1. (a) the quotient of

   1. (1) the sum of

      1. (ii) plus projected defense and cost containment expenses, as defined in section 2644.8,
      2. (B) multiplied by 1 minus the fixed investment income factor as defined in section 2644.19(a),

      (A)(i) projected losses, as defined in section 2644.4,

   2. (2) minus projected ancillary income, as defined in section 2644.13,

2. (b) divided by the maximum denominator, as defined in section 2644.2(c).

   Stated as a formula:

   (losses + DCCE) x (1- fixed invest inc factor) - ancil income

   Max Permitted EP=

   max denom

3. (c) The maximum denominator means:

   1. (1) 1.0,
   2. (2) minus the efficiency standard, as defined in section 2644.12,
   3. (3) minus the maximum profit factor, as defined in section 2644.15,

   4. (4) plus the variable investment income factor, as defined in section 2644.19(b).

      Stated as a formula:

      Max denom =1 - eff std - profit factor + var invest inc factor

The maximum permitted earned premium is calculated as follows:

Note: Authority cited: Sections 1861.01 and 1861.05, Insurance Code; and 20th Century v. Garamendi, 8 Cal.4th 216 (1994). Reference: Sections 1861.01 and 1861.05, Insurance Code; and Calfarm Insurance Company v. Deukmejian (1989) 48 Cal.3d 805.

History

1. New section filed 8-13-91 as an emergency; operative 8-13-91 (Register 92, No. 3). A Certificate of Compliance must be transmitted to OAL 12-11-91 or emergency language will be repealed by operation of law on the following day.

2. Repealed by operation of Government Code section 11346.1(g) (Register 92, No. 15).

3. New section refiled 2-14-92 as an emergency; operative 2-14-92 (Register 92, No. 15). A Certificate of Compliance must be transmittted to OAL 6-15-92 or emergency language will be repealed by operation of law on the following day.

4. Repealed by operation of Government Code section 11346.1(g) and new section filed 3-15-95; operative 3-15-95. Submitted to OAL for printing only pursuant to Government Code section 11343(a)(1) (Register 95, No. 11).

5. Amendment filed 1-3-2007; operative 4-3-2007. Submitted to OAL for printing only pursuant to Government Code section 11340.9(g) (Register 2007, No. 1).

6. Amendment filed 5-16-2008; operative 5-16-2008. Submitted to OAL for printing only pursuant to Government Code section 11340.9(g) (Register 2008, No. 20).