§ 27-52-7 - Required contract provisions – Reinsurance intermediary – Managers.
SECTION 27-52-7
§ 27-52-7 Required contract provisions– Reinsurance intermediary – Managers. – Transactions between a RM and the reinsurer it represents in that capacityshall only be entered into pursuant to a written contract, specifying theresponsibilities of each party, which shall be approved by the reinsurer'sboard of directors. At least thirty (30) days before the reinsurer assumes orcedes business through the producer, a true copy of the approved contract shallbe filed with the commissioner for approval. The contract shall, at a minimum,provide that:
(1) The reinsurer may terminate the contract for cause uponwritten notice to the RM. The reinsurer may immediately suspend the authorityof the RM to assume or cede business during the pendency of any disputeregarding the cause for termination;
(2) The RM 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 the RM, andremit all funds due under the contract to the reinsurer on not less than amonthly basis;
(3) All funds collected for the reinsurer's account will beheld by the RM in a fiduciary capacity in a bank that is a qualified U.S.financial institution as defined in this chapter. The RM may retain no morethan three (3) months estimated claims payments and allocated loss adjustmentexpenses. The RM shall maintain a separate bank account for each reinsurer thatit represents;
(4) For at least ten (10) years after the expiration of eachcontract of reinsurance transacted by the RM, the RM will keep a completerecord for each transaction showing:
(i) The type of contract, limits, underwriting restrictions,classes, or risks and territory;
(ii) Period of coverage, including effective and expirationdates, cancellation provisions, and notice required of cancellation, anddisposition of outstanding reserves on covered risks;
(iii) Reporting and settlement requirements of balances;
(iv) Rate used to compute the reinsurance premium;
(v) Names and addresses of reinsurers;
(vi) Rates of all reinsurance commissions, including thecommissions on any retrocessions handled by the RM;
(vii) Related correspondence and memoranda;
(viii) Proof of placement;
(ix) Details regarding retrocessions handled by the RM, asthe provision of this chapter, including the identity of retrocessionaries andpercentage of each contract assumed or ceded;
(x) Financial records including, but not limited to, premiumand loss accounts; and
(xi) When the RM places a reinsurance contract on behalf of aceding insurer:
(A) Directly from any assuming reinsurer, written evidencethat the assuming reinsurer has agreed to assume the risk; or
(B) If placed through a representative of the assumingreinsurer, other than an employee, written evidence that the reinsurer hasdelegated binding authority to the representative;
(5) The reinsurer will have access and the right to copy allaccounts and records maintained by the RM related to its business in a formusable by the reinsurer;
(6) The contract cannot be assigned in whole or in part bythe RM;
(7) The RM will comply with the written underwriting andrating standards established by the insurer for the acceptance, rejection, orcession of all risks;
(8) Sets forth the rates, terms, and purposes of commissions,charges, and other fees that RM may levy against the reinsurer;
(9) If the contract permits the RM to settle claims on behalfof the reinsurer:
(i) All claims will be reported to the reinsurer in a timelymanner;
(ii) A copy of the claim file will be sent to the reinsurerat its request or as soon as it becomes known that the claim:
(A) Has the potential to exceed the lesser of an amountdetermined by the commissioner or the limit set by the reinsurer;
(B) Involves a coverage dispute;
(C) May exceed the RM's claims settlement authority;
(D) Is open for more than six (6) months; or
(E) Is closed by payment of the lesser of an amount set bythe commissioner or an amount set by the reinsurer;
(iii) All claim files will be the joint property of thereinsurer and RM. Upon an order of liquidation of the reinsurer the files shallbecome the sole property of the reinsurer or its estate; the RM shall havereasonable access to and the right to copy the files on a timely basis;
(iv) Any settlement authority granted to the RM may beterminated for cause upon the reinsurer's written notice to the RM or upon thetermination of the contract. The reinsurer may suspend the settlement authorityduring the pendency of the dispute regarding the cause of termination;
(10) If the contract provides for a sharing of interimprofits by the RM, the interim profits will not be paid until one year afterthe end of each underwriting period for property business and five (5) yearsafter the end of each underwriting period for casualty business, or a laterperiod set by the commissioner for specified lines of insurance, and not untilthe adequacy of reserves on remaining claims has been verified pursuant to theprovisions of this chapter;
(11) The RM will annually provide the reinsurer with astatement of its financial condition prepared by an independent certifiedaccountant.
(12) The reinsurer shall periodically, at least semiannually,conduct an onsite review of the underwriting and claims processing operationsof the RM;
(13) The RM will disclose to the reinsurer any relationshipit has with any insurer prior to ceding or assuming any business with theinsurer pursuant to this contract; and
(14) Within the scope of its actual or apparent authority,the acts of the RM are deemed to be the acts of the reinsurer on whose behalfit is acting.