26.1-31.1 Reinsurance Intermediaries
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<![CDATA[CHAPTER 26.1-31.1REINSURANCE INTERMEDIARIES26.1-31.1-01. 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."Controlling person" means any person, firm, association, corporation, or limited<br>liability company who directly or indirectly has the power to direct or cause to be<br>directed, the management, control, or activities of the reinsurance intermediary.3."Insurer" means any person, firm, association, or corporation duly licensed in this<br>state pursuant to the applicable provisions of the insurance law as an insurer.4."Licensed producer" means an insurance producer or reinsurance intermediary<br>licensed pursuant to the applicable provision of this title.5."Qualified United States financial institution" means an institution that:a.Is organized or in the case of a United States office of a foreign banking<br>organization, is licensed, under the laws of the United States or any state<br>thereof;b.Is regulated, supervised, and examined by United States federal or state<br>authorities having regulatory authority over banks and trust companies; andc.Has been determined by either the commissioner, or the securities valuation<br>office of the national association of insurance commissioners, to meet<br>standards of financial condition and standing considered necessary and<br>appropriate to regulate the quality of financial institutions whose letters of credit<br>will be acceptable to the commissioner.6."Reinsuranceintermediary"meansa reinsurance intermediary-broker or areinsurance intermediary-manager as these terms are defined in subsections 7 and<br>8.7."Reinsurance intermediary-broker" means any person, other than an officer or<br>employee of the ceding insurer, firm, association, or corporation who solicits,<br>negotiates, or places reinsurance cessions or retrocessions on behalf of a ceding<br>insurer without the authority or power to bind reinsurance on behalf of such insurer.8."Reinsuranceintermediary-manager"meansanyperson,firm,association,corporation, or limited liability company who has authority to bind or manages all or<br>part of the assumed reinsurance business of a reinsurer, including the management<br>of a separate division, department, or underwriting office, and acts as an agent for<br>the reinsurer whether known as a reinsurance intermediary-manager, manager, or<br>other similar term. Notwithstanding this definition, the following persons may not be<br>considered a reinsurance intermediary-manager, with respect to such reinsurer, for<br>the purposes of this chapter:a.An employee of the reinsurer.b.A United States manager of the United States branch of an alien reinsurer.c.An underwriting manager which, pursuant to contract, manages all or part of<br>the reinsurance operations of the reinsurer, is under common control with thePage No. 1reinsurer and subject to chapter 26.1-10, and whose compensation is not<br>based on the volume of premiums written.d.The manager of a group, association, pool, or organization of insurers which<br>engage in joint underwriting or joint reinsurance and who are subject to<br>examination by the insurance commissioner of the state in which the manager's<br>principal business office is located.9."Reinsurer" means any person, firm, association, or corporation duly licensed in this<br>state pursuant to the applicable provisions of this title as an insurer with the authority<br>to assume reinsurance.10."To be in violation" means that the reinsurance intermediary, insurer, or reinsurer for<br>whom the reinsurance intermediary was acting failed to substantially comply with the<br>provisions of this chapter.26.1-31.1-02. Licensure.1.No person, firm,association,orcorporationmayactasareinsuranceintermediary-broker in this state if the reinsurance intermediary-broker maintains an<br>office either directly or as a member or employee of a firm or association, or an<br>officer, director, or employee of a corporation:a.In this state, unless the reinsurance intermediary-broker is a licensed producer<br>in this state; orb.In another state, unless the reinsurance intermediary-broker is a licensed<br>producer in this state or another state having a law substantially similar to this<br>law or such reinsurance intermediary-broker is licensed in this state as a<br>nonresident reinsurance intermediary.2.Noperson,firm,association,orcorporationmayactas a reinsuranceintermediary-manager:a.Forareinsurerdomiciledinthisstate,unlessthereinsuranceintermediary-manager is a licensed producer in this state.b.In this state, if the reinsurance intermediary-manager maintains an office either<br>directly or as a member or employee of a firm or association, or as an officer,<br>director, or employee of a corporation in this state, unless the reinsurance<br>intermediary-manager is a licensed producer in this state.c.In another state for anondomesticinsurer,unlessthereinsuranceintermediary-manager is a licensed producer in this state or another state<br>having a law substantially similar to this law or the person is licensed in this<br>state as a nonresident reinsurance intermediary.3.The commissioner may require a reinsurance intermediary-manager subject to<br>subsection 2 to:a.File a bond in an amount from an insurer acceptable to the commissioner for<br>the protection of the reinsurer; andb.Maintain an errors and omissions policy in an amount acceptable to the<br>commissioner.4.a.The commissioner may issue a reinsurance intermediary license to any person,<br>firm, association, corporation, or limited liability company who has complied<br>with the requirements of this chapter. Any such license issued to a firm orPage No. 2association will authorize all the members of the firm or association and any<br>designated employees to act as reinsurance intermediaries under the license,<br>and all such persons must be named in the application and any supplements<br>thereto. Any such license issued to a corporation must authorize all of the<br>officers and any designated employees and directors thereof to act as<br>reinsurance intermediaries on behalf of the corporation, and all such persons<br>must be named in the application and any supplements thereto.Any suchlicense issued to a limited liability company must authorize all of the managers<br>and any designated employees and governors thereof to act as reinsurance<br>intermediaries on behalf of the limited liability company, and all such persons<br>must be named in the application and any supplements thereto.b.If the applicant for a reinsurance intermediary license is a nonresident, the<br>applicant, as a condition precedent to receiving or holding a license, shall<br>designate the commissioner as agent for service of process in the manner, and<br>with the same legal effect, provided for by this title for designation of service of<br>process upon unauthorized insurers.The applicant shall also furnish thecommissioner with the name and address of a resident of this state upon whom<br>notices or orders of the commissioner or process affecting the nonresident<br>reinsurance intermediary may be served. The licensee shall promptly notify the<br>commissioner in writing of every change in its designated agent for service of<br>process, and the changes do not become effective until acknowledged by the<br>commissioner.5.The commissioner may refuse to issue a reinsurance intermediary license if, in the<br>commissioner's judgment, the applicant, anyone named on the application, or any<br>member, principal, officer, or director of the applicant, is not trustworthy, or that any<br>controlling person of the applicant is not trustworthy to act as a reinsurance<br>intermediary, or that any of the foregoing has given cause for revocation or<br>suspension of the license, or has failed to comply with any prerequisite for the<br>issuance of such license.Upon written request therefor, the commissioner willfurnish a summary of the basis for refusal to issue a license.6.Licensed attorneys at law of this state when acting in their professional capacity as<br>such are exempt from this section.26.1-31.1-03.Required contract provisions - Reinsurance intermediary-brokers.Transactions between a reinsurance intermediary-broker and the insurer it represents in such<br>capacity may only be entered into, pursuant to a written authorization, specifying the<br>responsibilities of each party. The authorization must, at a minimum, contain provisions that:1.The insurer may terminate the reinsurance intermediary-broker's authority at any<br>time.2.The reinsurance intermediary-broker will render accounts to the insurer accurately<br>detailing all material transactions, including information necessary to support all<br>commissions, charges, and other fees received by, or owing, to the reinsurance<br>intermediary-broker, and remit all funds due to the insurer within thirty days of<br>receipt.3.All funds collected for the insurer's account will be held by the reinsurance<br>intermediary-broker in a fiduciary capacity in a bank which is a qualified United<br>States financial institution as defined by this chapter.4.The reinsurance intermediary-broker will comply with section 26.1-31.1-04.5.The reinsurance intermediary-broker will comply with the written standards<br>established by the insurer for the cessions or retrocession of all risks.Page No. 36.The reinsurance intermediary-broker will disclose to the insurer any relationship with<br>any reinsurer to which business will be ceded or retroceded.26.1-31.1-04. Books and records - Reinsurance intermediary-brokers.1.For at least ten years after expiration of each contract of reinsurance transacted by<br>the reinsurance intermediary-broker, the reinsurance intermediary-broker will keep a<br>complete record for each transaction showing:a.The type of contract, limits, underwriting restrictions, classes or risks, and<br>territory;b.Period of coverage, including the effective date and the expiration date,<br>cancellation provisions and notice required of cancellation;c.Reporting and settlement requirements of balances;d.Rate used to compute the reinsurance premium;e.Names and addresses of assuming reinsurers;f.Rates of all reinsurance commissions, including the commissions on any<br>retrocessions handled by the reinsurance intermediary-broker;g.Related correspondence and memoranda;h.Proof of placement;i.Detailsregardingretrocessionshandledbythereinsuranceintermediary-broker, including the identity of retrocessionaires and percentage<br>of each contract assumed or ceded;j.Financial records, including premium and loss accounts; andk.When the reinsurance intermediary-broker procures a reinsurance contract on<br>behalf of a licensed ceding insurer:(1)Directly from any assuming reinsurer, written evidence that the assuming<br>reinsurer has agreed to assume the risk; or(2)If placed through a representative of the assuming reinsurer, other than<br>an employee, written evidence that the reinsurer has delegated binding<br>authority to the representative.2.The insurer will have access and the right to copy and audit all accounts and records<br>maintained by the reinsurance intermediary-broker related to its business in a form<br>usable by the insurer.26.1-31.1-05.Dutiesofinsurersutilizingtheservicesofreinsuranceintermediary-broker.1.An insurer may not engage the services of any person, firm, association,<br>corporation, or limited liability company to act as a reinsurance intermediary-broker<br>on its behalf unless the person, firm, association, corporation, or limited liability<br>company is licensed as required by subsection 1 of section 26.1-31.1-02.2.An insurer may not employ an individual who is employed by a reinsurance<br>intermediary-broker with which it transacts business, unless the reinsurancePage No. 4intermediary-broker is under common control with the insurer and subject to chapter<br>26.1-10.3.The insurer shall annually obtain a copy of statements of the financial condition of<br>each reinsurance intermediary-broker with which it transacts business.26.1-31.1-06. Required contract provisions - Reinsurance intermediary-managers.Transactions between a reinsurance intermediary-manager and the reinsurer it represents in that<br>capacity may only be entered into pursuant to a written contract, approved by the reinsurer's<br>board of directors, which specifies the responsibilities of each party. At least thirty days before<br>the reinsurer assumes or cedes business through the producer, a true copy of the approved<br>contract must be filed with the commissioner for approval. The contract must, at a minimum,<br>contain provisions that:1.The reinsurer may terminate the contract for cause upon written notice to the<br>reinsurance intermediary-manager.The reinsurer may immediately suspend theauthority of the reinsurance intermediary-manager to assume or cede business<br>during the pendency of any dispute regarding the cause for termination.2.The reinsurance intermediary-manager will render accounts to the reinsurer<br>accurately detailing all material transactions, including information necessary to<br>support all commissions, charges, and other fees received by, or owing to the<br>reinsurance intermediary-manager, and remit all funds due under the contract to the<br>reinsurer on not less than a monthly basis.3.All funds collected for the reinsurer's account will be held by the reinsurance<br>intermediary-manager in a fiduciary capacity in a bank which is a qualified United<br>States financial institution as defined by this chapter.The reinsuranceintermediary-manager may retain no more than three months' estimated claims<br>paymentsandallocatedlossadjustmentexpenses.Thereinsuranceintermediary-manager shall maintain a separate bank account for each reinsurer<br>that it represents.4.For at least ten years after expiration of each contract of reinsurance transacted by<br>the reinsurance intermediary-manager, the reinsurance intermediary-manager will<br>keep a complete record for each transaction showing:a.The type of contract, limits, underwriting restrictions, classes or risks, and<br>territory;b.Period of coverage, including the effective date and the expiration date,<br>cancellation provisions and notice required of cancellation, and disposition of<br>outstanding reserves on covered risks;c.Reporting and settlement requirements of balances;d.Rate used to compute the reinsurance premium;e.Names and addresses of reinsurers;f.Rate of all reinsurance commissions, including the commissions on any<br>retrocessions handled by the reinsurance intermediary-manager;g.Related correspondence and memoranda;h.Proof of placement;i.Detailsregardingretrocessionshandledbythereinsuranceintermediary-manager, as permitted by subsection 4 of section 26.1-31.1-08,Page No. 5including the identity of retrocessionaires and percentage of each contract<br>assumed or ceded;j.Financial records premium and loss accounts; andk.When the reinsurance intermediary-manager places a reinsurance contract on<br>behalf of a ceding insurer:(1)Directly from any assuming reinsurer, written evidence that the assuming<br>reinsurer has agreed to assume the risk; or(2)If placed through a representative of the assuming reinsurer, other than<br>an employee, written evidence that the reinsurer has delegated binding<br>authority to the representative.5.The reinsurer will have access and the right to copy all accounts and records<br>maintained by the reinsurance intermediary-manager related to its business in a<br>form usable by the reinsurer.6.The contract cannot be assigned in whole or in part by the reinsurance<br>intermediary-manager.7.The reinsurance intermediary-manager will comply with the written underwriting and<br>rating standards established by the insurer for the acceptance, rejection, or cession<br>of all risks.8.Set forth the rates, terms, and purposes of commissions, charges, and other fees<br>which the reinsurance intermediary-manager may levy against the reinsurer.9.If the contract permits the reinsurance intermediary-manager to settle claims on<br>behalf of the reinsurer:a.All claims will be reported to the reinsurer in a timely manner.b.A copy of the claim file will be sent to the reinsurer at its request or as soon as<br>it becomes known that the claim:(1)Has the potential to exceed the lesser of an amount determined by the<br>commissioner or the limit set by the reinsurer;(2)Involves a coverage dispute;(3)May exceed the reinsurance intermediary-manager's claims settlement<br>authority;(4)Is open for more than six months; or(5)Is closed by payment of the lesser of an amount set by the commissioner<br>or an amount set by the reinsurer.c.All claim files will be the joint property of the reinsurer and reinsurance<br>intermediary-manager. However, upon an order of liquidation of the reinsurer<br>the files become the sole property of the reinsurer or its estate.Thereinsurance intermediary-manager shall have reasonable access to and the<br>right to copy the files on a timely basis.d.Any settlement authority granted to the reinsurance intermediary-manager may<br>be terminated for cause upon the reinsurer's written notice to the reinsurance<br>intermediary-manager or upon the termination of the contract. The reinsurerPage No. 6may suspend the settlement authority during the pendency of the dispute<br>regarding the cause of termination.10.If the contract provides for a sharing of interim profits by the reinsurance<br>intermediary-manager, the interim profits will not be paid until one year after the end<br>of each underwriting period for property business and five years after the end of<br>each underwriting period for casualty business, or a later period set by the<br>commissioner for specified lines of insurance, and not until the adequacy of reserves<br>on remaining claims has been verified pursuant to subsection 3 of section<br>26.1-31.1-08.11.The reinsurance intermediary-manager will annually provide the reinsurer with a<br>statement of its financial condition prepared by an independent certified public<br>accountant.12.The reinsurer shall periodically and at least semiannually conduct an onsite review<br>of the underwriting and claims processing operations of the reinsurance<br>intermediary-manager.13.The reinsurance intermediary-manager will disclose to the reinsurer any relationship<br>it has with any insurer prior to ceding or assuming any business with the insurer<br>pursuant to this contract.14.The acts of the reinsurance intermediary-manager must be deemed to be the acts of<br>the reinsurer on whose behalf it is acting.26.1-31.1-07. Prohibited acts. The reinsurance intermediary-manager may not:1.Bind retrocessions on behalf of the reinsurer, except that the reinsurance<br>intermediary-manager may bind facultative retrocessions pursuant to obligatory<br>facultative agreements if the contract with the reinsurer contains reinsurance<br>underwriting guidelines for such retrocessions. The guidelines must include a list of<br>reinsurers with which the automatic agreements are in effect, and for each such<br>reinsurer, the coverages and amounts or percentages that may be reinsured, and<br>commission schedules.2.Commit the reinsurer to participate in reinsurance syndicates.3.Appoint any producer without assuring that the producer is lawfully licensed to<br>transact the type of reinsurance for which the producer is appointed.4.Without prior approval of the reinsurer, pay or commit the reinsurer to pay a claim,<br>net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer<br>or one percent of the reinsurer's policyholder's surplus as of December thirty-first of<br>the last complete calendar year.5.Collect any payment from a retrocessionaire or commit the reinsurer to any claim<br>settlement with a retrocessionaire, without prior approval of the reinsurer. If prior<br>approval is given, a report must be promptly forwarded to the reinsurer.6.Jointly employ an individual who is employed by the reinsurer unless such<br>reinsurance intermediary-manager is under common control with the reinsurer<br>subject to chapter 26.1-10.7.Appoint a subreinsurance intermediary-manager.26.1-31.1-08.Duties of reinsurers utilizing the services of a reinsuranceintermediary-manager.Page No. 71.A reinsurer may not engage the services of any person, firm, association,<br>corporation,orlimitedliabilitycompanytoactasareinsuranceintermediary-manager on its behalf unless such person, firm, association,<br>corporation, or limited liability company is licensed as required by subsection 2 of<br>section 26.1-31.1-02.2.The reinsurer shall annually obtain a copy of statements of the financial condition of<br>each reinsurance intermediary-manager which the reinsurer has engaged, prepared<br>by an independent certified public accountant, in a form acceptable to the<br>commissioner.3.If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall<br>annually 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>reinsurance intermediary-manager. This opinion must be in addition to any other<br>required loss reserve certification.4.Binding authority for all retrocessional contracts or participation in reinsurance<br>syndicates rests with an officer of the reinsurer who may not be affiliated with the<br>reinsurance intermediary-manager.5.Withinthirtydaysofterminationofacontractwithareinsuranceintermediary-manager, the reinsurer shall provide written notification of its<br>termination to the commissioner.6.A reinsurer may not appoint to its board of directors any officer, director, employee,<br>controlling shareholder, or subproducer of its reinsurance intermediary-manager.<br>This subsection does not apply to relationships governed by chapter 26.1-10.26.1-31.1-09. Examination authority.1.A reinsurance intermediary is subject to examination by the commissioner.Thecommissioner shall have access to all books, bank accounts, and records of the<br>reinsurance intermediary in a form usable to the commissioner.2.A reinsurance intermediary-manager may be examined as if it was the reinsurer.26.1-31.1-10. Penalties and liabilities.1.If the commissioner determines that the reinsurance intermediary 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 five<br>thousand dollars;b.Revocation or suspension of the reinsurance intermediary's license; andc.If it was found that because of the material noncompliance the insurer or<br>reinsurer has suffered any loss or damage, the commissioner may maintain a<br>civil action brought by or on behalf of the reinsurer or insurer and its<br>policyholders and creditors for recovery of compensatory damages for the<br>benefit of the reinsurer or insurer and its policyholders and creditors or seek<br>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>reinsurance intermediary or any other person has not materially complied with thisPage No. 8chapter, 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 may in any manner limit or restrict<br>the rights of policyholders, claimants, creditors, or other third parties.5.The decision, determination, or order of the commissioner pursuant to subsection 1<br>is subject to judicial review pursuant to chapter 28-32.26.1-31.1-11.Rules.The commissioner may adopt reasonable rules for theimplementation and administration of the provisions of this chapter.26.1-31.1-12. Effective date. No insurer or reinsurer may continue to utilize the servicesof a reinsurance intermediary after July 7, 1991, unless utilization is in compliance with this<br>chapter.Page No. 9Document Outlinechapter 26.1-31.1 reinsurance intermediaries]]>