§ 27-6-9-21 — Transactions between reinsurance intermediary-manager and reinsurer; written contract; contents

Transactions between a RM and the reinsurer
it represents in the capacity of RM may only be entered into pursuant
to a written contract, specifying the responsibilities of each party,
which must be approved by the reinsurer's board of directors. At least
thirty (30) days before a reinsurer assumes or cedes business through
a RM, a true copy of the approved contract must be filed with the
commissioner for approval. The contract must, at a minimum, contain
provisions that state the following:
(1) The reinsurer may terminate the contract for cause upon
written notice to the RM, and may suspend the authority of the
RM to assume or cede business during the pendency of any
dispute regarding the cause for termination.
(2) The RM will:
(A) render accounts to the reinsurer accurately detailing all
material transactions, including information necessary to
support all commissions, charges, and other fees received by,
or owing to, the RM; and
(B) remit all funds due under the contract to the reinsurer on
not less than a monthly basis.
(3) All funds collected for the reinsurer's account will be held by
the RM in a fiduciary capacity in a bank which is a qualified
United States financial institution. The RM may retain no more
than three (3) months estimated claims payments and allocated
loss adjustment expenses. The RM shall maintain a separate bank
account for each reinsurer that it represents.
(4) For at least ten (10) years after expiration of each contract of
reinsurance transacted by the RM, the RM will keep a complete
record for each transactions showing the following:
(A) The type of contract, limits, underwriting restrictions,
classes or risks, and territory.
(B) Period of coverage, including effective and expiration
dates, cancellation provisions and notice required of
cancellation, and disposition of outstanding reserves on covered
risks.
(C) Reporting and settlement requirements of balances.
(D) Rate used to compute the reinsurance premium.
(E) Names and addresses of reinsurers.
(F) Rates of all reinsurance commissions, including the
commissions on any retrocessions handled by the RM.
(G) Related correspondence and memoranda.
(H) Proof of placement.
(I) Details regarding retrocessions handled by the RM, as
permitted by section 23(d) of this chapter, including the identity
of retrocessionaires and percentage of each contract assumed or
ceded.
(J) Financial records, including premium and loss accounts.
(K) When the RM places a reinsurance contract on behalf of a
ceding insurer:
(i) directly from any assuming reinsurer, written evidence
that the assuming reinsurer has agreed to assume the risk; or
(ii) if placed through a representative of the assuming
reinsurer, other than an employee, written evidence that the
reinsurer has delegated binding authority to the
representative.
(5) The reinsurer will have access and the right to copy all
accounts and records maintained by the RM related to its business
in a form usable by the reinsurer.
(6) The contract cannot be assigned in whole or in part by the
RM.
(7) The RM will comply with the written underwriting and rating
standards established by the insurer for the acceptance, rejection,
or cession of all risks.
(8) The rates, terms, and purposes of commissions, charges, and
other fees which the RM may levy against the reinsurer.
(9) If the contract permits the RM to settle claims on behalf of the
reinsurer the following apply:
(A) All claims will be reported to the reinsurer in a timely
manner.
(B) A copy of the claim file will be sent to the reinsurer at its
request or as soon as it becomes known that the claim:
(i) has the potential to exceed the lesser of an amount
determined by the commissioner or the limit set by the
reinsurer;
(ii) involves a coverage dispute;
(iii) may exceed the RM's claims settlement authority;
(iv) is open for more than six (6) months; or
(v) is closed by payment of the lesser of an amount set by the
commissioner or an amount set by the reinsurer.
(C) All claim files will be the joint property of the reinsurer and
RM. However, upon an order of liquidation of the reinsurer, the
files shall become the sole property of the reinsurer or its estate,
and the RM shall have reasonable access to and the right to
copy the files on a timely basis.
(D) Any settlement authority granted to the RM may be
terminated for cause upon the reinsurer's written notice to the
RM or upon the termination of the contract. The reinsurer may
suspend the settlement authority during the pendency of the
dispute regarding the cause of termination.
(10) If the contract provides for a sharing of interim profits by the
RM, that those interim profits will not be paid until one (1) year
after the end of each underwriting period for property business
and five (5) years after the end of each underwriting period for
casualty business (or a later period set by the commissioner for
specified lines of insurance) and not until the adequacy of
reserves on remaining claims has been verified under section
23(c) of this chapter.
(11) The RM will annually provide the reinsurer with a statement
of its financial condition prepared by an independent certified
accountant.
(12) The reinsurer shall periodically (at least semiannually)
conduct an on-site review of the underwriting and claims
processing operations of the RM.
(13) The RM will disclose to the reinsurer any relationship it has
with any insurer prior to ceding or assuming any business with
that insurer pursuant to the contract.
(14) The acts of the RM shall be considered to be the acts of the
reinsurer on whose behalf the RM is acting.

Legislative History

As added by P.L.26-1991, SEC.26.