2009 Iowa Code
Title 13 - Commerce
Subtitle 1 - Insurance and Related Regulation
CHAPTER 510A - BUSINESS PRODUCER CONTROLLED PROPERTY AND CASUALTY INSURERS
510A.4 - MINIMUM STANDARDS.

        510A.4  MINIMUM STANDARDS.
         1.  Applicability of section.
         a.  This section applies if, in any calendar year, the
      aggregate amount of gross written premium on business placed with a
      controlled insurer by a controlling producer is equal to or greater
      than five percent of the admitted assets of the controlled insurer,
      as reported in the controlled insurer's quarterly statement filed as
      of September 30 of the preceding year.
         b.  Notwithstanding paragraph "a", this section does not
      apply if both of the following apply:
         (1)  The controlling producer does all of the following:
         (a)  Places insurance only with the controlled insurer, or only
      with the controlled insurer and 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.
         (b)  Accepts insurance placements only from nonaffiliated
      subproducers and not directly from insureds.
         (2)  The controlled insurer, except for insurance business written
      through a residual market facility, accepts insurance business only
      from the controlling producer, an insurance producer controlled by
      the controlled insurer, or an insurance producer that is a subsidiary
      of the controlled insurer.
         2.  Required contract provisions.  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 has been approved by the board of directors of the controlled
      insurer and filed with the commissioner.  The contract must contain,
      at a minimum, the following provisions:
         a.  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.
         b.  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.
         c.  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 no later than
      ninety days after the effective date of any policy placed with the
      controlled insurer under this contract.
         d.  All funds collected for the controlled insurer's account
      shall be held by the controlling producer in a fiduciary capacity, in
      one 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 this state shall
      be maintained in compliance with the requirements of the controlling
      producer's domiciliary jurisdiction.
         e.  The controlling producer shall maintain separately
      identifiable records of business written for the controlled insurer.

         f.  The contract shall not be assigned in whole or in part by
      the controlling producer.
         g.  The controlled insurer shall provide the controlling
      producer with its 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 an insurance producer other than the
      controlling producer.
         h.  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 paragraph and paragraph
      "g" of this subsection, "comparable business" includes the
      same lines of insurance, same kinds of insurance, same kinds of
      risks, similar policy limits, and similar quality of business.
         i.  If the contract provides that the controlling producer, on
      insurance business placed with the controlled 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 years after the premiums on liability insurance are earned
      and at least one year after the premiums are earned on any other
      insurance.  In no event shall the commissions be paid until the
      adequacy of the controlled insurer's reserves on remaining claims has
      been independently verified pursuant to subsection 4, paragraph
      "a".
         j.  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 subline 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 which would exceed the limit.  The controlling
      producer shall not place business with the controlled insurer if it
      has been notified by the controlled insurer that the limit has been
      reached.
         k.  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
      pursuant to 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.
         3.  Audit committee.  A controlled insurer must establish an
      audit committee of the board of directors composed of independent
      directors.  Prior to approval of the annual financial statement, the
      audit committee shall 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.

         4.  Reporting requirements.
         a.  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 another 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 on
      business placed by the insurance producer, including incurred but not
      reported losses.
         b.  The controlled insurer shall annually report to the
      commissioner the amount of commissions paid to the insurance
      producer, the percentage such amount represents of the net premiums
      written, and comparable amounts and percentage paid to noncontrolling
      producers for placements of the same kinds of insurance.  

         91 Acts, ch 26, § 13; 91 Acts, ch 213, § 9; 92 Acts, ch 1117, §
      38; 2003 Acts, ch 91, §16--18; 2004 Acts, ch 1101, §72