§ 5405. Participation. (a) Every member of the association shall
participate in its writings, expenses, profits and losses in the
proportion that the net direct premiums of the member (but excluding
that portion of premiums attributable to the operation of the
association) written during the preceding calendar year bear to the
aggregate net direct premiums written in this state by all members of
the association. Each member's participation in the association shall be
determined annually on the basis of such net direct premiums written
during the preceding calendar year as disclosed in the annual statements
and other reports filed by the member with the superintendent.

(b) No member shall be obligated in any year to reimburse the
association on account of its proportionate share in the deficit from
operations of the association in that year in excess of one percent of
its surplus to policyholders. The aggregate amount not so reimbursed
shall be reallocated among the remaining members in accordance with the
method of determining participation prescribed in this section, after
excluding from the computation the total net direct premiums of all
members not sharing in such excess deficit. In the event that the
deficit from operations allocated to all members in any calendar year
shall exceed one percent of their respective surplus to policyholders,
the amount of such deficit shall be allocated to each member in
accordance with the method of determining participation prescribed in
this section.

(c) Annually, on a date set by the superintendent, the association
shall estimate its deficit from operations, and after application of the
funds provided for in subsection (d) of this section, calculate a
factor, not to exceed one percent, by relating such deficit to net
direct premiums written for the latest calendar year, subject to the
approval of the superintendent. Such factor may be reflected in the
determination of rates filed by the principal rating organization in
this state and by members of the association for fire, extended
coverage, broad form coverage pursuant to subsection (g) of section five
thousand four hundred two of this article, additional perils, homeowners
and commercial multiple peril package policies which include the perils
of fire and extended coverage. Notwithstanding the provisions of section
five thousand four hundred four of this article to the contrary, any
part of such deficit which exceeds one percent as so calculated, shall
be defrayed by an increase in rates for the respective occupancy
classes, based upon the association's related loss and expense
experience together with other information the superintendent requires,
in accordance with filings approved by the superintendent. Each member's
share of the estimated deficit shall be collected by the association in
accordance with the plan of operation.

(d) In accordance with regulations of the superintendent, the deficit
from the operations of the association shall be credited with income
earned from the New York property/casualty insurance security fund. The
credit shall be an amount determined by the superintendent, which in no
year shall exceed income earned or the sum of fifteen million dollars
whichever is less. The credit shall be estimated annually by the
superintendent on a date set by the superintendent, and such estimated
amount shall be credited to the association and transferred from the
income as earned during the year by the New York property/casualty
insurance security fund. Any difference between the estimated amount of
income and the actual amount of income for the year shall be taken into
account in computing the estimate for the next period. Notwithstanding
the foregoing provisions of this section or any other law to the
contrary, if the assets of the association exceed its liabilities on the
thirtieth day of November in any year commencing on or after April
first, nineteen hundred eighty-two in accordance with regulations of the
superintendent, the association shall pay to the New York
property/casualty insurance security fund an amount equal to any amounts
paid from such fund to the association in accordance with the provisions
of article seventy-six of this chapter and this section which have not
been repaid prior to such thirtieth day of November, together with any
investment income attributable thereto, as determined by the
superintendent, up to the amount of such excess. Any such payment shall
be made no later than February first of the following year.

(e) Members shall not be relieved of their obligation to reimburse the
association for their share of the deficit resulting from the operations
of the association prior to August first, nineteen hundred seventy-nine.

(f) (1) Any member that voluntarily writes, as of expiration date, a
policy or coverage currently written through the association, shall
receive credit against its participation in association writings. Such
credit shall be to the extent of twice the net direct premium, on an
annual basis, of such policy or coverage voluntarily written and shall
apply for one year.

(2) Subject to approval by the superintendent, the association shall
develop and implement an incentive plan for members which voluntarily
write policies that include windstorm coverage in coastal areas. Such
plan shall also include incentives for members to voluntarily write
wraparound policies, as defined by the association, in coastal areas,
when such wraparound policies include coverage for windstorm on a
replacement cost basis in excess of the windstorm coverage contained in
an association policy issued to the same policyholder. The purpose of
these incentives shall be to encourage the writing of voluntary
insurance policies in coastal areas by reducing the participation in the
writings of the association of those member companies which voluntarily
write policies that include windstorm coverage in such areas. For the
purposes of this section, coastal areas include: areas within one mile
of a saltwater ocean, sound, inlet or bay on Long Island's south shore
or along the shore of Brooklyn, Queens, Staten Island and Long Island's
forks; areas within two thousand five hundred feet of a saltwater ocean,
sound, inlet or bay on Long Island's north shore, the Bronx or
Westchester.

(3) The association shall offer a policy form which may be used only
in conjunction with voluntary market wraparound policies that provide
windstorm coverage in excess of amounts insured by the association. The
policy form, which may include broad form coverage, shall provide
replacement cost coverage for dwellings and personal property for repair
or replacement without deduction for depreciation on terms and
conditions generally consistent with policies customarily in use in the
voluntary market as modified to make the association policy compatible
with voluntary market wraparound policies. Coverage offered by the
association under such policy shall not exceed six hundred thousand
dollars for dwelling coverage and two hundred fifty thousand dollars for
personal property, and shall be available to cover one to four family
owner-occupied dwellings, apartment units or condominium units. The
association may require applicants to provide evidence of the purchase
of flood insurance as a condition of eligibility for coverage under this
policy. The association shall file the form for approval with the
superintendent.