40-4507. Contracts between reinsurance managers and reinsurers; writing and commissioner's approval required; contents.
40-4507
40-4507. Contracts between reinsurance managers and reinsurers; writingand commissioner's approval required; contents.Transactions between a reinsurance manager and the reinsurer itrepresents in such capacity shall only be entered into pursuant to a writtencontract, specifying the responsibilities of each party, which shall beapproved by the reinsurer's board of directors. At least 30 days before suchreinsurer assumes or cedes business through such producer, a true copy of theapproved contract shall be filed with the commissioner for approval. Thecontract shall, at a minimum, provide that:
(a) The reinsurer may terminate the contract for cause upon written noticeto the reinsurance manager. The reinsurer may immediately suspend theauthority of the reinsurance manager to assume or cede business during thependency of any dispute regarding the cause for termination;
(b) the reinsurance manager will render accounts to the reinsurer accuratelydetailing all material transactions, including information necessary to supportall commissions, charges and other fees received by, or owing to thereinsurance manager, and remit all funds due under the contract to thereinsurer on not less than a monthly basis;
(c) all funds collected for the reinsurer's account will be held by thereinsurance manager in a fiduciary capacity in a bank which is a qualifiedUnited States financial institution as defined herein. The reinsurance managermay retain no more than three months estimated claims payments and allocatedloss adjustment expenses. The reinsurance manager shall maintain a separatebank account for each reinsurer that it represents;
(d) for at least 10 years after expiration of each contract of reinsurancetransacted by the reinsurance manager, the reinsurance manager shall keep acomplete record for each transaction showing:
(1) The type of contract, limits, underwriting restrictions, classes orrisks and territory;
(2) period of coverage, including effective and expiration dates,cancellation provisions and notice required of cancellation, and disposition ofoutstanding reserves on covered risks;
(3) reporting and settlement requirements of balances;
(4) rate used to compute the reinsurance premium;
(5) names and addresses of reinsurers;
(6) rates of all reinsurance commissions, including the commissions on anyretrocessions handled by the reinsurance manager;
(7) related correspondence and memoranda;
(8) proof of placement;
(9) details regarding retrocessions handled by the reinsurance manager, aspermitted by subsection (d) of K.S.A. 40-4509, including theidentity ofretrocessionaires and percentage of each contract assumed or ceded;
(10) financial records, including but not limited to, premium and lossaccounts; and
(11) when the reinsurance manager places a reinsurance contract on behalf ofa ceding insurer:
(A) Directly from any assuming reinsurer, written evidence that the assumingreinsurer has agreed to assume the risk; or
(B) if placed through a representative of the assuming reinsurer, other thanan employee, written evidence that such reinsurer has delegated bindingauthority to the representative.
(e) the reinsurer shall have access and the right to copy all accounts andrecords maintained by the reinsurance manager related to its business in a formusable by the reinsurer;
(f) the contract cannot be assigned in whole or in part by the reinsurancemanager;
(g) the reinsurance manager shall comply with the written underwriting andrating standards established by the insurer for the acceptance, rejection orcession of all risks;
(h) sets forth the rates, terms and purposes of commissions, charges andother fees which the reinsurance manager may levy against the reinsurer;
(i) if the contract permits the reinsurance manager to settle claims onbehalf of the reinsurer:
(1) All claims shall be reported to the reinsurer in a timely manner;
(2) a copy of the claim file shall be sent to the reinsurer at its requestor as soon as it becomes known that the claim:
(A) Has the potential to exceed the lesser of an amount determined by thecommissioner or the limit set by the reinsurer;
(B) involves a coverage dispute;
(C) may exceed the reinsurance manager's claims settlement authority;
(D) is open for more than six months; or
(E) is closed by payment of the lesser of an amount set by the commissioneror an amount set by the reinsurer;
(3) all claim files will be the joint property of the reinsurer andreinsurance manager. However, upon an order of liquidation of the reinsurersuch files shall become the sole property of the reinsurer or its estate; thereinsurance manager shall have reasonable access to and the right to copy thefiles on a timely basis;
(4) any settlement authority granted to the reinsurance manager may beterminated for cause upon the reinsurer's written notice to the reinsurancemanager or upon the termination of the contract. The reinsurer may suspend thesettlement authority during the pendency of the dispute regarding the cause oftermination.
(j) if the contract provides for a sharing of interim profits by thereinsurance manager, that such interim profits will not be paid until one yearafter the end of each underwriting period for property business and five yearsafter the end of each underwriting period for casualty business and not untilthe adequacy of reserves on remaining claims has been verified pursuant tosubsection (c) of K.S.A. 40-4509;
(k) the reinsurance manager shall annually provide the reinsurer with astatement of its financial condition prepared by an independent certifiedaccountant;
(l) the reinsurer shall periodically but not less than semiannually, conductan on-site review of the underwriting and claims processing operations of thereinsurance manager;
(m) the reinsurance manager shall disclose to the reinsurer any relationshipit has with any insurer prior to ceding or assuming any business with suchinsurer pursuant to this contract;
(n) within the scope of its actual or apparent authority the acts of thereinsurance manager shall be deemed to be the acts of the reinsurer on whosebehalf it is acting.
History: L. 1992, ch. 15, § 7; Dec. 31.