Commitment by Members
- Purchase of common stock in a total amount of $75,000 when the commitment is made (non-refundable).
- Purchase of a ten-year, interest-bearing debenture based
on approximately 10% of the first-year premiums at the time insurance is placed.
- Placement of business for first three years.
- Commitment to achieve a 10% underwriting margin on net
premiums to the Company. The Company uses retrospective rating plans with three year terms.
- During the fourth, fifth, and sixth years, business
must be placed with the Company or a maintenance fee of 2.5% of the average annual premiums during the three previous years of active participation is to be paid.
- After six years, there are no further obligations to
purchase insurance.
- There are penalties for default, primarily 50% reduction
in equity interest.
- Participants are subject to calls for pro rata capital
contributions - although only one capital call has ever been made and that was in 1985.
