CHAPTER 35. BUSINESS TRANSACTED WITH PRODUCER CONTROLLED PROPERTY AND CASUALTY INSURERS
IC 27-1-35
Chapter 35. Business Transacted With Producer Controlled
Property and Casualty Insurers
IC 27-1-35-1
Applicability of law
Sec. 1. This chapter applies to licensed insurers either domiciled
in Indiana or domiciled in a state that is not an accredited state
having in effect a substantially similar law. All provisions of the
Insurance Holding Company System Regulation Act, to the extent
the provisions are not superseded by this chapter, continue to apply
to all parties within holding company systems subject to this chapter.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-2
"Accredited state" defined
Sec. 2. As used in this chapter, "accredited state" means a state in
which the insurance department or regulatory agency has qualified
as meeting the minimum financial regulatory standards promulgated
and established periodically by the National Association of Insurance
Commissioners (NAIC).
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-3
"Captive insurer" defined
Sec. 3. As used in this chapter, "captive insurer" means an
insurance company owned by another organization whose exclusive
purpose is to insure risks of the parent organization and affiliated
companies, or in the case of groups and associations, insurance
organizations owned by the insureds whose exclusive purpose is to
insure risks of any of the following:
(1) Member organizations.
(2) Group members and their affiliates.
(3) Member organizations and group members and their
affiliates.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-4
"Control" or "controlled" defined
Sec. 4. As used in this chapter, "control" or "controlled" has the
meaning set forth in IC 27-1-23-1.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-5
"Controlled insurer" defined
Sec. 5. As used in this chapter, "controlled insurer" means a
licensed insurer that is controlled, directly or indirectly, by a
producer.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-6
"Controlling producer" defined
Sec. 6. As used in this chapter, "controlling producer" means a
producer that, directly or indirectly, controls an insurer.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-7
"Licensed insurer" or "insurer" defined
Sec. 7. As used in this chapter, "licensed insurer" or "insurer"
means any person, firm, association, or corporation licensed to
transact a property/casualty insurance business in Indiana. The
following are not licensed insurers for the purposes of this chapter:
(1) All risk retention groups (as defined in the Superfund
Amendments Reauthorization Act of 1986, Pub. L. No. 99-499,
100 Stat. 1613 (1986), the Risk Retention Act, 15 U.S.C.
Section 3901 et seq. (1982 & Supp. 1986), and IC 27-7-10-11).
(2) All residual market pools and joint underwriting authorities
or associations.
(3) All captive insurers.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-8
"Producer" defined
Sec. 8. As used in this chapter, "producer" means an insurance
broker or brokers or any other person, firm, association, or
corporation, when, for any compensation, commission, or other thing
of value, the person, firm, association, or corporation acts or aids in
any manner in soliciting, negotiating, or procuring the making of any
insurance contract on behalf of an insured other than the person,
firm, association, or corporation.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-9
Threshold limit of premiums
Sec. 9. The provisions of sections 11 through 14 of this chapter
apply if, in any calendar year, the aggregate amount of gross written
premiums on business placed with a controlled insurer by a
controlling producer is equal to or greater than five percent (5%) of
the admitted assets of the controlled insurer, as reported in the
controlled insurer's quarterly statement filed as of September 30 of
the prior year.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-10
Exempt transactions
Sec. 10. Notwithstanding section 9 of this chapter, the provisions
of sections 11 through 14 of this chapter do not apply if:
(1) the controlling producer:
(A) places insurance only with the controlled insurer, or only
with the controlled insurer and a member or members of the
controlled insurer's holding company system, or the
controlled insurer's parent, affiliate, or subsidiary and
receives no compensation based upon the amount of
premiums written in connection with such insurance; and
(B) accepts insurance placements only from nonaffiliated
subproducers, and not directly from insureds; and
(2) the controlled insurer, except for insurance business written
through a residual market facility accepts insurance business
only from a controlling producer, a producer controlled by the
controlled insurer, or a producer that is a subsidiary of the
controlled insurer.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-11
Written contract requirement
Sec. 11. A controlled insurer shall not accept business from a
controlling producer and a controlling producer shall not place
business with a controlled insurer unless there is a written contract
between the controlling producer and the controlled insurer
specifying the responsibilities of each party, which contract has been
approved by the board of directors of the controlled insurer and
contains the following minimum provisions:
(1) The controlled insurer may terminate the contract for cause,
upon written notice to the controlling producer. The controlled
insurer shall suspend the authority of the controlling producer
to write business during the pendency of any dispute regarding
the cause for the termination.
(2) The controlling producer shall render accounts to the
controlled insurer detailing all material transactions, including
information necessary to support all commissions, charges, and
other fees received by or owing to the controlling producer.
(3) The controlling producer shall remit all funds due under the
terms of the contract to the controlled insurer on at least a
monthly basis. The due date shall be fixed so that premiums or
installments of premiums collected shall be remitted not later
than ninety (90) days after the effective date of any policy
placed with the controlled insurer under this contract.
(4) All funds collected for the controlled insurer's account shall
be held by the controlling producer in a fiduciary capacity, in
one (1) or more appropriately identified bank accounts in banks
that are members of the Federal Reserve System, in accordance
with the provisions of the insurance law as applicable.
However, funds of a controlling producer not required to be
licensed in Indiana shall be maintained in compliance with the
requirements of the controlling producer's domiciliary
jurisdiction.
(5) The controlling producer shall maintain separately
identifiable records of business written for the controlled
insurer.
(6) The contract shall not be assigned in whole or in part by the
controlling producer.
(7) The controlled insurer shall provide the controlling producer
with the controlled insurer's underwriting standards, rules, and
procedures, manuals setting forth the rates to be charged, and
the conditions for the acceptance or rejection of risks. The
controlling producer shall adhere to the standards, rules,
procedures, rates, and conditions. The standards, rules,
procedures, rates, and conditions shall be the same as those
applicable to comparable business placed with the controlled
insurer by a producer other than the controlling producer.
(8) The rates and terms of the controlling producer's
commissions, charges, or other fees, and the purposes for those
charges or fees. The rates of the commissions, charges, and
other fees shall be no greater than those applicable to
comparable business placed with the controlled insurer by
producers other than controlling producers. For purposes of this
subdivision and subdivision (7), examples of "comparable
business" include the same lines of insurance, same kinds of
insurance, same kinds of risks, similar policy limits, and similar
quality of business.
(9) If the contract provides that the controlling producer, on
insurance business placed with the insurer, is to be compensated
contingent upon the insurer's profits on that business, then such
compensation shall not be determined and paid until at least
five (5) years after the premiums on liability insurance are
earned and at least one (1) year after the premiums are earned
on any other insurance. The commissions may not be paid until
the adequacy of the controlled insurer's reserves on remaining
claims has been independently verified under section 13 of this
chapter.
(10) A limit on the controlling producer's writings in relation to
the controlled insurer's surplus and total writings. The insurer
may establish a different limit for each line or sub-line of
business. The controlled insurer shall notify the controlling
producer when the applicable limit is approached and shall not
accept business from the controlling producer if the limit is
reached. The controlling producer shall not place business with
the controlled insurer if the controlling producer has been
notified by the controlled insurer that the limit has been
reached.
(11) The controlling producer may negotiate but shall not bind
reinsurance on behalf of the controlled insurer on business the
controlling producer places with the controlled insurer, except
that the controlling producer may bind facultative reinsurance
contracts under obligatory facultative agreements if the contract
with the controlled insurer contains 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.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-12
Audit committees
Sec. 12. Each controlled insurer shall have an audit committee of
the board of directors composed of independent directors. The audit
committee shall annually meet with management, the insurer's
independent certified public accountants, and an independent
casualty actuary or other independent loss reserve specialist
acceptable to the commissioner to review the adequacy of the
insurer's loss reserves.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-13
Opinions of independent casualty actuaries or independent loss
reserve specialists
Sec. 13. In addition to any other required loss reserve
certification, the controlled insurer shall annually, on April 1 of each
year, file with the commissioner an opinion of an independent
casualty actuary or such other independent loss reserve specialist
acceptable to the commissioner reporting loss ratios for each line of
business written and attesting to the adequacy of loss reserves
established for losses incurred and outstanding as of year end
(including incurred but not reported) on business placed by the
producer.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-14
Annual reports
Sec. 14. The controlled insurer shall annually report to the
commissioner the amount of commissions paid to the producer, the
percentage this amount represents of the net premiums written, and
comparable amounts and percentage paid to noncontrolling
producers for placements of the same kind of insurance.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-15
Notice of relationship
Sec. 15. A producer, before the effective date of the policy, shall
deliver written notice to the prospective insured disclosing the
relationship between the producer and the controlled insurer, except
that, if the business is placed through a subproducer who is not a
controlling producer, the controlling producer shall retain in the
controlling producer's records a signed commitment from the
subproducer that the subproducer is aware of the relationship
between the insurer and the producer and that the subproducer has or
will notify the insured.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-16
Orders to cease placing business
Sec. 16. If the commissioner believes that the controlling producer
or any other person has not materially complied with this chapter or
any rule or order adopted under this chapter, after notice and
opportunity to be heard, the commissioner may order the controlling
producer to cease placing business with the controlled insurer.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-17
Civil actions by commissioner
Sec. 17. If the commissioner finds that because of a material
noncompliance under section 16 of this chapter the controlled insurer
or any policyholder of the controlled insurer has suffered any loss or
damage, the commissioner may maintain a civil action or intervene
in an action brought by or on behalf of the insurer or policyholder for
recovery of compensatory damages for the benefit of the insurer or
policyholder or other appropriate relief.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-18
Civil actions by receivers
Sec. 18. If an order for liquidation or rehabilitation of the
controlled insurer has been entered under IC 27-9, and the receiver
appointed under that order believes that the controlling producer or
any other person has not materially complied with this chapter or any
rule or order adopted under this chapter, and the insurer suffered any
loss or damage therefrom, the receiver may maintain a civil action
for recovery of damages or other appropriate sanctions for the benefit
of the insurer.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.
IC 27-1-35-19
Other rights not affected
Sec. 19. Sections 16 through 18 of this chapter do not:
(1) affect the right of the commissioner to impose any other
penalties provided by Indiana law; or
(2) in any manner alter or affect the rights of policyholders,
claimants, creditors, or other third parties.
As added by P.L.130-1994, SEC.36 and P.L.116-1994, SEC.47.