26.1-26.3 Managing General Agents
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<![CDATA[CHAPTER 26.1-26.3MANAGING GENERAL AGENTS26.1-26.3-01. Definitions. As used in this chapter:1."Actuary" means a person who is a member in good standing of the American<br>academy of actuaries.2."Insurer" means any person, firm, association, or corporation duly licensed in this<br>state as an insurance company pursuant to this title.3."Managing general agent" means any individual, partnership, corporation, or limited<br>liability company which:a.Manages all or part of the insurance business of an insurer, including the<br>management of a separate division, department, or underwriting office.b.Acts as an insurance producer for the insurer whether known as a managing<br>general agent, manager, or other similar term, who, with or without the<br>authority, either separately or together with affiliates, produces, directly or<br>indirectly, and underwrites an amount of gross direct written premium equal to<br>or more than five percent of the policyholder surplus as reported in the last<br>annual statement of the insurer in any one quarter or year together with one or<br>more of the following activities related to the business produced:(1)Adjusts or pays claims in excess of an amount determined by the<br>commissioner; or(2)Negotiates reinsurance on behalf of the insurer.c.Notwithstanding the above, the following persons will not be considered as<br>managing general agents for the purposes of this chapter:(1)An employee of the insurer.(2)A United States manager of the United States branch of an alien insurer.(3)An underwriting manager which, pursuant to contract, manages all or<br>part of the insurance operations of the insurer, is under common control<br>with the insurer, subject to chapter 26.1-10, and whose compensation is<br>not based on the volume of premiums written.(4)The attorney in fact authorized by and acting for the subscribers of a<br>reciprocal insurer or interinsurance exchange under powers of attorney.4."Underwrite" means the authority to accept or reject risk on behalf of the insurer.26.1-26.3-02. Licensure.1.No individual, partnership, corporation, or limited liability company may act in the<br>capacity of a managing general agent with respect to risks located in this state for an<br>insurer licensed in this state unless the individual, partnership, corporation, or limited<br>liability company is licensed as an insurance producer in this state.2.An individual, partnership, corporation, or limited liability company may not act in the<br>capacity of a managing general agent representing an insurer domiciled in this state<br>with respect to risks located outside this state unless the individual, partnership,Page No. 1corporation, or limited liability company is licensed as either a resident or<br>nonresident insurance producer in this state pursuant to the provisions of this title.3.The commissioner may require a bond in an amount acceptable to the<br>commissioner for the protection of the insurer.4.The commissioner may require the managing general agent to maintain an<br>adequate errors and omissions policy.26.1-26.3-03. Required contract provisions. No individual, partnership, corporation, orlimited liability company acting in the capacity of a managing general agent may place business<br>with an insurer unless there is in force a written contract between the parties which sets forth the<br>responsibilities of each party and when both parties share responsibility for a particular function,<br>specifies the division of the responsibilities, and which contains the following minimum<br>provisions:1.The insurer may terminate the contract for cause upon written notice to the<br>managing general agent. The insurer may suspend the underwriting authority of the<br>managing general agent during the pendency of any dispute regarding the cause for<br>termination.2.The managing general agent will render accounts to the insurer detailing all<br>transactions and remit all funds due under the contract to the insurer on not less<br>than a monthly basis.3.All funds collected for the account of an insurer will be held by the managing general<br>agent in a fiduciary capacity in a bank which is a member of the federal reserve<br>system. This account must be used for all payments on behalf of the insurer. The<br>managing general agent may retain no more than three months estimated claims<br>payments and allocated loss adjustment expenses.4.Separate records of business written by the managing general agent will be<br>maintained.The insurer shall have access and right to copy all accounts andrecords related to its business in a form usable by the insurer and the commissioner<br>shall have access to all books, bank accounts, and records of the managing general<br>agent in a form usable to the commissioner.5.The contract may not be assigned in whole or in part by the managing general<br>agent.6.Appropriate underwriting guidelines, including:a.The maximum annual premium volume;b.The basis of the rates to be charged;c.The types of risks which may be written;d.Maximum limits of liability;e.Applicable exclusions;f.Territorial limitations;g.Policy cancellation provisions; andh.The maximum policy period.Page No. 2The insurer has the right to cancel or nonrenew any policy of insurance subject to<br>the applicable laws and rules concerning the cancellation and nonrenewal of<br>insurance policies.7.If the contract permits the managing general agent to settle claims on behalf of the<br>insurer:a.All claims must be reported to the company in a timely manner.b.A copy of the claim file must be sent to the insurer at its request or as soon as it<br>becomes known that the claim:(1)Has the potential to exceed an amount determined by the commissioner<br>or exceeds the limit set by the company, whichever is less;(2)Involves a coverage dispute;(3)May exceed the managing general agent's claims settlement authority;(4)Is open for more than six months; or(5)Is closed by payment of an amount set by the commissioner or an<br>amount set by the company, whichever is less.c.All claims files will be the joint property of the insurer and managing general<br>agent. However, upon an order of liquidation of the insurer, the files become<br>the sole property of the insurer or its estate. The managing general agent shall<br>have reasonable access to and the right to copy the files on a timely basis.d.Any settlement authority granted to the managing general agent may be<br>terminated for cause upon the insurer's written notice to the managing general<br>agent or upon the termination of the contract. The insurer may suspend the<br>settlement authority during the pendency of any dispute regarding the cause for<br>termination.8.If electronic claims files are in existence, the contract must address the timely<br>transmission of the data.9.If the contract provides for a sharing of interim profits by the managing general<br>agent, and the managing general agent has the authority to determine the amount of<br>the interim profits by establishing loss reserves or controlling claim payments, or in<br>any other manner, interim profits will not be paid to the managing general agent until<br>one year after they are earned for property insurance business and five years after<br>they are earned on casualty business and not until the profits have been verified<br>pursuant to section 26.1-26.3-04.10.The managing general agent may not:a.Bind reinsurance or retrocessions on behalf of the insurer, except that the<br>managing general agent may bind facultative reinsurance contracts pursuant to<br>obligatory facultative agreements if the contract with the insurer contains<br>reinsurance underwriting guidelines including, for both reinsurance assumed<br>and ceded, a list of reinsurers with which such automatic agreements are in<br>effect, the coverages, and amounts or percentages that may be reinsured and<br>commission schedules.b.Commit the insurer to participate in insurance or reinsurance syndicates.Page No. 3c.Appoint any insurance producer without assuring that the insurance producer is<br>licensed in the appropriate lines of insurance.d.Without prior approval of the insurer, pay or commit the insurer to pay a claim<br>over a specified amount, net of reinsurance, which may not exceed one percent<br>of the insurer's policyholder's surplus as of December thirty-first of the last<br>completed calendar year.e.Collect any payment from a reinsurer or commit the insurer to any claim<br>settlement with a reinsurer without prior approval of the insurer.If priorapproval is given, a report must be promptly forwarded to the insurer.f.Permit its subagent to serve on the insurer's board of directors.g.Jointly employ an individual who is employed with the insurer.h.Appoint a submanaging general agent.26.1-26.3-04. Duties of insurers.1.The insurer shall have on file, in a form acceptable to the commissioner, an<br>independent financial examination of each managing general agent with which it has<br>done business.2.If a managing general agent establishes loss reserves, the insurer shall annually<br>obtain the opinion of an actuary attesting to the adequacy of loss reserves<br>established for losses incurred and outstanding on business produced by the<br>managing general agent.This is in addition to any other required loss reservecertification.3.The insurer shall periodically and at least semiannually conduct an onsite review of<br>the underwriting and claims processing operations of the managing general agent.4.Binding authority for all reinsurance contracts or participation in insurance or<br>reinsurance syndicates rests with an officer of the insurer, who may not be affiliated<br>with the managing general agent.5.Within thirty days of entering into or termination of a contract with a managing<br>general agent, the insurer shall provide written notification of the appointment or<br>termination to the commissioner. Notices of appointment of a managing general<br>agent must include a statement of duties which the applicant is expected to perform<br>on behalf of the insurer, the lines of insurance for which the applicant is to be<br>authorized to act, and any other information the commissioner may request.6.An insurer shall review its books and records each quarter to determine if any of its<br>insurance producers have become, by operation of subsection 3 of section<br>26.1-26.3-01, a managing general agent as defined in that section. If the insurer<br>determines that an insurance producer has become a managing general agent<br>pursuant to the above, the insurer shall promptly notify the insurance producer and<br>the commissioner of the determination and the insurer and insurance producer shall<br>fully comply with the provisions of this chapter within thirty days.7.An insurer may not appoint to its board of directors an officer, director, employee,<br>subagent, or controlling shareholder of its managing general agents.Thissubsection does not apply to relationships governed by chapter 26.1-10.26.1-26.3-05. Examination authority. The acts of the managing general agent areconsidered to be the acts of the insurer on whose behalf it is acting. A managing general agent<br>may be examined as if it were the insurer.Page No. 426.1-26.3-06. Penalties and liabilities.1.If the commissioner determines that the managing general agent or any other<br>person has not materially complied with this chapter or any rule or order adopted<br>under this chapter, after notice and opportunity to be heard, the commissioner may<br>order:a.For each separate violation, a penalty in an amount not exceeding one<br>thousand dollars;b.Revocation or suspension of the insurance producer's license; andc.If it was found that because of the material noncompliance that the insurer has<br>suffered any loss or damage, the commissioner may maintain a civil action<br>brought by or on behalf of the insurer and its policyholders and creditors for<br>recovery of compensatory damages for the benefit of the insurer and its<br>policyholders and creditors or other appropriate relief.2.If an order of rehabilitation or liquidation of the insurer has been entered pursuant to<br>chapter 26.1-06.1, and the receiver appointed under that order determines that the<br>managing general agent or any other person has not materially complied with this<br>chapter, or any rule or order adopted under this chapter, and the insurer suffered<br>any loss or damage as a result of the material noncompliance, the receiver may<br>maintain a civil action for recovery of damages or other appropriate sanctions for the<br>benefit of the insurer.3.Nothing contained in this section affects the right of the commissioner to impose any<br>other penalties provided for in the insurance law.4.Nothing contained in this chapter is intended to or shall in any manner limit or restrict<br>the rights of policyholders, claimants, and auditors.5.The decision, determination, or order of the commissioner pursuant to subsection 1<br>is subject to judicial review pursuant to chapter 28-32.26.1-26.3-07. Rules. The insurance commissioner may adopt reasonable rules for theimplementation and administration of the provisions of this chapter.Page No. 5Document Outlinechapter 26.1-26.3 managing general agents]]>