§ 6405. Reserves. (a) Every title insurance corporation organized and
doing an insurance business under this article shall establish,
segregate and maintain a reinsurance reserve during the period and for
the uses and purposes hereinafter provided which shall at all times and
for all purposes be deemed and shall constitute unearned portions of the
original premiums and shall be charged as a reserve liability of such
corporation in determining its financial condition.

(1) Beginning June first, nineteen hundred forty-five, the amount of
such reserve shall be cumulative and shall consist of (i) one dollar
fifty cents for each risk assumed under a binder or policy of insurance
or any certificate or agreement issued under either of them, plus
one-eightieth of one percent of the face amount of insurance effected
thereby; and (ii) three percent of the gross fees and premiums received
by it for guaranteed certificates of title, guaranteed searches and
guaranteed abstracts of title not included in item (i) of this
paragraph. That portion of the reinsurance reserve established as
required by this paragraph more than one hundred eighty months prior
shall be released and shall no longer constitute part of the reinsurance
reserve and may be used for any corporation purpose.

(2) Beginning January first, nineteen hundred eighty-six, the amount
of such reserve provided shall consist of (i) one dollar fifty cents for
each risk assumed under a binder or policy of insurance or any
certificate or agreement issued under either of them, plus one-eightieth
of one percent of the face amount of insurance effected thereby; and
(ii) three percent of the gross fees and premiums received by it for
guaranteed certificates of title, guaranteed searches and guaranteed
abstracts of title not included in item (i) of this paragraph. "Risk
assumed" and "insurance effected", as used in this paragraph, shall not
include the face amount of a policy insuring a lender to the extent of
the face amount of a policy insuring the owner of an interest in the
same land under an owner's policy which provides that any amount paid
under the lender's policy shall reduce the amount of, and be deemed a
payment under, the owner's policy. A title insurer shall release from
the reinsurance reserve established as required by this paragraph a sum
equal to five percent of the amount added to the reserve during each
year following the year in which the sum was added, until the entire
amount added has been released.

(b) Every title insurance corporation organized or authorized to do
business in this state shall on or before March first each year, file a
report in such form as may be prescribed by the superintendent of all
unpaid losses and claims upon title insurance policies, guaranteed
certificates of title, guaranteed searches and guaranteed abstracts of
title (such policies, certificates, searches and abstracts being
hereafter in this section called "guarantees") of which the corporation
has received due notice in writing from or on behalf of the insured or
the guaranteed and keep such records thereof as may be prescribed by the
superintendent. Every title insurance corporation doing business under
this article shall set up and maintain a loss reserve at least equal to
the aggregate estimated amounts due or to become due on account of all
such unpaid losses and claims.

(c) The reinsurance reserve required by subsection (a) of this section
shall be maintained as follows:

Admitted assets of a value at least equal to the amount required for
such reserve shall be continuously held by the corporation as a
segregated reserve fund at all times distinct and separate from all its
other assets. Cash paid into such fund shall, unless invested, be kept
in legal tender or deposited in a separate account. Securities which are
a part of such fund shall be kept separate from all other securities and
shall be clearly identified as securities belonging to such fund. The
net income and profits derived from such fund investments shall be
transferred to the general assets of the corporation. Such corporation
shall at all times keep a separate record of the cash and securities in
such fund, giving complete identification of the assets belonging at any
time to such fund and showing full particulars as to withdrawals and
additions. No assets of such fund shall be taken or used in satisfaction
of any claim against such corporation except as hereinafter provided and
such fund shall be held solely for the purpose of satisfying such
claims.

(d) The funds constituting the reinsurance reserve required by
subsection (a) of this section shall be held in cash or invested only in
the types of reserve investments that meet the requirements of
paragraphs one, two, and three of subsection (a) of section one thousand
four hundred four of this chapter. In no event shall the investment made
under such paragraph three exceed twenty percent of the reinsurance
reserve at preceding year-end.

(e) If at any time the superintendent finds from the report of any
examiner filed pursuant to section three hundred eleven of this chapter
or otherwise, after reasonable notice to and hearing of such
corporation, that the value of the cash and investments lawfully in the
reserve fund required to be established, segregated and maintained by
subsection (c) of this section is less than the amount required to be
maintained at such time pursuant to subsection (a) of this section, the
superintendent shall determine the amount of such impairment and issue a
written requisition to such corporation to remove, repair or make good
such impairment within such period as he shall designate, not less than
thirty nor more than ninety days from the service of such requisition.
If at the expiration of such designated period such impairment has not
been removed, repaired or made good, the superintendent shall order such
corporation in writing to cease doing any new business. If such
corporation, or any officer thereof, having notice of such order of the
superintendent, shall thereafter transact or participate in the
transaction of any new business, such corporation or person shall be in
violation of the provisions of this chapter.

(f) The reinsurance reserve fund required to be maintained pursuant to
subsection (c) of this section shall constitute a separate and distinct
trust fund for the security of holders of guarantees of the corporation
as hereinafter provided.

(g) In the event the superintendent, pursuant to the provisions of
article seventy-four of this chapter, obtains an order for the
rehabilitation or liquidation of a title insurance corporation, he shall
have the power:

(1) to pay out of such reinsurance reserve fund, subject to the
approval of the court, the claims for losses sustained by the holders of
guarantees of such corporation pending at the time of the making of such
order or arising subsequently thereto and up to the time reinsurance is
effected, and

(2) to negotiate and enter into a contract with one or more solvent
corporations authorized to transact the business of title insurance,
subject to the approval of the court, for the reinsurance of the
obligations under such outstanding guarantees in accordance with their
terms, covenants and conditions, and

(3) to pay the cost of reinsurance out of said reinsurance reserve
fund of such corporation.

(h) After the payments hereinbefore authorized shall have been made by
the superintendent, he shall transfer any balance in said reinsurance
reserve fund to the general assets of the corporation in rehabilitation
or liquidation. The reinsuring corporation shall segregate and maintain
the reinsurance reserve fund acquired from the superintendent under the
terms of the agreement of reinsurance except that on the first day of
the month next succeeding such acquisition and on the first day of each
month thereafter, one one-hundred-eightieth of the amount of the said
fund so acquired shall be released therefrom and shall no longer
constitute part of the reinsurance reserve fund so acquired and may be
used for any corporate purpose of the reinsuring corporation.

(i) In the event the superintendent shall be unable to effect a
contract for reinsurance as provided in subsection (g) of this section,
for the reinsurance of the outstanding guarantees of a title corporation
in rehabilitation or liquidation, the reinsurance reserve fund of such
corporation shall constitute a separate and distinct trust fund for the
payment therefrom by the superintendent, on the approval of the court,
in the following order of preference, (i) of all expenses of proceedings
incurred under this subsection, (ii) of all allowed claims for losses
sustained by the holders of guarantees of such corporation which are
unpaid or pending at the time fixed by the court for the filing of
claims and (iii) of all allowed claims for losses which shall be
asserted at any time within twenty years from the date of the entry of
such order of rehabilitation or liquidation and which shall be paid in
the order of the date of their allowance by the court. Any balance in
the reinsurance reserve fund of a title insurance corporation after
payment of allowed claims asserted within twenty years from the date of
the entry of the order of rehabilitation or liquidation shall be
transferred to the general assets of such corporation. The
superintendent shall keep and retain for such period of twenty years all
title records of the corporation which he in his discretion shall deem
necessary to effectuate the purposes of this trust.

(j) The payments out of the reinsurance reserve fund which shall have
been made by the superintendent on allowed claims for losses which shall
have been filed within the time fixed by the court for the filing of
claims in a rehabilitation or liquidation proceeding, shall constitute
an allowed claim in favor of the reinsurance reserve fund of such
corporation entitled to share with general creditors in the dividends
directed to be paid and the dividends so paid on such claim shall fall
into such reinsurance reserve fund.

(k) In proceedings for the rehabilitation or liquidation of a title
insurance corporation which shall not have been declared insolvent, no
assets of such corporation shall be distributed to the shareholders of
such corporation (i) until all claims allowed in the rehabilitation or
liquidation proceedings have been paid in full, and (ii) if such
distribution is within twenty years from the date of the entry of the
order of rehabilitation or liquidation such distribution shall not be
made unless prior to or at the time of the making of such distribution
there shall be transferred to the reinsurance reserve fund general
assets of the corporation sufficient to restore such fund to its amount
on the date of the entry of such order. Upon the expiration of twenty
years from the date of the entry of such order of rehabilitation or
liquidation any balance in such reinsurance reserve fund after payment
of all allowed claims asserted within such twenty year period shall be
transferred to the general assets of such corporation.