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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;
(5)
(6)
(7)
(8)
(9)
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;
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;
The contract shall not be assigned in whole or in part by the reinsurance
intermediary manager;
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;
Set forth the rates, terms, and purposes of commissions, charges, and other fees
which the reinsurance intermediary manager may levy against the reinsurer;
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 the adequacy of
reserves on remaining claims has been verified pursuant to KRS 304.9-735(3);
(11) The reinsurance intermediary manager shall annually provide the reinsurer with a
statement of its financial condition prepared by an independent certified accountant;
(12) The reinsurer shall at least semiannually conduct an on-site review of the
underwriting and claims processing operations of the reinsurance intermediary
manager;
(13) 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
(14) 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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