2006 Code of Virginia § 38.2-1352 - Required contract provisions; reinsurance intermediary managers

38.2-1352. Required contract provisions; reinsurance intermediary managers.

Transactions between a reinsurance intermediary manager and the reinsurer itrepresents in such capacity shall only be entered into pursuant to a writtencontract, specifying the responsibilities of each party, which shall beapproved by the reinsurer's board of directors. At least thirty calendar daysbefore such reinsurer assumes or cedes business through such reinsuranceintermediary manager, a true copy of the approved contract shall be filedwith the Commission for approval. The contract shall, at a minimum, providethat:

1. The reinsurer may terminate the contract for cause upon written notice tothe reinsurance intermediary manager. The reinsurer may immediately suspendthe authority of the reinsurance intermediary manager to assume or cedebusiness during the pendency of any dispute regarding the cause fortermination.

2. The reinsurance intermediary manager will render timely accounts to thereinsurer accurately detailing all material transactions, includinginformation necessary to support all commissions, charges and other feesreceived by, or owing to the reinsurance intermediary manager, and remit allfunds due under the contract to the reinsurer on not less than a monthlybasis.

3. All funds collected for the reinsurer's account will be held by thereinsurance intermediary manager in a fiduciary capacity in a bank that is aqualified United States financial institution as defined in 38.2-1347. Thereinsurance intermediary manager may retain no more than three months'estimated claims payments and allocated loss adjustment expenses. Thereinsurance intermediary manager shall maintain a separate bank account foreach reinsurer that it represents.

4. For at least ten years after expiration of each contract of reinsurancetransacted by the reinsurance intermediary manager, the reinsuranceintermediary manager will keep a complete record for each transaction showing:

a. The type of contract, limits, underwriting restrictions, classes or risksand territory;

b. Period of coverage, including effective and expiration dates, cancellationprovisions and notice required of cancellation, and disposition ofoutstanding reserves on covered risks;

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 anyretrocessions handled by the reinsurance manager;

g. Related correspondence and memoranda;

h. Proof of placement;

i. Details regarding retrocessions handled by the reinsurance intermediarymanager, as permitted by subsection D of 38.2-1354, including the identityof retrocessionaires and percentage of each contract assumed or ceded;

j. Financial records, including but not limited to, premium and lossaccounts; and

k. When the reinsurance intermediary manager places a reinsurance contract onbehalf of a ceding insurer:

(1) Directly from any assuming reinsurer, written evidence that the assumingreinsurer has agreed to assume the risk; or

(2) If placed through a representative of the assuming reinsurer, other thanan employee, written evidence that such reinsurer has delegated bindingauthority to the representative.

5. The reinsurer will have reasonable access to and the right to copy allaccounts and records maintained by the reinsurance intermediary managerrelated to its business in a form usable by the reinsurer.

6. The contract cannot be assigned in whole or in part by the reinsuranceintermediary manager.

7. The reinsurance intermediary manager will comply with the writtenunderwriting and rating standards established by the insurer for theacceptance, rejection or cession of all risks.

8. Sets forth the rates, terms and purposes of commissions, charges and otherfees that the reinsurance intermediary manager may levy against the reinsurer.

9. If the contract permits the reinsurance intermediary manager to settleclaims on 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 oras soon as it becomes known that the claim:

(1) Has the potential to exceed one percent of the insurer's surplus topolicyholders as of December 31 of the last completed calendar year, anamount set by the reinsurer, or any other amount deemed appropriate by theCommission, whichever is less;

(2) Involves a coverage dispute;

(3) May exceed the reinsurance intermediary manager's claims settlementauthority;

(4) Is open for more than six months; or

(5) Is closed by payment of an amount exceeding one percent of the insurer'ssurplus to policyholders as of December 31 of the last completed calendaryear, an amount set by the reinsurer, or any other amount deemed appropriateby the Commission, whichever is less;

c. All claim files will be the joint property of the reinsurer andreinsurance intermediary manager. However, upon entry of order of liquidationor the appointment of a receiver for the liquidation of the reinsurer, suchfiles shall become the sole property of the reinsurer or its estate; thereinsurance intermediary manager shall have reasonable access to and theright to copy the files on a timely basis;

d. Any settlement authority granted to the reinsurance intermediary managermay be terminated for cause upon the reinsurer's written notice to thereinsurance intermediary manager or upon the termination of the contract. Thereinsurer may suspend the settlement authority during the pendency of thedispute regarding the cause of termination.

10. Where electronic claims files are in existence, the contract must addressthe timely transmission of the data.

11. If the contract provides for a sharing of interim profits by thereinsurance intermediary manager, such interim profits will not be paid untilone year after the end of each underwriting period for property business andfive years after the end of each underwriting period for casualty business,or a later period set by the Commission for specified lines of insurance, andnot until the adequacy of reserves on remaining claims has been verifiedpursuant to subsection C of 38.2-1354.

12. The reinsurance intermediary manager will annually provide the reinsurerwith a current financial statement prepared by an independent certifiedaccountant in a form acceptable to the Commission.

13. The reinsurer shall, at least semiannually, conduct an on-site review ofthe underwriting and claims processing operations of the reinsuranceintermediary manager.

14. The reinsurance intermediary manager will disclose to the reinsurer anyrelationship it has with any insurer prior to negotiating any business withsuch insurer pursuant to this contract.

15. Within the scope of its actual or apparent authority, the acts of thereinsurance intermediary manager shall be deemed to be the acts of thereinsurer on whose behalf it is acting.

(2001, c. 706.)