A. A person, firm, association or corporation acting in the capacity of a managing general agent shall not place business with an insurer unless there is in force a written contract between the parties that sets forth the responsibilities of each party and, if both parties share responsibility for a particular function, specifies the division of the responsibilities. The contract shall contain the following minimum provisions:
1. The insurer may terminate the contract for cause on written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of a dispute regarding the cause for termination.
2. At least each month the managing general agent shall render accounts to the insurer detailing all transactions and remit all monies due under the contract to the insurer.
3. The managing general agent shall hold in a fiduciary capacity all monies that are collected for the account of an insurer in a bank that is an institution that is insured by the federal deposit insurance corporation. The account shall be used for all payments on behalf of the insurer. The managing general agent may retain no more than three months' estimated claims payments and allocated loss adjustment expenses.
4. The managing general agent shall maintain separate records of business that is written by the managing general agent. The insurer shall have access to and the right to copy all accounts and records related to its business in a form usable by the insurer. The director shall have access to all books, bank accounts and records of the managing general agent in a form usable to the director.
5. The managing general agent may not assign the contract in whole or in part.
6. Appropriate underwriting guidelines, including:
(a) The maximum annual premium volume.
(b) The basis of the rates to be charged.
(c) The types of risks that may be written.
(d) Maximum limits of liability.
(e) Applicable exclusions.
(f) Territorial limitations.
(g) Policy cancellation provisions.
(h) The maximum policy period.
7. The insurer may cancel or refuse to renew an insurance policy subject to applicable laws and rules.
8. If the contract permits the managing general agent to settle claims on behalf of the insurer:
(a) All claims shall be reported to the company in a timely manner.
(b) A copy of the claim file shall be sent to the insurer on request or as soon as it becomes known that the claim:
(i) May exceed an amount determined by the director or exceeds the limit set by the company, whichever is less.
(ii) Involves a coverage dispute.
(iii) May exceed the managing general agent's claims settlement authority.
(iv) Is open for more than six months.
(v) Is closed by payment of an amount set by the director or an amount set by the company, whichever is less.
(c) All claim files are the joint property of the insurer and the managing general agent. On an order of liquidation of the insurer the files become the sole property of the insurer or its estate. The managing general agent shall have reasonable access to and the right to copy the files on a timely basis.
(d) Any settlement authority that is granted to the managing general agent may be terminated for cause on the insurer's written notice to the managing general agent or on the termination of the contract. The insurer may suspend the settlement authority during the pendency of a dispute regarding the cause for termination.
9. If electronic claims files exist, provisions on the timely transmission of the data.
10. If the contract provides for the sharing of interim profits by the managing general agent, and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves, controlling claim payments or any other manner, interim profits shall not be paid to the managing general agent until one year after the interim profits are earned for property insurance business or five years after the interim profits are earned on casualty business and the interim profits have been verified pursuant to subsection B of this section.
11. The managing general agent shall not:
(a) Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with whom the automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules.
(b) Commit the insurer to participation in insurance or reinsurance syndicates.
(c) Appoint a producer without assuring that the producer is lawfully licensed to transact the type of insurance for which the producer is appointed.
(d) Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, that does not exceed one per cent of the insurer's policyholder's surplus as of December 31 of the last completed calendar year.
(e) Without prior approval of the insurer, collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer. If prior approval is given, a report shall be forwarded promptly to the insurer.
(f) Permit its subproducer to serve on the insurer's board of directors.
(g) Employ jointly an individual who is employed by the insurer.
(h) Appoint a submanaging general agent.
12. The managing general agent may use only advertising material pertaining to the business issued by an insurer that has been approved in writing by the insurer in advance of its use.
B. With respect to its managing general agent, an insurer shall:
1. Require the managing general agent to obtain and maintain a surety bond for the protection of the insurer. The amount of the surety bond shall be ten per cent of the managing general agent's total annual written premium nationwide produced by the managing general agent for the insurer in the prior calendar year, except that the surety bond shall not be in an amount less than one hundred thousand dollars or more than five hundred thousand dollars. The insurer shall make the bond available for inspection by the director.
2. Have on file an independent audited annual financial statement or report for the two most recent fiscal years that prove that the managing general agent has a positive net worth. If the managing general agent has been in existence for less than two fiscal years, the managing general agent shall include financial statements or reports that are certified by an officer of the managing general agent and that are prepared in accordance with generally accepted accounting principles for any completed fiscal years and for any month during the current fiscal year for which the financial statements or reports have been completed. For an audited financial report prepared on a consolidated basis, a managing general agent shall provide to the insurer with the financial report a columnar consolidating worksheet that includes amounts shown on the consolidated audited financial report, amounts for each entity stated separately and explanations of consolidating and eliminating entries.
3. Notwithstanding any other required loss reserve certification, if the managing general agent establishes loss reserves, annually obtain an actuary's opinion attesting to the adequacy of the loss reserves established for losses incurred and outstanding on business that is produced by the managing general agent.
4. Conduct semiannually an on-site review of the managing general agent's underwriting and claims processing operations.
5. Give to an officer of the insurer who is not affiliated with the managing general agent binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicates.
6. Within thirty days of entering into or terminating a contract with a managing general agent, provide to the director written notification of the appointment or termination. A notice of appointment of a managing general agent shall include a statement of the duties that the applicant shall perform on behalf of the insurer, the lines of insurance for which the applicant shall be authorized to act and any other information the director may request.
7. Review its books and records each quarter to determine if a producer has become, by operation, a managing general agent. If the insurer determines that a producer has become a managing general agent, the insurer promptly shall notify the producer and the director of the determination. The insurer and the producer shall comply with this section within thirty days.
C. An insurer shall not appoint to its board of directors an officer, director, employee, subproducer or controlling shareholder of its managing general agents. This subsection does not apply to relationships that are governed by the insurance holding company act or, if applicable, the producer controlled insurer act.
D. The acts of the managing general agent are considered to be the acts of the insurer on whose behalf the managing general agent is acting. A managing general agent may be examined by the director as if the managing general agent were the insurer and the insurer shall bear all expenses of the examination as prescribed by sections 20-156 and 20-159.
E. If after a hearing the director finds that a person has violated this section, the director may order:
1. For each separate violation, a civil penalty in an amount of up to one thousand dollars.
2. Revocation or suspension of the producer's license.
3. The managing general agent to reimburse the insurer or the rehabilitator or liquidator of the insurer for any losses that are incurred by the insurer and that are caused by an act that is committed by the managing general agent in violation of this section.
F. Nothing contained in this section affects the right of the director to impose any other penalties pursuant to this title.
G. Nothing contained in this section limits or restricts the rights of policyholders, claimants and auditors.
H. The director may adopt rules for the implementation and administration of this section.
I. Except as provided in section 41-1092.08, subsection H, the final decision, determination or order of the director pursuant to subsection E of this section is subject to judicial review pursuant to title 12, chapter 7, article 6.