in such maximum amount as is specified in the insurer's articles of incorporation.

(2) Termination of the policy of any member shall not relieve the member of contingent liability for his or her proportion, if any, of the obligations of the insurer which accrued while the policy was in force.

(3) Unrealized contingent liability of members does not constitute an asset of the insurer in any determination of its financial condition.

(b)(1) If at any time the assets of a domestic mutual insurer other than a life insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it by the Arkansas Insurance Code for authority to transact the kinds of insurance being transacted, and the deficiency is not cured from other sources, its directors shall levy an assessment only upon its members who held policies providing for contingent liability at any time within the twelve (12) months preceding the date notice of the assessment was mailed to them, and the members shall be liable to the insurer for the amount so assessed.

(2) The assessment shall be for such an amount as is required to cure the deficiency and to provide a reasonable amount of working funds above the minimum amount of surplus, but working funds so provided shall not exceed five percent (5%) of the insurer's liabilities as of the date as of which the amount of the deficiency was determined.

(3) In levying an assessment on policies providing for contingent liability, the assessment shall be computed on the basis of premiums earned on the policies.

(4) No member shall have an offset against any assessment for which he or she is liable, on account of any claim for unearned premium or loss payable.