REPORT ON EXAMINATION
OF
BROOME CO-OPERATIVE INSURANCE COMPANY
AS OF
DECEMBER 31, 2017
DATE OF REPORT JANUARY 4, 2019
EXAMINER SABU CHERIAN
TABLE OF CONTENTS
ITEM NO. PAGE NO.
1
.
Scope of
e
xamination
2
2.
Description of Company
3
A.
Corporate governance
3
B. Territory and plan of operation 4
C.
Reinsurance ceded
5
D. Holding company system 7
E.
Significant ratios
7
3
.
Financial
s
tatements
8
A.
Balance sheet
8
B. Statement of income 10
C.
Capital and surplus account
11
4.
Losses and loss adjustment expenses
11
5
.
Compliance with prior report on examination
12
6
.
Summary of comments and recommendations
13
One State Street, New York, NY 10004-1511 │ (212) 480-6400│ www.dfs.ny.gov
ANDREW M. CUOMO
Governor
LINDA A. LACEWELL
Acting Superintendent
April 24, 2019
Honorable Linda A. Lacewell
Acting Superintendent
New York State Department of Financial Services
Albany, New York 12257
Madam:
Pursuant to the requirements of the New York Insurance Law, and in compliance with the instructions
contained in Appointment Number 31795 dated June 27, 2018, attached hereto, I have made an
examination into the condition and affairs of Broome Co-operative Insurance Company as of December
31, 2017, and submit the following report thereon.
Wherever the designation “the Company” appears herein without qualification, it should be understood
to indicate Broome Co-operative Insurance Company.
Wherever the term “Department” appears herein without qualification, it should be understood to mean
the New York State Department of Financial Services.
The examination was conducted at the Company’s administrative office located at 1923 Vestal Parkway
East, Vestal, New York 13851.
2
1. SCOPE OF EXAMINATION
The Department has performed an examination of the Company, a single-state insurer. The previous
examination was conducted as of December 31, 2012. This examination covered the five-year period from
January 1, 2013 through December 31, 2017. Transactions occurring subsequent to this period were
reviewed where deemed appropriate by the examiner.
This examination was conducted in accordance with the National Association of Insurance
Commissioners (“NAIC”) Financial Condition Examiners Handbook (“Handbook”), which requires that
we plan and perform the examination to evaluate the financial condition and identify current and prospective
risks of the Company by obtaining information about the Company including corporate governance,
identifying and assessing inherent risks within the Company and evaluating system controls and procedures
used to mitigate those risks. This examination also includes assessing the principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation,
management’s compliance with New York laws, statutory accounting principles, and annual statement
instructions.
This examination report includes, but is not limited to, the following:
Company history
Management and control
Territory and plan of operation
Reinsurance
L
oss
review and analysis
Financial statement presentation
Significant subsequent events
Summary of recommendations
A review was also made to ascertain what action was taken by the Company with regard to
comments and recommendations contained in the prior report on examination.
This report on examination is confined to financial statements and comments on those matters that
involve departures from laws, regulations or rules, or that are deemed to require explanation or description.
3
2. DESCRIPTION OF COMPANY
The Company was incorporated under the laws of the State of New York as the Broome County
Farmers’ Fire Relief Association (“Association”) on January 20, 1887 for the purpose of transacting the
business as an assessment cooperative fire insurance association in Broome County of New York State.
In 1951, the Association merged with Broome County Patrons’ Fire Relief Association of Whitney
Point, New York and the surviving corporation resulting from said merger became the Broome County Co-
operative Fire Insurance Company.
On March 27, 2002, approval was given by the Department for the Company to change its name
from “Broome County Co-operative Fire Insurance Company to “Broome Co-operative Insurance
Company.”
A. Corporate Governance
Pursuant to the Company’s charter and by-laws, management of the Company is vested in a board
of directors consisting of not less than seven nor more than ten members. The board meets four times
during each calendar year. At December 31, 2017, the board of directors was comprised of the following
seven members:
Name and Residence
Principal Business Affiliation
Kimberly S. Chidester
Lisle, New York
Owner,
Lakeside Bookkeeping & Tax Service.
J. Paul Cavatio
Owego, New York
Owner,
Agway Stores
Steven J. Coffey
Binghamton, New York
Steven D. Contento
Windsor, New York
Clifford W. Crouch
Bainbridge, New York
Michael Decker
Whitney Point, New York
President & CEO,
Broome Co-operative Insurance Co.
Director,
Ross Park Zoo
Assemblyman,
New York State
Broker,
ERA Decker Realty
4
Name and Residence
Principal Business Affiliation
Debra K. Eaton-Turner
Smithville Flats, New Jersey
Ralph E. Kelsey
Endicott, New York
Marc J. Palumbo
Dryden, New York
Siobhan G. Davey
Vestal, New York
Bank Manager,
NBT Bank
Retired,
Tioga State Bank
Claims Adjuster,
Larose & Palumbo Claim Service
Chief Operating Officer,
Broome Co
-
o
perative Insurance Co.
At December 31, 2017, the principal officers of the Company were as follows:
B. Territory and Plan of Operation
At December 31, 2017, the Company was licensed to write business in New York only.
As of the examination date, the Company was authorized to transact the kinds of insurance as
defined in the following numbered paragraphs of Section 1113(a) of the New York Insurance Law:
Paragraph
Line of Business
4 Fire
5
Miscellaneous property
6 Water damage
7
Burglary and
theft
8 Glass
9
Boiler and machinery
12 Collision
13
Personal injury liability
14 Property damage liability
15 Workers' compensation and employers' liability (excluding
workers’ compensation)
19 Motor vehicle and aircraft physical damage (excluding aircraft
physical damage)
20
Marine and inland marine
(Inland only)
Name
Title
Steven J.Coffey
President
Siobhan G. Davey Chief Operating Officer
Ian T. Coffey
Vice President of Finance
Steven D. Contento Secretary/Treasurer
5
The Company is also licensed to accept and cede reinsurance provided in section 6606 of the New
York Insurance Law.
Based upon the lines of business for which the Company is licensed and the Company’s current
capital structure, and pursuant to the requirements of Articles 13, 41 and 66 of the New York Insurance
Law, the Company is required to maintain a minimum surplus to policyholders in the amount of $100,000.
The company did not assume any business during the examination period. The following schedule
shows the total gross premiums written by the Company for the period under examination:
Calendar Year
Total Gross Premiums
2013 $6,928,222
2014 $7,609,594
2015
$7,599,302
2016 $7,944,401
2017
$7,997,528
The Company predominantly wrote homeowners (51.3 %) and commercial (39.9%) multiple peril
in 2017. The Company’s products and services are distributed through a network of seventy-three
independent agents located in Southern tier, Central, and Western part of the New York State.
C. Reinsurance Ceded
The Company ceded $1,158,000 and has a reinsurance recoverable of $938,000 from reinsurers as
reported in the Company’s Schedule F.
The reinsurance treaties and arrangements principally consists of traditional reinsurance
arrangements whereby the reinsurer assumes a portion of the losses for a cost. The reinsurance contracts
cover property and casualty business and are as follows:
Type of Treaty Cession
Property Excess of Loss
(3 layers) 100% authorized
$850,000 excess of $150,000 ultimate net loss, each
loss, subject to a limit of liability to the reinsurer of
$2,55
0,000 each loss occurrence.
6
Type of Treaty
Cession
Casualty Excess of Loss
(3 layers) 100% authorized
$900,000 excess of $100,000 ultimate net loss, each
loss occurrence.
Property and Casualty Combined
(1 layer) 100% authorized
$150,000 excess of $100,000 ultimate net loss each
loss occurrence involving property and casualty loss.
Casualty Clash Excess of Loss
(1 layer) 100% authorized
$1,000,000 excess of $1,000,000 ultimate net loss,
each loss occurrence.
Property Catastrophe Excess of Loss
(3 layers) 100% authorized
$6,600,000 excess of $400,000 ultimate net loss each
loss, subject to a limit of liability to the reinsurer of
$13,200,000 for all loss occurrences during the term
of the contract. No claim shall be covered unless the
loss occurrence involves two or more risks insured or
reinsured by the Company.
At December 31, 2017, the Company ceded one hundred percent of its boiler and machinery net
retained liability.
The majority of the recoverable amounts reported on Schedule F – Part 3 are from Farmers Mutual
Hail Insurance Co. of Iowa (41%), Renaissance Reinsurance US Inc. (22%) and QBE Reinsurance Corp.
(11%), which are all authorized reinsurers.
All significant reinsurance agreements in effect as of the examination date were reviewed and found
to contain the required clauses, including an insolvency clause, meeting the requirements of Section 1308
of the New York Insurance Law.
Examination review found that the Schedule F data reported by the Company in its filed annual
statement accurately reflected its reinsurance transactions. Additionally, management has represented that
all material ceded reinsurance agreements transfer both underwriting and timing risk as set forth in SSAP
No. 62R. Representations were supported by an appropriate risk transfer analyses and an attestation from
the Company’s Chief Executive Officer and Chief Financial Officer pursuant to the NAIC Annual
Statement Instructions. Additionally, examination review indicated that the Company was not a party to
any finite reinsurance agreements. All ceded reinsurance agreements were accounted for utilizing
reinsurance accounting as set forth in SSAP No. 62R.
7
D. Holding Company System
At December 31, 2017, the Company was not a member to a holding company system and did not
have any affiliated or pooling agreements in force.
E. Significant Ratios
The Company’s operating ratios, computed as of December 31, 2017, fall within the benchmark
ranges set forth in the Insurance Regulatory Information System of the National Association of Insurance
Commissioners.
Operating Ratios Result
Net premiums written to surplus as regards policyholders 46%
Liabilities to liquid assets (cash and invested assets less investments in affiliates)
34
%
Two-year overall operating 82%
Underwriting Ratios
The underwriting ratios presented below are on an earned/incurred basis and encompass the five-
year period covered by this examination:
Amounts
Ratio
Losses and loss adjustment expenses incurred $17,624,102
56.91%
Other underwriting expenses incurred
11,874,320
38.34%
Net underwriting gain
1,469,631
4.
75%
Premiums earned
$
30,968,053
100.00%
The Company’s reported risk based capital score (“RBC”) was 1,716.9% at 12/31/2017. The RBC
is a measure of the minimum amount of capital appropriate for a reporting entity to support its overall
business operations in consideration of its size and risk profile. An RBC of 200 or below can result in
regulatory action. There were no financial adjustments in this report that impacted the Company’s RBC
score.
8
3. FINANCIAL STATEMENTS
A. Balance Sheet
The following shows the assets, liabilities and surplus as regards policyholders as of December 31,
2017, as reported by the Company:
Assets
Assets
Assets Not
Admitted
Net Admitted
Assets
Bonds $14,913,294
$14,913,294
Common stocks (stocks)
5,285,587
5,285,587
First liens - mortgage loans on real estate 1,028
1,028
Properties occupied by the company
795,841
795,841
Cash, cash equivalents and short-term investments 541,626
541,626
Company owned life
i
nsurance
64,180
64,180
Investment income due and accrued 99,387
99,387
Uncollected premiums and agents' balances in the
course of collection 147,470 $10,249 137,221
Deferred premiums, agents' balances and
installments booked but deferred and not yet due 864,738 864,738
Amounts recoverable from reinsurers
85,625
85,625
Prepaid commissions 26,078 26,078 0
Cash corrections
(5)
(5)
0
Totals $22,885,165 $96,638 $22,788,527
9
Liabilities,
S
urplus and
O
ther
F
unds
Liabilities
Losses and loss adjustment expenses
$3,100,547
Commissions payable, contingent commissions and other similar
Charges
351,430
Other expenses (excluding taxes, licenses and fees)
205,358
Taxes, licenses and fees (excluding federal and foreign income
taxes)
1,992
Current federal and foreign income taxes
14,562
Net deferred tax liability
70,590
Unearned premiums
4,060,945
Advance premium
146,760
Ceded reinsurance premiums payable (net of ceding commissions)
(61,877)
Total liabilities
$7,890,237
Surplus and other funds
Unassigned funds (surplus)
$
14,898,289
Surplus as regards policyholders 14,898,289
Total liabilities, surplus and other funds
$22,788,526
Note: The Internal Revenue Service has not performed any audits of the examination years. The examiner
is unaware of any potential exposure of the Company to any tax assessment and no liability has been
established herein relative to such contingency.
10
B. Statement of Income
The net income for the examination period as reported by the Company was $2,806,053 as detailed
below:
Underwriting
in
come
Premiums earned
$
30,968,053
Deductions:
Losses and loss adjustment expenses incurred
$
17,624,102
Other underwriting expenses incurred
11,874,320
Total underwriting deductions
29,498,422
Net underwriting gain
$
1,469,631
Investment
i
ncome
Net
investment income earned
$ 1,468,591
Net realized capital gain
or (loss)
432,833
Net investment gain
1,901,424
Other
i
ncome
Net
gain or
(
loss
)
from agents' or premium balances charged off
$
10,148
Finance and service
charges not included in premiums
637,236
Aggregate write
-
ins for miscellaneous income
$
(48,408)
Total other income
598,976
Net income before federal
and foreign income taxes
$
3,970,031
Federal and foreign income taxes
incurred
1,109,978
Net
i
ncome
$
2
,860,053
11
C. Capital and Surplus Account
Surplus as regards policyholders increased $3,906,103 during the five-year examination period
January 1, 2013 through December 31, 2017 as reported by the Company, detailed as follows:
Surplus as regards policyholders as reported
by the Company as of December 31, 2012
$ 10,992,186
Gains in
Losses in
Surplus Surplus
Net income
$
2,860,053
Net unrealized capital gains or (losses) 764,760
Change in net deferred income tax
45,231
Change in non-admitted assets 236,059
Net increase in surplus
$3,906,103
$
3,906,103
Surplus as regards policyholders as reported
by the Company as
of December 31, 2017
$
14,898,289
No adjustments were made to surplus as a result of this examination.
4. LOSSES AND LOSS ADJUSTMENT EXPENSES
The examination liability for the captioned items of $3,100,547 is the same as reported by the
Company as of December 31, 2017. The examination analysis of the loss and loss adjustment expense
reserves was conducted in accordance with generally accepted actuarial principles and statutory accounting
principles, including the NAIC Accounting Practices & Procedures Manual, Statement of Statutory
Accounting Principle No. 55 (“SSAP No. 55”).
Significant reserves are concentrated in the following lines of business: Commercial multiple peril
(56%), Homeowners multiple peril (39%) and Other Liability - Occurrence (2%) Other Liability -
Occurrence consists of dwelling fire - liability.
12
5. COMPLIANCE WITH PRIOR REPORT ON EXAMINATION
The prior report on examination contained six recommendations as follows (page numbers refer to
the prior report):
ITEM
A.
i.
ii.
iii.
B.
C.
i.
ii.
Management
It is recommended that the Company implement control procedures to
ensure that its funds are not used to pay for non-business-related
expenses pursuant to Section 1217 of the New York Insurance Law,
Section 715(h) of the Business Corporation Law and the Company’s
own Travel and Expense Policy.
The Company has complied with this recommendation.
It is recommended that the Company’s board of directors review all
corporate credit usage during the examination period and seek
reimbursement of all expenses for which a specified business purpose is
not demonstrated.
The Company has complied with this recommendation.
It is recommended that the Company comply with Section 6613(a) of
the New York Insurance Law and monitor management expenses to
ensure they do not exceed 42.5% of net premiums written.
The Company has complied with this recommendation.
Reinsurance
It is recommended that the Company comply with SSAP No. 62R,
paragraph 8(d) by amending its reinsurance agreements to include all
required terms.
The Company has complied with this recommendation.
Accounts and Records
It is recommended that the Company report its loss data to the correct
lines of business on its filed annual statements pursuant to the NAIC
Annual Statement Instructions.
The Company has complied with this recommendation.
It is recommended that the Company obtain all required forms prior to
making claim payments pursuant to Regulation 21 and 96.
The Company has complied with this recommendation.
PAGE NO.
5
5
6
9
10
10
13
6. SUMMARY OF COMMENTS AND RECOMMENDATIONS
This report on examination does not contain any comments or recommendations.
Respectfully submitted,
/S/
Sabu Cherian
Financial Services Examiner 2
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
Sabu Cherian, being duly sworn, deposes and says that the foregoing report, subscribed by him, is
true to the best of his knowledge and belief.
/S/
Sabu Cherian
Subscribed and sworn to before me
this day of , 2019.
