Sec. 38a-90c. Contractual agreement between insurer and managing general agent. Minimum provisions of the contract.
Sec. 38a-90c. Contractual agreement between insurer and managing general
agent. Minimum provisions of the contract. No person, firm, association or corporation acting in the capacity of a managing general agent shall place business with an
insurer unless there is in force a written contract between the parties which sets forth the
responsibilities of each party and where both parties share responsibility for a particular
function, specifies the division of such responsibilities, and such contract shall contain
the following minimum provisions:
(a) The insurer may terminate the contract for cause upon written notice to the
managing general agent. The insurer may suspend the underwriting authority of the
managing general agent during the pendency of any dispute regarding the cause for
termination.
(b) The managing general agent shall render an accounting to the insurer detailing
all transactions and remitting all funds due under the contract to the insurer on a
monthly basis.
(c) All funds collected for the account of an insurer shall be held by the managing
general agent in a fiduciary capacity in a bank which is a member of the Federal Reserve
System. This 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.
(d) Separate records of business written by the managing general agent shall be
maintained. The insurer shall have access and 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 managing general agent in a form
usable to the commissioner.
(e) The contract may not be assigned in whole or part by the managing general
agent.
(f) Appropriate underwriting guidelines including: (1) The maximum annual premium volume; (2) the basis of the rates to be charged; (3) the types of risks which may
be written; (4) maximum limits of liability; (5) applicable exclusions; (6) territorial
limitations; (7) policy cancellation provisions; and (8) the maximum policy period. The
insurer shall have the right to cancel or nonrenew any policy subject to the applicable
laws and regulations.
(g) If the contract permits the managing general agent to settle claims on behalf of
the insurer: (1) All claims must be reported to the company in a timely manner; (2) a
copy of the claim file shall 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 managing general agent claims settlement authority; (D) is open for more than six months or (E) is closed by payment of an amount
set by the company. (3) All claim files will be the joint property of the insurer and
managing general agent. However, upon an order of liquidation of the insurer such files
shall become the sole property of the insurer or its estate and the managing general agent
shall have reasonable access and the right to copy the files on a timely basis. (4) Any
settlement authority granted to the managing general agent may be terminated for cause
upon the insurer's written notice to the managing general agent 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.
(h) Where electronic claims files are in existence, the contract must address the
timely transmission of data.
(i) If the contract provides for a 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 or controlling claim payments, or in any
other manner, interim profits will not be paid to the managing general agent until one
year after they are earned for property insurance and five years after they are earned
on casualty insurance and not until the profits have been verified pursuant to section
38a-90d.
(j) The managing general agent shall not: (1) 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 which such automatic agreements are in
effect, the coverages and amounts or percentages that may be reinsured and commission
schedules; (2) commit the insurer to participate in insurance or reinsurance syndicates;
(3) appoint any producer or agent without assuring that the producer or agent is lawfully
licensed to transact the type of insurance for which he is appointed; (4) 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 per cent of the insurer's policyholder's
surplus as of December thirty-first of the last completed calendar year; (5) 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; (6) jointly employ an individual who is employed with the
insurer; (7) appoint a submanaging general agent; or (8) permit its subproducer or subagent to serve on the insurer's board of directors.
(P.A. 91-262, S. 13, 19; P.A. 93-239, S. 20.)
History: P.A. 93-239 amended Subsec. (j) to delete reference to "automatic" facultative agreements and to add a new
Subdiv. (8) prohibiting a subproducer as subagent of a managing general agent to serve on an insurer's board of directors.