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304.9-725 Minimum contract provisions.
Transactions between a reinsurance intermediary manager and the reinsurer it
represents in such capacity shall only be entered into pursuant to a written contract,
specifying the responsibilities of each party, which shall be approved by the
reinsurer's board of directors. At least thirty (30) days before the reinsurer assumes
or cedes business through such producer, a true copy of the contract approved by
the reinsurer's board of directors shall be filed with the commissioner for approval.
The contract shall, at a minimum, contain provisions that:
(1) The reinsurer may terminate the contract for cause upon written notice to the
reinsurance intermediary manager. The reinsurer may suspend the authority of
the reinsurance intermediary manager to assume or cede business during the
pendency of any dispute regarding the cause for termination;
(2) The reinsurance intermediary manager shall render accounts to the reinsurer
accurately detailing all material transactions, including information necessary to
support all commissions, charges, and other fees received by, or owing to, the
reinsurance intermediary manager, and remit all funds due under the contract
to the reinsurer on not less than a monthly basis;
(3) All funds collected for the reinsurer's account shall be held by the reinsurance
intermediary manager in a fiduciary capacity in a bank which is a qualified
United States financial institution. The reinsurance intermediary manager may
retain no more than three (3) months estimated claims payment and allocated
loss adjustment expenses. The reinsurance intermediary manager shall
maintain a separate bank account for each reinsurer that it represents;
(4) For at least ten (10) years after expiration of each contract of reinsurance
transacted by the reinsurance intermediary manager, the reinsurance
intermediary manager shall keep a complete record for each transaction
showing:
(a) The type of contract, limits, underwriting restrictions, classes or risks, and
territory;
(b) Period of coverage, including effective and expiration dates, cancellation
provisions and notice required for cancellation; and disposition of
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) Rates of all reinsurance commissions, including the commissions on any
retrocessions handled by the reinsurance intermediary manager;
(g) Related correspondence and memoranda;
(h) Proof of placement;
(i) Details regarding retrocessions handled by the reinsurance intermediary
manager, as permitted by KRS 304.9-735(4), including the identity of
retrocessionaires and percentage of each contract assumed or ceded;
(j) Financial records, including, but not limited to, premium and loss
accounts; and
(k) When the reinsurance intermediary manager places a reinsurance
contract on behalf of a ceding insurer:
1.
Directly from any assuming reinsurer, written evidence that the
assuming reinsurer has agreed to assume the risk; and
2.
If placed through a representative of the assuming reinsurer, other
than an employee, written evidence that the reinsurer has delegated
binding authority to the representative;
(5) The reinsurer shall have access to and the right to copy all accounts and
records maintained by the reinsurance intermediary manager related to its
business in a form usable by the reinsurer;
(6) The contract shall not be assigned in whole or in part by the reinsurance
intermediary manager;
(7) The reinsurance intermediary manager shall comply with the written
underwriting and rating standards established by the insurer for the
acceptance, rejection, or cession of all risks;
(8) Set forth the rates, terms, and purposes of commissions, charges, and other
fees which the reinsurance intermediary manager may levy against the
reinsurer;
(9) If the contract permits the reinsurance intermediary manager to settle claims
on behalf of the reinsurer:
(a) All claims shall be reported to the reinsurer in a timely manner;
(b) A copy of the claim file shall be sent to the reinsurer at its request or as
soon as it becomes known that the claim:
1.
Has the potential to exceed the lesser of an amount determined by
the commissioner or the limit set by the reinsurer;
2.
Involves a coverage dispute;
3.
May exceed the reinsurance intermediary manager's claims
settlement authority;
4.
Is open for more than six (6) months; or
5.
Is closed by payment of the lesser of an amount set by the
commissioner or an amount set by the reinsurer;
(c) All claim files shall be the joint property of the reinsurer and the
reinsurance intermediary manager. However, upon an order of liquidation
of the reinsurer, the files shall become the sole property of the reinsurer
or its estate, but the reinsurance intermediary manager shall have
reasonable access to and the right to copy the files; and
(d) Any settlement authority granted to the reinsurance intermediary
manager may be terminated for cause upon the reinsurer's written notice
to the reinsurance intermediary manager or upon the termination of the
contract. The reinsurer may suspend the settlement authority during the
pendency of the dispute regarding the cause of termination;
(10) If the contract provides for a sharing of interim profits by the reinsurance
intermediary manager, that the interim profits shall not be paid until one (1)
year after the end of each underwriting period for property business and five (5)
years after the end of each underwriting period for casualty business, or a later
period set by the commissioner for specified lines of insurance, and not until
(11)
(12)
(13)
(14)
the adequacy of reserves on remaining claims has been verified pursuant to
KRS 304.9-735(3);
The reinsurance intermediary manager shall annually provide the reinsurer
with a statement of its financial condition prepared by an independent certified
accountant;
The reinsurer shall at least semiannually conduct an on-site review of the
underwriting and claims processing operations of the reinsurance intermediary
manager;
The reinsurance intermediary manager shall disclose to the reinsurer any
relationship it has with any insurer prior to ceding or assuming any business
with such reinsurer pursuant to this contract; and
The acts of the reinsurance intermediary manager shall be deemed to be the
acts of the reinsurer on whose behalf it is acting.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1086, effective July 15, 2010. -Created 1992 Ky. Acts ch. 155, sec. 6, effective July 14, 1992.
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