ModifiedKentucky Department of InsurancePolicy N/A

Mine Subsidence Insurance Premium Rates and Reinsurance Agreement

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This bulletin describes new premium rates, updated maximum reinsured values, and related reinsurance agreement terms for Kentucky's Mine Subsidence Insurance Program, affecting insurers that provide mine subsidence coverage in Kentucky.

Policy Summary

PayerKentucky Department of Insurance

PolicyMine Subsidence Insurance Premium Rates and Reinsurance Agreement

Policy CodePolicy N/A

Change TypeMaterial updates to reinsured limits, living expense limit, and premium rate schedule

Effective DateJan 1, 2025

Next Review DateN/A

Key ActionInsurers must re-execute the attached reinsurance agreement with the Department by January 1, 2025.

SourceLink

POLICY UPDATE CHANGES

The maximum total insured value eligible to be reinsured per structure is increased from $300,000 to $500,000.

The additional living expense limit is increased to $50,000.

A new schedule of premium rates by insured value bands for residential and commercial structures is published and will apply beginning January 1, 2025.

All insurers must re-execute reinsurance agreements with the Department reflecting the new reinsured value limits by January 1, 2025.

$500,000maximum reinsured value per structure

$50,000additional living expense limit

Jan 1, 2025effective date for rates and agreements

30%ceding commission on gross rate

100%quota share cession to the Fund

Reinsurance Eligibility and Operational Conditions

inv-01: Reinsurance Eligibility and Operational Conditions

Conditions and scope for Fund reinsurance and insurer obligations:

Insurer must use policy and endorsement forms approved by the Administrator to be eligible for Fund reinsurance.

The Fund will accept cessions only for losses occurring in qualified locations; it has no liability for losses in exempt or unqualified locations.

Insurers must remit collected premiums (less ceding commissions) and submit reports of reinsured policies, proofs of reinsured claims, periodic status reports, pleadings for litigation, and cooperate with audits and loss reserve development.

Maximum liability limit under the Fund includes $500,000 for structures and $50,000 for additional living expense.

A ceding commission of 30% is allowed only on the gross rate portion of the premium; municipal taxes and state surcharges are excluded from this base.

Policies in force on January 1, 2025 may remain at current rates and limits until renewal; new rates and limits apply at renewal.

Insurers must re-execute the new reinsurance agreement attached to the bulletin by January 1, 2025.

Qualified locations are defined by the agreement (counties certified by fiscal courts); eligible and qualified counties are listed in the agreement.

Deductible: 2% of total insured value, not less than $250 and not more than $500.

Insurer retains a licensed professional civil engineer to investigate mine subsidence claims; the Fund may audit claims processing and review company adjusting methods and engineers' procedures.

inv-02: Conditions and procedural requirements

The fund's obligation to provide reinsurance and pay losses and authorized fees is conditioned on insurer compliance with the fund's plan of operation, bulletins and circulars, including:

Remit collected mine subsidence premiums to the Fund, less ceding commissions.

Timely submit proofs of reinsured claims.

Timely submit reports of statutory mine subsidence insurance coverage.

Cooperate in the Fund's examination and audit of mine subsidence insurance books and records.

Assist the Fund in development of loss reserves for reported but unpaid or unsettled claims.

Timely submit periodic status reports on open claims.

Timely submit pleadings and other relevant documents regarding claims in litigation.

Adjust insureds' losses in the customary manner.

Fund shall establish reasonable rules and procedures (in the plan of operation or in periodic bulletins/circulars) covering content and timely submission of reports of reinsured policies, premiums, proofs of reinsured claims, periodic status reports, pleadings, and rules governing reimbursement to insurers; such rules will be distributed to insurers.

Premium Rates, Limits, and Coding

inv-04: Maximum reinsured value per structure

Maximum reinsured value per structure$500,000

Statutory change sourceHB 371 amended KRS 304.44-030 increasing the per-structure limit from $300,000 to $500,000 effective Jan 1, 2025

Commissioner authorityCommissioner may amend the threshold in the future as provided in HB 371

inv-05: Additional living expense limit

Additional living expense limit$50,000

Included in Fund maximum liabilityThe maximum liability limit includes $50,000 for additional living expense

Effective dateApplies as of the effective date of the reinsurance agreement (see notice effective Jan 1, 2025)

inv-06: Deductible

DeductibleTwo percent (2%) of the policy's total insured value (minimum $250, maximum $500)

Statutory locationDefined in agreement definitions as the policy deductible

Applies per policyDeductible calculated on the policy's total insured value for mine subsidence coverage

Insurer Actions and Administrative Procedures

Prior Authorization

Re-execute reinsurance agreement by Jan 1, 2025; implementation at renewal

All insurers providing mine subsidence coverage must execute the reinsurance agreement attached to this bulletin with the Department by January 1, 2025. Policies already in effect on January 1, 2025 may remain at their current rate and coverage limit until the policy's renewal, at which time the new reinsured value limits and corresponding premium rates take effect.

Execute the attached Kentucky Mine Subsidence Reinsurance Agreement and return it to the Department by Jan 1, 2025.
Existing policies in force on Jan 1, 2025 may remain at current rate/limit until each policy's renewal; implement new rates/limits at renewal.

Billing Rule

100% quota-share cession to Fund; 30% ceding commission on gross rate

Insurers must cede a 100% quota share of all mine subsidence coverage to the Fund up to the Fund's maximum liability limit, and the Fund will accept those cessions as described in the reinsurance agreement. A ceding commission of 30% is allowed only on the gross rate portion of the premium charged to policyholders.

Cede a 100% quota share of mine subsidence coverage up to the Fund's maximum liability (including $500,000 for structures and $50,000 additional living expense).
Apply a 30% ceding commission only to the gross rate portion of the premium; municipal taxes and state premium surcharges are not part of the gross rate for this purpose.
Report accounting for premiums and losses arising from business ceded to the Fund as prescribed by the Administrator.

Denial Risk

Request administrative hearing for disputes (KRS Chapter 13B)

If an insurer disagrees with the Administrator's determination of the Fund's obligation to pay any reinsured claim or claims, the insurer may request an administrative hearing under KRS Chapter 13B.

Submit a request for an administrative hearing pursuant to KRS Chapter 13B to dispute the Administrator's determination.
Note that the agreement terminates if the authorizing legislation is repealed.

Key Terms and Definitions

inv-10: Mine Subsidence — definition of mine subsidence

Definition of Mine SubsidenceThe collapse of underground coal mines resulting in damage to a structure; excludes loss caused by earthquake, landslide, water seepage, volcanic eruption or collapse of storm and sewer drains.

SourceAgreement definitions (I.1–5)

ScopeApplies to damage sustained within the scope of statutory mine subsidence insurance coverage

inv-11: Structure — definition and exclusions

Structure — primary definitionAny dwelling, building or fixture permanently affixed to realty.

ExclusionsDoes not include land, trees, plants or crops; does not include dwellings, buildings or fixtures designed to be mobile or portable regardless of foundation type.

Permanently affixed meaningAssembled or constructed at its present location upon a permanent foundation.

inv-12: Deductible — definition (2% of total insured value, min $250, max $500)

Deductible definitionTwo percent (2%) of the policy's total insured value, not less than $250 and not more than $500.

ApplicationDeductible applies to mine subsidence insurance losses as defined in the agreement.

ReferenceAgreement definitions and reinsurance provisions

inv-13: Cession/Quota Share — definition of 100% quota share cession to the Fund

Cession/Quota ShareInsurer cedes a 100% quota share of all mine subsidence coverage written up to the Fund's maximum liability limit.

Effect on insurer liabilityCessions made within coverage limits relieve the insurer of all liability for those ceded losses; the Fund alone is liable for ceded coverage.

ScopeCession applies per risk assumed and is subject to the maximum liability limits set in statute and the agreement.

inv-14: Fund-established rules and procedures — plan of operation, bulletins/circulars and submission requirements

Plan of Operation and bulletinsRules and procedures shall be contained in the plan of operation or in periodic bulletins or circulars prepared by the Fund.

Submission requirements coveredContent and timely submission of reports of reinsured policies in force, premiums, proof of reinsured claims, periodic status reports on open claims, and pleadings/other litigation documents.

DistributionThe plan of operation and all such bulletins and circulars shall be distributed to the insurers.

inv-15: Conditions for fund obligations — insurer obligations including remitting premiums, timely submissions, cooperation

Condition for Fund obligation — premium remittanceInsurer must remit collected mine subsidence premiums to the Fund, less ceding commissions.

Timely submissions and cooperationInsurer must timely submit proofs of reinsured claims, reports of statutory coverage, status reports on open claims, pleadings for litigation, and cooperate with examinations and audits.

Assistance with loss reserves and customary adjustmentInsurer must assist the Fund in development of loss reserves for reported but unpaid claims and adjust insured losses in the customary manner.

Policy Summary

PayerKentucky Department of Insurance

PolicyMine Subsidence Insurance Premium Rates and Reinsurance Agreement

Policy CodePolicy N/A

Change TypeMaterial updates to reinsured limits, living expense limit, and premium rate schedule

Effective DateJan 1, 2025

Next Review DateN/A

Key ActionInsurers must re-execute the attached reinsurance agreement with the Department by January 1, 2025.

SourceLink

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