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PROPERTY POOL

PROPERTY POOL

GENERAL ASSESSMENT FORMULA

FOR THE

PURMS JOINT SELF-INSURANCE AGREEMENT

Amended and Restated as of November 21, 2002

TABLE OF CONTENTS

Definitions for Property Pool General Assessment Formula. 2

Annual Assessment Limit 2

Assessment Limit Overage. 2

Assessment Share. 2

Assigned Deductible. 2

Assigned Insured Value. 2

Basic Per Capita” Component 3

Blended Risk Based Rate. 3

Category of Insured Property. 3

Category of Risk. 3

Deductible. 3

Direct Physical Loss or Damage. 3

Exempted Category. 3

Exempt Category of Insured Property. 3

Exempt Category of Risk. 3

Excess Property Insurance Retention. 4

Gross Revenues. 4

Insured Location. 4

Insured Perils. 4

Insured Property. 4

Insured Value. 4

Item of Insured Property. 4

Mandatory Deductible. 4

Mothballed Equipment 4

Partially Exempt Insured Property. 5

Perils. 5

Property Coverage Limit 5

Property Deductible Credits. 5

Property Pool Operation Costs. 5

Relative Insured Value Component 5

Retention Adjusted Insured Values. 5

Risk Adjusted Insured Value. 6

Risk Based Component 6

Risk Based Rates. 6

Specific Risk Based Rate. 6

Valuation Cap. 6

Statement of Property General Assessment Formula. 7

Basic Per Capita” Component at 10%. 7

Relative Insured Value” Component at 20%.. 7

Risk Based” Component at 70%. 10

Property Deductible Credit for Assigned and Mandatory Deductibles. 13

Limitation on Amount of Annual Property General Assessments per Member 14

Application of Annual Assessment Limit 14

Reallocation of Assessment Limit Overages to Remaining Members. 14

Former Members. 15

New Members. 15

 


 

PROPERTY POOL

GENERAL ASSESSMENT FORMULA

FOR THE

PURMS JOINT SELF-INSURANCE AGREEMENT

Amended and Restated as of November 21, 2002

Overview of Assessment Formulas for PURMS Risk Pools

The “Assessment Formulas” Sections of the PURMS Joint Self-Insurance Agreement (“SIA”) set forth the formulas for assessing the Members of each Risk Pool for the Operational Costs the Fund incurs in operating their respective Risk Pools, including without limitation, Coverage Payments (all Risk Pools), Defense Costs (Liability Pool), Property Claim Costs (Property Pool), Direct H&W Claims Costs and Shared H&W Costs (H&W Pool), and the Direct and Shared Administrative Expenses of all Risk Pools.

The Liability Pool is governed by two Assessment Formulas, one for General Assessments and one for Premium Assessments.  The two current formulas for the Liability Pool are: 

(a)   The Liability General Assessment Formula (with Annual Assessment Limit) (SIA § VIII); and

(b)  The Liability Premium Assessment Formula (with Added-Risk Pass Through, and without Annual Assessment Limit) (SIA § IX). 

The Liability General Assessment Formula was first adopted by the Members of the Fund on December 20. 1976, has been amended from time to time, and was unanimously re-adopted on March 30, 1995. The Liability Premium Assessment Formula (with Added-Risk Pass Through and without Annual Assessment Limit) was unanimously re-adopted by the Board at its General Meeting on December 9, 1994, effective January 1, 1995. 

The Property Pool is also governed by two Assessment Formulas, one for General Assessments and one for Premium Assessments.  The two current formulas for the Property Pool are: 

(a)   The Property General Assessment Formula (with Annual Assessment Limit) (SIA § XII); and

(b)  The Property Premium Assessment Formula (without Annual Assessment Limit) (SIA § XIII). 

The Property General Assessment and the Property Premium Assessment Formulas were unanimously adopted by the Members of the Fund, effective February 27, 1997, and were both amended and restated and unanimously adopted by the Board, effective as of November 21, 2002. 

The Assessment of Members of the H&W Pool is governed by a single Assessment Formula called the H&W General Assessment Formula (SIA, § XV). This Formula covers both the self-insured portion of the H&W Pool’s Operational Costs as well as the cost of Stop Loss Insurance. The H&W General Assessment Formula was unanimously adopted by the Members of the Fund on March 16, 2000, effective April 1, 2000, and was amended and restated and unanimously re-adopted by the Members as of December 7, 2001.

These Formulas, as amended from time to time pursuant to § I, § 5.2, are specifically incorporated into the Interlocal Agreement and shall be deemed a part of that Agreement as if fully set forth therein.

PROPERTY POOL GENERAL ASSESSMENT FORMULA

1.               Definitions for Property Pool General Assessment Formula.  The Definitions set forth in the "Definitions" Section of the SIA (§ II) apply to the interpretation of the Fund's Assessment Formulas, except as may be modified specifically or by necessary implication by the Definitions set forth below, some of which are specific to this Property General Assessment Formula Section.

1.1.          Annual Assessment Limit – shall mean the limit on the total amount of Property General Assessments the Fund may levy on an individual Member of the Property Pool in any calendar year, as provided in § I, ¶ 13.8, and subject the Additional Discretionary General Assessments provided for therein.

1.2.          Assessment Limit Overage – shall mean the amount by which a Member's Assessment Share of a Property General Assessment exceeds the amount of such Assessment the Member is required to pay after application of the Annual Assessment Limit, in accordance with § XII, ¶ 4.

1.3.          Assessment Share – shall mean the amount of money a Member becomes obligated to pay to the Fund as a result of an Assessment.

1.4.          Assigned Deductible – shall mean the Deductible a Member of the Property Pool chooses to assign to an Item of Insured Property that is not otherwise subject to a Mandatory Deductible, as reflected in the Schedule of Values maintained by the Administrator (see § X, ¶ 7.1.1), or the Deductible otherwise established as an Assigned Deductible for a Member's Insured Property pursuant to § X, ¶ 7.2.2).

1.5.          Assigned Insured Value – shall mean the Insured Value listed for an Item of Insured Property on the Schedule of Values, as established by Annual Appraisal pursuant to § X, ¶ 14.

1.6.          Basic Per Capita” Component – shall mean the Formula Component consisting of the 10% portion of a Property General Assessment amount that is allocated equally among all Members of the Property Pool for purposes of calculating a Member's Assessment Share of a Property General Assessment, as provided in § XII, ¶ 2.1.

1.7.          Blended Risk Based Rate – shall mean the number resulting from the weighted average of applying each applicable Specific Risk Based Rate to the Total Insured Value of a Member’s Insured Property in each Category of Risk associated with an applicable Specific Risk Based Rate.

1.8.          Category of Insured Property – depending upon the context, shall mean the grouping of Insured Property that is subject to a particular Specific Risk Based Rate, or the grouping of Insured Property that is subject to a particular Excess Property Insurance Retention that exceeds the Property Coverage Limit.

1.9.          Category of Risk – depending upon the context, shall mean or refer to the Peril(s) associated with a particular Specific Risk Based Rate, or the Perils associated with a particular Excess Property Insurance Retention that exceeds the Property Coverage Limit.

1.10.       Deductible – in the context of the Property Coverage, shall mean either an Assigned Deductible or a Mandatory Deductible, as determined in accordance with § X, ¶¶ 7.1 and 7.2, respectively, of the General Property Coverage Section of the SIA.

1.11.       Direct Physical Loss or Damage – shall mean the physical destruction of or damage to Insured Property as a result of an Insured Peril(s) (see definition of "Property Loss", § X, ¶ 1.42, and terms of "Property Coverage" set forth in § X, ¶ 4).

1.12.       Exempted Category – shall mean either an Exempted Category of Insured Property or an Exempted Category of Risk.

1.13.       Exempt Category of Insured Property – shall mean any Category of Insured Property that has been exempted from application of the Specific Risk Based Rate(s) associated therewith for purposes of determining a Member’s “Blended Risk Based Rate” under § XII, ¶ 2.3.3(a), in connection with calculating a Member’s allocation of the 70% Risk Based Component of the Property General Assessment Formula (see, § XII, ¶ 2.3) or the 90% Risk Based Component of the Property Premium Assessment Formula (see, § XIII, ¶ 2.2).

1.14.       Exempt Category of Risk – shall mean any Category of Risk that has been exempted from application of the Specific Risk Based Rate(s) associated therewith for purposes of determining a Member’s “Blended Risk Based Rate” under § XII, ¶ 2.3.3(a), in connection with calculating a Member’s allocation of the 70% Risk Based Component of the Property General Assessment Formula (see, § XII, ¶ 2.3) or the 90% Risk Based Component of the Property Premium Assessment Formula (see, § XIII, ¶ 2.2).

1.15.       Excess Property Insurance Retention – shall mean the amount of the self-insured retention or deductible imposed under the Excess Property Policy for a Property Loss to a particular Category of Insured Property, or from a Peril in a particular Category of Risk, before the Excess Property Insurance attaches and begins to provide Excess Property Coverage for such Loss. (See § XII, ¶ 2.2.1.)

1.16.       Gross Revenues – for purposes of determining application of the Annual Assessment Limit under the Property General Assessment Formula in § XII, ¶ 4, shall mean the annual total of revenue dollars received by a Member from sales of electricity, water, gas and/or sewer Services, less the amount of any municipal urban taxes that the Member collects from Customers and remits to the taxing authority.

1.17.       Insured Location – shall mean a geographic location at which a Member maintains one or more Items of Insured Property.

1.18.       Insured Perils – shall mean Perils that are not otherwise Excluded from the General Property Coverage (see, § X).

1.19.       Insured Property – shall mean property identified to the Member in the Schedule of Values maintained by the Administrator or property subject to one of the exceptions thereto set forth in § X, ¶¶ 3.2.1 and 12.1.1 or in ¶ 3.2.2, and shall include all Autos identified for Coverage under § XI.

1.20.       Insured Value – shall mean the value assigned to an Item of Insured Property listed in the Schedule of Values established pursuant to Annual Appraisals (see § X, ¶ 3.1 and ¶ 14), or the value otherwise assigned to an Item of Insured Property by the Administrator in accordance with § X, ¶ 3.1, which shall be used as the basis for determining Members' Assessment Shares under the Property General Assessment and Premium Assessment Formulas.

1.21.       Item of Insured Property – shall mean and refer to each separate listing of Insured Property on the Schedule of Values which is subject to an Assigned Insured Value, whether such listing reflects a single piece of Insured Property or multiple pieces of like-kind property.

1.22.       Mandatory Deductible – shall mean the Automatic Mandatory Deductible applied to those Categories of Risk for which the Excess Property Carrier has established Excess Property Insurance Retentions that do or, under certain circumstances, could exceed the amount of the Property Coverage Limit, as provided in § X, ¶ 7.2.1, or a Discretionary Mandatory Deductible established pursuant to the procedures in § X, ¶ 7.2.2.

1.23.       Mothballed Equipment – shall mean machinery or equipment that a Member has inactivated or taken out of service for a period of time: (a) which constitutes Partially Exempt Insured Property, as provided in § XII, ¶ 2.3.5; (b) with respect to which the Member is exempted from Assessment under the 70% “Risk Based” Component of the Property General Assessment Formula for the Specific Risk Based Rate(s) associated with the Exempt Categories of Risk, as provided in § XII, ¶ 2.3.3(a); and (c) which is excluded from General Property Coverage for Loss resulting from the Peril(s) within the associated Exempt Category of Risk, as provided in § X, ¶ 9.4.

1.24.       Partially Exempt Insured Property – shall mean Insured Property that has been established as “Partially Exempt Insured Property” pursuant to written notice to the Administrator, as provided in § XII, ¶ 2.5.3(a), which is exempted from Assessment under the 70% “Risk Based” Component of the Property General Assessment Formula for the Specific Risk Based Rate(s) associated with the applicable Exempt Category of Insured Property or Exempt Category of Risk, as provided in § XII, ¶¶ 2.5.3(b) and 2.3.3(a), and which is excluded from General Property Coverage for Loss resulting to Property in the Exempt Category of Property and/or from the Peril(s) within the associated Exempt Category of Risk, as provided in § XII, ¶ 2.5.3(c) and § X, ¶ 9.4.

1.25.       Perils – shall mean any of the types of acts or events that can result in Direct Physical Loss or Damage to Insured Property. “Perils” generally shall mean “Insured Perils” (unless such Peril(s) are Excluded because they relate to an Exempt Category of Risk or are otherwise Excluded).

1.26.       Property Coverage Limit – shall mean the maximum amount the Fund may be required to pay, including Property Claim Costs, for all Covered Property Claims filed by one or more Members arising from one Property Loss, as provided in § X, ¶ 4, less applicable Assigned or Mandatory Deductibles, and subject to the provisions of § X, ¶ 4.3.1 which provide for Automatic Extended Property Coverage when the applicable Excess Property Insurance Retention exceeds the amount of the Property Coverage Limit.

1.27.       Property Deductible Credits – shall mean the credits a Member is allocated under the Property General Assessment Formula according to rates set forth in the current ISO Commercial Lines Manual or successor manuals (which shall be available for inspection at the Administrator's offices), based upon the levels of Deductibles applicable to a Member's Insured Property determined in accordance with § X, ¶ 7. 

1.28.       Property Pool Operation Costs – shall mean Property Claim Costs, Property Coverage Payments and the Property Pool's allocation of Direct and Shared Administrative Expenses.

1.29.       Relative Insured Value Component – shall mean the Formula Component consisting of the 20% portion of a Property General Assessment that is allocated among all Members of the Property Pool based on the Members’ relative Retention Adjusted Insured Values for purposes of calculating a Member's Assessment Share of a Property General Assessment, as provided in § XII, ¶ 2.2.

1.30.       Retention Adjusted Insured Values – shall mean the Insured Values of a Member after those values have been adjusted by application of the Valuation Cap, as provided in § XII, ¶ 2.2.1, and such Retention Adjusted Insured Values shall be the Values used for purposes of calculating each Property Pool Member’s Assessment Share of the 20% “Relative Insured Value” Component of the Property General Assessment Formula. (See § XII, ¶ 2.2.2).

1.31.       Risk Adjusted Insured Value – shall mean the number resulting from application of the applicable Blended Risk Based Rate to the Total Insured Value of a Member’s Insured Property, as provided in § XII, ¶ 2.3.3, and the Risk Adjusted Insured Value of each Member’s Insured Property shall be the Value used for purposes of calculating each Property Pool Member’s Assessment Share of the 70% “Risk Based” Component of the Property General Assessment Formula. (See § XII, ¶ 2.3.4).

1.32.       Risk Based Component – depending upon the context, shall mean either: (a) the Formula Component consisting of the 70% portion of a Property General Assessment amount that is allocated among all Members of the Property Pool based on the relative relationship of each Member’s Risk Adjusted Insured Value for purposes of calculating a Member's Assessment Share of a Property General Assessment, as provided in § XII, ¶ 2.3; or (b) the Formula Component consisting of the 90% portion of a Property Premium Assessment amount that is allocated among all Members of the Property Pool based on the relative relationship of each Member’s Coverage Limit Adjusted Insured Value, calculated as provided in § XIII, ¶ 2.3. for purposes of calculating a Member's Assessment Share of a Property Premium Assessment, as provided in § XIII, ¶ 2.3.

1.33.       Risk Based Rates – shall mean the property insurance rates, or coverage or classification codes for the various Categories of Insured Property or Categories of Risk, including information regarding the relative relationship of such rates, obtained from the Excess Property Carrier (or otherwise from the property insurance industry, as provided in § XII, ¶¶ 2.3.1 and 2.3.2), used by the Excess Carrier to calculate the premium for the Excess Property Insurance. These are the rates that are used to calculate the relative Risk Adjusted Insured Value of each Member’s Insured Property for purposes of allocating among Property Pool Members the 70% Risk Based Component of the Property General Assessment Formula, and the 90% Risk Based Component of the Property Premium Assessment Formula. (See § XII, ¶ 2.3.4.)

1.34.       Specific Risk Based Rate – shall mean a Risk Based Rate applicable to a specific Category of Risk, as determined under § XII, ¶¶ 2.3.1 or 2.3.2. Such Specific Risk Based Rates shall be used for determining each Member’s Risk Adjusted Insured Value for purposes of allocating the 70% Risk Based Component of the Property General Assessment Formula, or the 90% Risk Based Component of the Property Premium Assessment Formula, among Property Pool Members.

1.35.       Valuation Cap – shall mean the maximum Insured Value for an Item of Insured Property that will be used in calculating a Member’s Retention Adjusted Insured Values for purposes of determining such Member’s Assessment Share of the 20% “Relative Insured Value” Component of the Property General Assessment Formula. (See § XII, ¶ 2.2.1.)

2.               Statement of Property General Assessment Formula.  The Property General Assessment Formula has three (3) Formula Components that shall be applied as provided in this § XII. A Member's Assessment Share of any Property General Assessment shall be the total of the allocations to a Member under each of the three Formula Components.

The “Basic Per Capita” Component allocates 10% of the total Assessment needed among the Members of the Property Pool equally, as provided in ¶ 2.1 below.

The “Relative Insured Value” Component allocates 20% of the total Assessment needed among Members based on the percentage that the total of each Member’s “Retention Adjusted Insured Values” bears to the total of the Retention Adjusted Insured Values for all Members (as provide in ¶ 2.2 below).

The “Risked Based” Component allocates 70% of the total General Assessment among Members based on the percentage that each Member’s Risk Adjusted Insured Value bears to the total of the Risk Adjusted Insured Values of all Members (as provide in ¶ 2.3 below).

The Insured Values for applying these last two Formula Components shall be those identified to the Insured Property listed for each Member in the Schedule of Values at the time of the Assessment

2.1.          “Basic Per Capita” Component at 10%. Ten percent (10%) of the amount of the Property General Assessment to be levied will be allocated equally among all Members of the Property Pool.

Example of “Basic Per Capita” Component Calculation:  Assume a Property General Assessment amount of $778,098.  10% times that amount yields $77,810, which will be divided in equal shares among all Property Pool Members.  Assume the Property Pool is composed of 13 Members.  $77,810 (10% of the Property General Assessment amount) divided by a hypothetical 13 total Property Pool Members yields an allocation of $5,985.

2.2.          Relative Insured Value” Component at 20%.  Twenty percent (20%) of the amount of the Property General Assessment to be levied will be allocated among Members based on the relative relationship of the total of each Member's Retention Adjusted Insured Values to the total Retention Adjusted Insured Values of all Insured Property of all Property Pool Members at the time of the Assessment.  The Retention Adjusted Insured Values of Member’s Insured Property shall be determined in accordance with ¶ 2.2.1 below.

2.2.1.     Application of Valuation Cap to Determine Retention Adjusted Insured Values. For purposes of applying the 20% “Relative Insured Value” Component:

2.2.1(a)                   The Valuation Cap shall be applied to the Assigned Insured Value of each Item of Insured Property separately listed for each Member in the Schedule of Values at each Insured Location in order to determine the Retention Adjusted Insured Value of each such Item of Insured Property.

2.2.1(b)                   For Insured Property with an Assigned Insured Value of less than the amount of the Property Coverage Limit, the Retention Adjusted Insured Value shall be equal to the amount of the Assigned Insured Value.

2.2.1(c)                   For Insured Property with an Assigned Insured Value greater than the amount of the Property Coverage Limit, and provided that the Excess Property Insurance Retention applicable to such Property is set at the same amount as the Property Coverage Limit, the Retention Adjusted Insured Value shall be equal to the amount of the Property Coverage Limit.

2.2.1(d)                   For Insured Property with an Assigned Insured Value greater than the amount of the Property Coverage Limit, if the Excess Property Insurance Retention applicable to such Property is set at a specific dollar amount which is greater than the Property Coverage Limit, the Retention Adjusted Insured Value shall be equal to the amount of the applicable Excess Property Insurance Retention or the amount of the Assigned Insured Value, whichever is less.

2.2.1(e)                   For Insured Property with an Assigned Insured Value greater than the amount of the Property Coverage Limit, if the Excess Property Insurance Retention applicable to such Property is stated as a specific dollar amount that exceeds the amount of the Property Coverage Limit or some percentage of an Insured Location’s Total Insured Value (“TIV”), whichever is greater, then the Retention Adjusted Insured Value for such Property shall be either such stated specific dollar amount or the amount of the stated percentage of the Insured Location’s TIV (measured by the total of the Assigned Insured Values for such Location on the Schedule of Values), whichever is greater; provided, however, that if the Assigned Insured Value of the Item of Insured Property is less than this resulting greater amount, then the Retention Adjusted Insured Value for such Property shall be its Assigned Insured Value.

2.2.2.     Calculation of a Member’s Allocation Under 20% “Relative Insured Value” Component. The total of a Member’s Retention Adjusted Insured Values for all Insured Property shall be compared to the total of the Retention Adjusted Insured Values for all Members of the Property Pool, and the resulting ratio multiplied times 20% of the General Assessment amount needed by the Property Pool shall be such Member’s allocation under the “Relative Insured Value” Component of the Property General Assessment Formula.

Examples of Application of Valuation Cap to Determine Retention Adjusted Insured Values:

Example 1: Application of Valuation Cap Where The Applicable Excess Property Insurance Retention for an Item of Insured Property is Equal to the Amount of the Property Coverage Limit. Assume that the Property Pool’s Property Coverage Limit is $250,000. Further, assume that Member A’s substation at Insured Location A has two power transformers with Assigned Insured Values of $500,000 each, and that the Assigned Insured Values of the rest of the Insured Property at Location A totals $1,000,000, with no single Item of this other Insured Property having an Insured Value that exceeds the $250,000 Property Coverage Limit. Also, assume that the Excess Property Insurance Retention applicable to the two transformers is the same amount as the Property Pool’s Property Coverage Limit of $250,000. In the absence of application of the Valuation Cap, there would be a total Assigned Insured Value at Location A of $2,000,000 for purposes of applying the “Relative Insured Value” Component of the General Assessment Formula. However, because the Excess Property Insurance Retention applicable to the two transformers is equal to the Property Coverage Limit, the Valuation Cap will be applied so that only the Insured Value of a transformer up to the $250,000 Property Coverage Limit is considered in calculating Member A’s Assessment Share of the 20% “Relative Insured Value” Component of the Property General Assessment Formula. After application of the Valuation Cap, the “Retention Adjusted Insured Value” of each of the $500,000 transformers is $250,000. Thus, the “Retention Adjusted Insured Value” of the Insured Property at Location A would be $1,500,000 rather than $2,000,000 (i.e., the $250,000 Retention Adjusted Insured Value for each of the two transformers, plus the $1,000,000 for the rest of the Insured Property at Location A).

Example 2: Application of Valuation Cap Where The Applicable Excess Property Insurance Retention for an Item  of Insured Property Exceeds the Amount of the Property Coverage Limit. Assume that the Property Pool’s Property Coverage Limit is $250,000. Further, assume that Member B’s power plant at Insured Location B has an internal combustion engine/generator with an Assigned Insured Value of $900,000, and that the Assigned Insured Values of the rest of the Insured Property at Location B totaled $1,100,000, with no single Item of this other Insured Property having an Assigned Insured Value that exceeds the $250,000 Property Coverage Limit. Also, assume that the Excess Property Insurance Retention applicable to the engine/generator is $500,000, $250,000 greater than the Property Pool’s Property Coverage Limit of $250,000. In the absence of application of the Valuation Cap, there would be a total Insured Value at Location B of $2,000,000 for purposes of applying the “Relative Insured Value” Component of the General Assessment Formula. However, because the Excess Property Insurance Retention applicable to each of the two transformers is $500,000, exceeding the Property Coverage Limit, and thereby exposing the Property Pool to additional risk for the Automatic Extended Property Coverage provided in such circumstances under § X, ¶ 4.3.1, the Valuation Cap will be applied so that only the Insured Value of the engine/generator up to the applicable $500,000 Excess Property Insurance Retention is considered in calculating Member B’s Assessment Share of the 20% “Relative Insured Value” Component of the Property General Assessment Formula. After application of the Valuation Cap, the “Retention Adjusted Insured Value” of the $900,000 engine/generator is $500,000. Thus, the “Retention Adjusted Insured Value” of the Insured Property at Location B would be $1,600,000 rather than $2,000,000 (i.e., $500,000 Retention Adjusted Insured Value for the engine/generator, and $1,100,000 for the rest of the Insured Property at Location B).

Example of “Relative Insured Value” Component Calculation Based on Retention Adjusted Insured Values: Assume a Property General Assessment amount of $778,098, a total Retention Adjusted Insured Value for the Insured Property of all Members of $225,509,634, and a Retention Adjusted Insured Value for Insured Property for Member A of $25,171,507.  The ratio of the Retention Adjusted Insured Value of Member A's Insured Property to the total for all Members is 12% ($25,171,507 ¸ $225,509,634 = 12%).  The 20% Relative Insured Value Component times the Property General Assessment amount of $778,098 is $155,620.  Therefore, Member A's 12% share of the Property General Assessment amount allocable to the 20% Relative Insured Value component is $18,674 (12% ´ $155,620).

2.3.          “Risk Based” Component at 70%.  Seventy percent (70%) of the Property General Assessment will be allocated among Members based on the percentage each Member's Risk Adjusted Insured Value bears to the total of the Risk Adjusted Insured Values of all Insured Property of all Property Pool Members at the time of the Assessment. The Risk Adjusted Insured Value of Member’s Insured Property shall be determined in accordance with ¶¶ 2.3.1 – 2.3.3 below.

2.3.1.     Initial Determination of Risk Based Rates. Based upon information obtained from the Property Pool’s Excess Property Carrier, the Administrative Committee has determined the Specific Risk Based Rates for the defined Categories of Risk applied by the Excess Property Carrier to the Property Pool and its Members for purposes of calculating the Excess Premium for Policy Year 2002. These Risk Based Rates shall be used in the Property General Assessment Formula for purposes of determining each Member’s Blended Risk Based Rate (see, ¶ 2.3.3(a) below), which is then used to determine the Risk Adjusted Insured Value of each Member’s Insured Property (see, ¶ 2.3.3(b) below), in order to calculate each Member’s Assessment Share of the 70% “Risk Based” Component of that Assessment Formula, subject to adjustment from time to time as provided in ¶ 2.3.3 below.

2.3.2.     Subsequent Adjustment of Risk Based Rates. From time to time, at its discretion, and at minimum every 5 years, the Administrative Committee shall: (a) attempt to determine the General and Specific Risk Based Rates then being applied by the Property Excess Carrier to the Property Pool and its Members; and (b) in the absence of such information, attempt to determine the Risk Based Rates then being applied by a credible source in the excess property insurance industry. The Administrative Committee, to the extent it can acquire such information, shall compare it to the Risk Based Rates then being used for the Property General and Premium Assessment Formulas and determine whether to recommend to the Board that the existing Risk Based Rates, or the relative relationship among them, be revised.

2.3.3.     Application of Risk Based Rates to Determine the Risk Adjusted Insured Value of Each Member’s Insured Property.

2.3.3(a)                   Application of Risk Based Rates to the Assigned Insured Values for Each Member’s Insured Property to Determine Each Member’s Blended Risk Based Rate. Excluding Assigned Insured Values relating to Insured Property that is excluded from application of the Property General Assessment Formula under ¶ 2.4 below, and excluding the Specific Risk Based Rates applicable to Partially Exempt Insured Property under ¶ 2.5 below, each Specific Risk Based Rate applicable to a Member’s Insured Property shall be applied to the Assigned Insured Values of all Items of Insured Property that fall within the Category of Insured Property or Category of Risk associated with such Specific Risk Based Rate, and the weighted average of the total thereof shall be deemed such Member’s “Blended Risk Based Rate” for purposes of determining the “Risk Adjusted Insured Value” of such Member’s Insured Property (see,    2.3.3(b) below).

2.3.3(b)                   Application of Each Member’s Blended Risk Based Rate to the Total of Each Member’s Assigned Insured Values to Determine the Risk Adjusted Insured Value for Each Member’s Insured Property. Each Member’s Blended Risk Based Rate shall then be applied to the total of each Member’s Assigned Insured Values and the result shall be deemed such Member’s “Risk Adjusted Insured Value” for purposes of calculating such Member’s Allocation of the 70% Risk Based Component of the Property General Assessment Formula.

2.3.4.     Calculation of a Member’s Allocation Under 70% Risk Based Component. Each Member’s Risk Adjusted Insured Value shall be compared to the total of the Risk Adjusted Insured Values for all Members of the Property Pool, and the resulting ratio multiplied times 70% of the General Assessment amount needed by the Property Pool shall be such Member’s allocation under the 70% Risk Based Component of the Property General Assessment Formula.

2.3.5.     Partially Exempt Insured Property, Including “Mothballed Equipment”.

2.3.5(a)                   Notice re Establishing Insured Property as “Partially Exempt Insured Property”. At any time, a Member may provide the Administrator with written notice that the Member wishes to designate certain Insured Property as “Partially Exempt Insured Property” with respect to one or more Categories of Insured Property or Categories of Risk. Such notice shall specifically identify the Insured Property being designated as Partially Exempt Insured Property, the Assigned Insured Value for such Property, and the specific Category of Insured Property or Category of Risk from which such Property shall be deemed exempt for purposes of this sub-¶ 2.3.5. The identified Insured Property shall be deemed Partially Exempt Insured Property effective as of the date the written notice is received by the Administrator, or at any later date specified in the notice. Insured Property that satisfies the definition of “Mothballed Equipment” shall be deemed and treated as Partially Exempt Insured Property.

2.3.5(b)                   Partially Exempt Insured Property” Is Exempt from Assessment for the Specific Risk Based Rates Applicable to the Exempt Categories of Insured Property or Exempt Categories of Risk. From the effective date of the notice, such Partially Exempt Insured Property shall not be subject to application of the Specific Rick Based Rate(s) applicable to the exempt Categories of Insured Property or exempt Categories of Risk for purposes of determining a Member’s “Blended Risk Based Rate” (see, ¶ 2.3.3(a) above).

2.3.5(c)                   Partially Exempt Insured Property is Subject to General Property Coverage Exclusion in § X, ¶ 9.4. Insured Property that has become Partially Exempt Insured Property shall, from the effective date thereof, be subject to General Property Coverage Exclusion § X, ¶ 9.4, entitled “Exclusion re Losses to Partially Exempt Insured Property”.

2.3.5(d)                   Removal of Insured Property From Partially Exempt Insured Property Status. At any time, a Member may remove Insured Property from the status of Partially Exempt Insured Property by providing written notice of the same to the Administrator. The removal of such Property from Partially Exempt Insured Property status shall become effective as of the date the written notice is received by the Administrator, or at any later date specified in the notice. The provisions of § X, ¶ 3.2.2 entitled “80% Coverage for Property Inadvertently Omitted from Schedule of Values” shall not apply to Property Losses to Partially Exempt Insured Property.

2.3.5(e)                   Limitation on Re-Designation of Insured Property as Partially Exempt Insured Property. Insured Property that has been removed from Partially Exempt Insured Property status shall not be re-designated as Partially Exempt Insured Property for a period of 365 days from the effective date of the removal. (See also, § X, ¶ ___.)

Example of “Risk Based” Component Calculation Based on a Member’s Risk Adjusted Insured Value:  Assume a Property General Assessment amount of $778,098, a total of the Risk Adjusted Insured Values for the Insured Property of all Members of $225,509,634, and a Risk Adjusted Insured Value for Insured Property for Member A of $17,137,320. The ratio of the Risk Adjusted Insured Value of Member A's Insured Property to the total for all Members is 7.6% ($17,137,320 ¸ $225,509,634 = 7.6%).  The 70% Risk Based Component times the Property General Assessment amount of $778,098 is $544,669.  Therefore, Member A's 7.6% share of the Property General Assessment amount allocable to the 70% Risk Based Component is $41,394 (7.6% ´ $544,669).

Example of Calculation of a Member’s Assessment Share Based on the Total of the Three Formula Components: Based on the sum of the amounts resulting from the calculations in the Examples for each of the three Formula Components above, Member A's Assessment Share of the $778,098 Property General Assessment amount is $ 66,053 ($5,985 under the 10% Basic Per Capita Component, + $18,674 under the 20% Relative Insured Value Component, + $41,394 under the 70% Risk Based Component = $66,053), unless the Annual Assessment Limit applied in accordance with ¶ 3 below yields a lesser amount.

2.4.          Exclusion of Insured Values from Application of Property General Assessment Formula for Insured Property that Has An Assigned Deductible Equal to the Amount of the Property Coverage Limit, or Equal to the Higher Amount of Any Applicable Excess Property Insurance Retention That Exceeds the Amount of the Property Coverage Limit  Consistent with § I, ¶ 13.3.1 of the Interlocal Agreement, application of the Property General Assessment Formula shall be limited as follows:  The Insured Value of an Item of Insured Property that has an Assigned Deductible in an amount equal to the Property Coverage Limit, or in an amount equal to the applicable Excess Property Insurance Retention, whichever is greater, shall be deemed to be “zero”, and therefore the Insured Value thereof shall not be considered in the calculation of the 20% “Relative Insured Value” Component or the 70% “Risk Based”  Component of the Property General Assessment Formula.

3.               Property Deductible Credit for Assigned and Mandatory Deductibles.  Each Member of the Property Pool shall receive a Property Deductible Credit based on the total of the Assigned and Mandatory Deductibles selected or applicable to its Insured Property as it compares to the average of the total Assigned and Mandatory Deductible amounts for the Insured Property of all Property Pool Members.  The amount of the Property Deductible Credit shall be determined in accordance with the Commercial Property Section of the ISO Commercial Lines Manual (or successor manuals).

Example of Application of Property Deductible Credits for Applicable Deductibles:  Assume Member A's credit per the ISO Commercial Lines Manual for all of its Assigned Deductibles is .9.  Also, assume the average credit for all Property Pool Members is .95.  Member A would then receive a 5.3% Property Deductible Credit on its Property General Assessment Share.  (.9 ¸ .95 = 0.947; 1 - .947 = .0526 or 5.3%).

4.               Limitation on Amount of Annual Property General Assessments per Member. 

4.1.          Application of Annual Assessment Limit.  Except as otherwise provided in the SIA, including but not limited to § I, ¶ 13.8.2, the maximum amount a Member may be required to pay in Property General Assessments in any one calendar year shall equal the greater of: (a) 2% of such Member's Gross Revenues in the calendar year prior to the last full calendar year, or (b) 10% of the total Property General Assessments levied by the Fund in the current year divided by the total number of Members in the Property Pool.

Example of Application of Annual Assessment Limit:  Assume the Gross Revenues of Member A in the example above was $4,146,321, and that the $778,098 Property General Assessment is the second Assessment for the calendar year, following an earlier Annual Automatic General Assessment of $520,019, for a total of Property General Assessments in the amount of $1,298,117.  2% of Member A's Gross Revenues (2% ´ $4,146,321) is $82,926.  Alternatively, 10% of all Property General Assessments ($1,298,117 ´ 10%) is $129,812, divided by a hypothetical 13 Members in the Property Pool, is $9,985.  Therefore, the Annual Assessment Limit applicable to Member A is the greater of these two numbers, or, in this case, $82,926.  Now, assume Member A paid $41,961 as its Assessment Share of the initial $520,019 Annual Automatic Property General Assessment for that year and would pay an additional $62,785 as its Assessment Share of the second Property General Assessment.  Thus, applying the Annual Assessment Limit to this second Property General Assessment limits Member A's Assessment Share thereof to a maximum of $40,965 ($82,926 Annual Assessment Limit, minus the $41,961 Member A paid on the first Property General Assessment = $40,965).  As a result, there is $21,820 left from Member A's Assessment Share of the second Property General Assessment that must be collected from Members other than Member A ($62,785 Assessment Share without application of the Annual Assessment Limit, minus $40,965, which is the amount Member A must pay on the second Property General Assessment to reach its Annual Assessment Limit = $21,820). This $21,820 Assessment Limit Overage then must be distributed among the remaining Property Pool Members who have not exceeded their Annual Assessment Limits.

4.2.          Reallocation of Assessment Limit Overages to Remaining Members.  The Assessment Limit Overage resulting from application of the Annual Assessment Limit to Member A is $21,820.  All such Overages for all Members shall be reallocated proportionately among the remaining Property Pool Members whose Assessment Shares have not exceeded their respective Annual Assessment Limits by determining the factor by which each remaining Member's Assessment Share needs to be increased to generate an amount sufficient to cover the total of unpaid Overages of all Members. 

Example of Reallocation of Assessment Limit Overages to Remaining Members:  Assume that Member A's Overage of $21,820 is the only Overage among all Members, and that the total of the first-round Assessment Shares of all other Members who have not exceeded the Annual Assessment Limit is $715,313 ($778,098 Property General Assessment amount minus $62,785, Member A's Assessment Share before application of the Annual Assessment Limit).  The total of the Assessment Shares the remaining Members must pay to cover Member A's Overage is $737,133 ($715,313 in first-round Assessment Shares of the remaining Members + $21,820, the amount of Member A's unpaid Overage, = $737,133).  The factor by which the remaining Member first-round Assessment Shares must be increased is determined by dividing the total amount needed from the remaining Members to cover their first-round Assessment Shares and Member A's Overage ($737,133) by the total amount of the remaining Member's first-round Assessment Shares ($715,313).  Thus, each remaining Member's Assessment Share amount will be increased by a factor of 1.03 ($737,133 ¸ $715,313 = 1.03).  As a cross-check, multiplying the factor of 1.03 x $715,313 (the total of the Assessment Shares of the remaining Members) equals $737,133, which is the total amount the remaining Members must pay to cover Member A's Overage.  Similarly, if the reallocation of Member A's Overage results in two additional Members exceeding their applicable Annual Assessment Limits, any Overages from their Assessment Shares shall be reallocated to those remaining Members whose Assessment Shares have not yet exceeded their respective Annual Assessment Limits, and so on until the total of all Members' Overages is reallocated.

5.               Former Members.  The Property General Assessment Formula shall be applied so that a Former Member of the Property Pool continues to be assessed its Assessment Share of only the Property Claim Costs, Property Coverage Payments and the Property Pool's allocation of Direct and Shared Administrative Expenses the Fund incurs in resolving Pre-Withdrawal Property Losses during each assessment period after the effective date of the Former Member's withdrawal, as provided in § I, ¶ 20.2.

6.               New Members.  The Property General Assessment Formula shall be applied so that the New Member's Assessment Share of any Property General Assessment levied by the Fund does not exceed what the New Member's Assessment Share would be for the portion of each Property General Assessment attributable to replenishing the Fund for its expenditures during the assessment period for Property Pool Operation Costs to resolve Post-Admission Property Losses, as provided in § I, ¶ 18.3.