§ 27-51-4. Required contract provisions.
No person, firm, association, or corporation acting in the capacity of an MGA shall
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 where both parties
share responsibility for a particular function, specifies the division of the responsibilities,
and that contains the following minimum provisions:
(1) The insurer may terminate the contract for cause upon written notice to the MGA. The
insurer may suspend the underwriting authority of the MGA during the pendency of any
dispute regarding the cause for termination;
(2) The MGA will render accounts to the insurer detailing all transactions and remit all
funds due under the contract to the insurer on not less than a monthly basis;
(3) All funds collected for the account of an insurer will be held by the MGA in a fiduciary
capacity in a bank that is a member of the Federal Reserve System. This account shall
be used for all payments on behalf of the insurer. The MGA may retain no more than
three (3) months estimated claims payments and allocated loss adjustment expenses;
(4) Separate records of business written by the MGA will be maintained. The insurer shall
have access and the right to copy all accounts and records related to its business
in a form usable by the insurer, and the commissioner shall have access to all books,
bank accounts, and records of the MGA in a form usable to the commissioner;
(5) The contract may not be assigned in whole or part by the MGA;
(6)(i) 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; and
(H) The maximum policy period;
(ii) The insurer shall have the right to cancel or not to renew any policy of insurance
subject to the applicable laws and regulations concerning the cancellation and nonrenewal
of insurance policies;
(7) If the contract permits the MGA to settle claims on behalf of the insurer:
(i) All claims must be reported to the company in a timely manner;
(ii) A copy of the claim file will be sent to the insurer at its request or as soon as
it becomes known that the claim:
(A) Has the potential to exceed an amount determined by the commissioner or exceeds the
limit set by the company, whichever is less;
(B) Involves a coverage dispute;
(C) May exceed the MGA's claims settlement authority;
(D) Is open for more than six (6) months; or
(E) Is closed by payment of an amount set by the commissioner or an amount set by the
company, whichever is less;
(iii) All claim files will be the joint property of the insurer and MGA. Upon an order of
liquidation of the insurer the files shall become the sole property of the insurer
or its estate; the MGA shall have reasonable access to and the right to copy the files
on a timely basis;
(iv) Any settlement authority granted to the MGA may be terminated for cause upon the insurer's
written notice to the MGA or upon the termination of the contract. The insurer may
suspend the settlement authority during the pendency of any dispute regarding the
cause for termination;
(8) Where electronic claims files are in existence, the contract must address the timely
transmission of the data;
(9) If the contract provides for a sharing of interim profits by the MGA, and the MGA
has the authority to determine the amount of the interim profits by establishing loss
reserves or controlling claim payments, or in any other manner, interim profits will
not be paid to the MGA until one year after they are earned for property insurance
business and five (5) years after they are earned on casualty business and not until
the profits have been verified pursuant to §â€‚27-51-5; and
(10) The MGA shall not:
(i) Bind reinsurance or retrocessions on behalf of the insurer, except that the MGA 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 which the automatic
agreements are in effect, the coverage and amounts or percentages that may be reinsured,
and commission schedules;
(ii) Commit the insurer to participate in insurance or reinsurance syndicates;
(iii) Appoint any producer without assuring that the producer is lawfully licensed to transact
the type of insurance for which the producer is appointed;
(iv) Without prior approval of the insurer, pay or commit the insurer to pay a claim over
a specified amount net of reinsurance, which shall not exceed one percent (1%) of
the insurer's policyholder's surplus as of December 31 of the last completed calendar
year;
(v) Collect any payment from a reinsurer or commit the insurer to any claim settlement
with a reinsurer, without prior approval of the insurer. If prior approval is given,
a report must be promptly forwarded to the insurer;
(vi) Permit its subproducer to serve on the insurer's board of directors;
(vii) Jointly employ an individual who is employed with the insurer; or
(viii) Appoint a sub-MGA.