# Cal. INS § 12109: Section 12109

> California · Statutes · In force

URL: https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12109

## Section

- **Citation:** Cal. INS § 12109
- **Heading:** Section 12109
- **Jurisdiction:** California
- **Kind:** Statutes
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** California Code / Code ins / Division 2 / Part 4 / Chapter 1 / Article 5 / Section 12109

## Text

(a) In addition to the contingency reserve, the case basis method or other method as may be prescribed by the commissioner shall be used to determine loss reserves, which shall include a reserve for claims reported and unpaid net of collateral. A deduction from loss reserves shall be allowed for the time value of money by application of a discount rate equal to the average rate of return on the admitted assets of the financial guaranty insurance corporation as of the date of the computation of that reserve. The discount rate shall be adjusted at the end of each calendar year.

In addition a reserve component for incurred but not reported claims shall be reasonably estimated if deemed necessary by the financial guaranty insurance corporation, or following an examination or actuarial analysis, by the commissioner.

(b) Except as otherwise permitted by the commissioner, no deduction shall be made for anticipated salvage in computing case basis loss reserves, unless that salvage is held by or under the control of the financial guaranty insurance corporation and would qualify as an admitted asset under Section 1100 and Article 3 (commencing with Section 1170) of Chapter 2 of Part 2 of Division 1 and Article 4 (commencing with Section 1190) of Chapter 2 of Part 2 of Division 1, or unless that salvage constitutes or is secured by a clean, irrevocable letter of credit which is approved by the commissioner or complies with the definition of a letter of credit provided in subdivision (e) of Section 12100.

(c) If the insured principal and interest on a defaulted issue of obligations exceed 10 percent of the financial guaranty insurance corporation’s capital, surplus, and contingency reserves, its reserve so established shall be supported by a report from an independent source acceptable to the commissioner.

## Nearby sections

- [Cal. INS § 12100 Section 12100](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12100.md)
- [Cal. INS § 12101 Section 12101](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12101.md)
- [Cal. INS § 12102 Section 12102](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12102.md)
- [Cal. INS § 12103 Section 12103](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12103.md)
- [Cal. INS § 12104 Section 12104](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12104.md)
- [Cal. INS § 12105 Section 12105](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12105.md)
- [Cal. INS § 12106 Section 12106](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12106.md)
- [Cal. INS § 12107 Section 12107](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12107.md)
- [Cal. INS § 12108 Section 12108](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12108.md)
- [Cal. INS § 12109 Section 12109](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12109.md)
- [Cal. INS § 12110 Section 12110](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12110.md)
- [Cal. INS § 12111 Section 12111](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12111.md)
- [Cal. INS § 12112 Section 12112](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12112.md)
- [Cal. INS § 12113 Section 12113](https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12113.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/STATE_CA_Cins_D2_P4_C1_A5_S12109. Check the current official text before relying on it. Not legal advice.