New Jersey Statutes Title 17. Corporations and Institutions for Finance and Insurance 17 § 36-2

Any fire insurance company of this state having a net surplus of more than the amount of its capital stock may, by resolution of its board of directors and with the consent of the commissioner, set aside a part or the whole of its net surplus in excess of an amount equal to its capital stock and not to exceed in amount five hundred thousand dollars as a special reserve fund, which, in case of an extraordinary conflagration, shall not be liable for any claims for loss by its policyholders arising out of the conflagration, but shall, with the company’s fund for unearned premiums, be held by the company for the protection of its other policyholders. In case the losses sustained by the company by conflagration exceed its general net surplus, not including therein the special reserve fund, the special reserve fund shall be applied to make up any impairment of the capital of the company. Any balance of the fund not required for that purpose shall be carried to the general surplus account of the company. Upon payment to the claimants against the company, for losses caused by the conflagration, of the amounts to which they are respectively entitled in proportion to their several claims out of the capital and general net surplus fund of the company, not including the special reserve fund, the company shall be forthwith discharged from all further liability to each of them. The special reserve fund may be increased from time to time, but shall never exceed the capital of the company, and the amount thereof shall be set forth in the company’s annual statement to the department. No company, so long as it continues to operate under this law, shall diminish its special reserve fund by paying dividends therefrom.