Section 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.