(1) Each title insurer shall maintain a special reserve in adequate amount to cover its liability as to losses incurred under policies issued by it.
(2) Each domestic title insurer shall establish and maintain a reserve for unearned premiums on its policies and guaranties in force. Such reserve shall at all times and for all purposes be considered a separate and distinct trust fund and shall be deemed and considered and shall constitute unearned portions of the original premiums and shall be charged as a reserve liability of the insurer in determining its financial condition. On all title insurance policies heretofore issued by the insurer, an unearned premiums reserve shall be set up and hereafter maintained in the amount which would have accumulated, as of the effective date of this code, if the foregoing requirement had been in existence ever since the date of the policy. Such reserve shall be computed as follows:
(a) With respect to owners and/or purchasers policies perpetual in term, monthly at the close of each month beginning as of July 1, 1947, the insurer shall set aside into the reserve ten per cent (10%) of the risk portion of the gross premium or fees received or to be received on account of policies written during the next preceding calendar month. After any such policy has been in force for ten (10) years, or upon earlier termination thereof for any cause, that portion of the reserve related thereto shall be released and may be used by the insurer thereafter for any lawful purpose.
(b) With respect to mortgage policies having a term, it shall be assumed for the purposes of this provision that all such policies have an average term of five (5) years from date of issue, and the unearned premium reserve thereon, commencing as of July 1, 1947, shall be computed upon the risk portion of the gross premium or fees charged for the policy according to the table for five (5) year term policies as provided in section 41-606(2)[, Idaho Code,] (unearned premium reserve). If such reserve is determined as at any date other than December 31 of any year, the reserve shall be computed on a pro rata basis for the elapsed months of the calendar year in which the computation is made.
(c) If at any time, after examination of the insurer, the director determines that its reserve for unearned premiums computed as hereinabove provided is inadequate for the reasonable protection of its policy holders, the director may by order made after hearing thereon require such reserve to be computed upon such reasonable basis as may be prescribed in the order. No such order shall be retroactively effective.
(3) The unearned premium reserve of a foreign insurer shall be as prescribed or permitted by the laws of the insurer’s domicile, unless found by the director to be inadequate for the reasonable protection of the insurer’s Idaho policy holders. In event of such a finding, the insurer shall maintain unearned premium reserves upon business thereafter written in an amount not less than the reserves which would then be required of a domestic title insurer hereunder writing the same business.