North Carolina Reinsurance Facility


The North Carolina Reinsurance Facility became operational on October 9, 1973 as the result of legislation that was enacted that year. The Facility replaced an automobile assigned risk plan which had been in operation since 1947.


The Reinsurance Facility is a mechanism for pooling of insurance risks who cannot obtain coverage by ordinary methods. Premiums, losses, and expenses are shared by the member companies in proportion to their respective North Carolina automobile liability insurance writings. Under the Facility law, licensed and writing carriers and agents must accept and insure any statutorily eligible applicant for coverages and limits which may be ceded to the Facility. The Facility accepts cession of bodily injury and property damage liability, medical payments, uninsured and combined uninsured/underinsured motorists coverages. Automobile physical damage coverages are not eligible for cession. Any eligible risk which a company elects not to retain for its own account may be ceded to the Facility.


All companies licensed to write and are actively writing automobile liability insurance in the State are required to become members of the Reinsurance Facility.


Responsibility for management is vested in a fifteen-member Board of Governors. There are twelve voting members of which seven are member insurance companies and five are agents appointed by the Insurance Commissioner. The other three Board members are non-voting with two public members appointed by the Governor and the Insurance Commissioner who is a member of the Board ex-officio and also without vote. In addition to the Board of Governors, the Facility has several standing committees which act in an advisory capacity to the Board. The Facility's staff in Raleigh, North Carolina consists of full-time employees that are responsible for managing millions of transactions and performing thousands of compliance audits throughout the year.

Rules and Procedures

Specific rules and procedures dealing with all areas of concern of the Reinsurance Facility have been drawn up and incorporated, along with the law and the Facility Plan of Operation, in a manual commonly referred to as the Standard Practice Manual.

The Facility adopted the North Carolina Rate Bureau Personal Automobile Manual to utilize in connection with non-fleet private passenger automobile risks ceded to the Facility. The Reinsurance Facility Commercial Automobile Manual of Rules and Rates is utilized in connection with commercial business ceded to the Facility.

Cession To The Facility

There appears to be a common misconception that an insurance company somehow benefits from ceding liability coverage to the Facility. First, there is no financial benefit from the ceded liability coverage for a company. Any opportunity for making a profit on that liability coverage is forfeited by the company once it is ceded. The only profit a company can make is on that coverage(s) that it retains on its own books through the voluntary market.

Ceding Procedures

If a company wants to cede a policy to the Facility it must file a cession notice identifying the case individually by name, policy number, effective and expiration dates.

Accounting Procedures

Each ceding company must submit to the Facility a monthly detailed report of premiums and paid losses for policies ceded to the Facility and a Monthly Recoupment Report summarizing Facility surcharges on both ceded and non-ceded policies. Each ceding company also submits a quarterly report of losses on ceded policies that have been reported but have not yet been settled.

After the monthly accounting reports are received from the ceding companies and balanced, there is a monthly cash settlement with the ceding companies. Companies whose written premiums and recoupment surcharges due the Facility exceeded the total of their paid losses plus expense allowances and other credits must pay the balances to the Facility. Companies whose written premiums and recoupment surcharges due the Facility were less than the total of their paid losses and other credits collect the deficit from the Facility.

The Facility prepares and distributes the financial reports and company participation reports necessary for the companies to prepare their annual statements so as to reflect their participation in the Facility as reinsurers. Facility losses are shared by the member companies in proportion to their respective automobile liability insurance writings. Facility losses may be recovered through recoupment surcharges and the recovery is shared by member companies in the same proportion as they shared in the losses.

Claims Activity

Member companies of the Facility are responsible for properly and promptly disposing of all claims in accordance with the terms of the contracts of insurance subject to the limits of liability provided thereby. Claim adjustment practices and procedures of each member company are required to correspond with those followed for non-facility business.

Expense Allowances

When a company cedes a liability risk to the Facility, the liability coverage written premium for that risk is submitted to the Facility. The Expense Allowance was established to reimburse a company for the expenses of servicing a risk ceded to the Facility as the company no longer holds the liability written premium to offset the expenses. An individual company ceding expense allowance is established annually on the basis of the company's actual expenses, subject to a maximum allowance determined on the basis of all carrier data as established by the Board of Governors. The claims expense allowance is the same for all companies and is established each year by the Board of Governors, on the basis of annual statement data from all carriers.

Audit Activity

The Facility Compliance Staff audit eligibility, premiums, losses, and recoupment for compliance with Facility rules. Any problem areas noted by the Audit Staff are brought to the attention of member companies for remedial action. In addition, the Audit Staff is involved in the annual audit of the Facility’s financial statements by external, independent auditors.

Designated Agent Program

The increased market availability over the past several decades has dramatically reduced the use of the Designated Agent Program.

When the Facility became operational many former assigned risk agents or brokers who did not have voluntary contracts with companies to write motor vehicle liability insurance and utilized only the assigned risk plan to write such insurance were left without a market for their automobile insurance clients.

The Facility's initial Plan of Operation required the Board of Governors to review the market for motor vehicle insurance throughout the State to make certain that eligible risks could obtain such insurance. Whenever the Board determined that a market need existed, the Board could designate a member company from members volunteering to appoint and license any fire and casualty agent duly licensed in North Carolina to write motor vehicle liability insurance. As a result of surveys conducted by the Board 101 agents who held a resident brokers license prior to May 24, 1973 were initially assigned to twelve designated carriers.

Since inception, the number of designated agents has fluctuated, with a high of approximately 200 agents. The law and the Plan of Operation have been amended numerous times with reference to eligibility requirements for designated carrier assignment. At the present time in order to qualify for appointment as a designated agent, the agent must be certified, as eligible for appointment, to the Facility by the Insurance Commissioner.



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