Upon a finding by the director of business regulation that a competitive, stable market for medical malpractice insurance is lacking in the state of Rhode Island and that as a consequence thereof, there is peril to the public health, safety, and welfare of the people of the state of Rhode Island, the director is authorized to promulgate a regulation addressed to the solution of the problem which may encompass among others, the following provisions:

(a)  Creation of a joint underwriting association consisting of all insurers authorized to write, within this state on a direct basis, personal injury liability insurance as defined in § 27-9-2, including insurers covering these perils in multiple peril package policies. Every insurer shall be a member of the association and shall remain a member as a condition of its authority to continue to transact these kinds of insurance in this state.

(b)  To effectuate the purpose of the association which is to provide a market for medical malpractice insurance on a self-supporting basis, the association shall be authorized to issue policies of medical malpractice and incidental liability insurance to physicians, hospitals, and other healthcare providers, but need not be the exclusive agency through which this insurance may be written on a primary basis in this state.

(c)  Policies issued by the association shall be subject to a group retrospective rating plan to be approved by the director of business regulation and shall be calculated to be self-supporting.

(d)  The creation and administration of a stabilization reserve fund and initial policyholder contribution to the fund. The purpose of the fund shall be the discharge when due of any retrospective premium charges payable by policyholders of the association under the group retrospective rating plan authorized by regulation. Any monies remaining in the fund after all retrospective premium charges have been paid shall be returned to policyholders.

(e)  Upon certification by the association to the director that the estimated amount of any deficit remaining after the stabilization reserve fund has been exhausted in payment of the maximum final premium for all policyholders of the association, the director shall authorize members of the association to commence recoupment by one of the following procedures:

(1)  Applying a surcharge to be determined by the association at a rate not to exceed one percent (1%) of the annual premiums on future policies affording those kinds of insurance which form the basis for their participation in the association, under procedures established by the association; or

(2)  Deducting their share of the deficit from past or future taxes due the state of Rhode Island.

(f)  Organization of a plan of operation, use of policies written on a “claim made” or “occurrence” basis, participation of members of the association and all other powers necessary to effectuate the purposes of the regulation.

(g)  Any joint underwriting association created pursuant to the authority granted in this chapter shall pay an annual tax to the tax administrator of two percent (2%) of the gross premiums on contracts of insurance.

(h)  Any joint underwriting association created pursuant to the authority granted in this chapter (including the related stabilization reserve fund) shall be an integral part of the state government, and its activities shall constitute the performance of an essential governmental function of the state of Rhode Island. This subdivision shall be applied retroactively to June 16, 1975.