PocketLaw | Illinois Compiled Statutes | Reinsurance Intermediary Act.

Reinsurance Intermediary Act.

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(215 ILCS 100/1) (from Ch. 73, par. 1601)

Sec. 1. Short title. This Act may be cited as the Reinsurance Intermediary Act.

(Source: P.A. 87-108.)

(215 ILCS 100/5) (from Ch. 73, par. 1605)

Sec. 5. Definitions.

"Actuary" means a person who is a member in good standing of the American Academy of Actuaries.

"Controlling person" means any person, firm, association, or corporation that directly or indirectly has the power to direct or cause to be directed the management, control, or activities of the reinsurance intermediary.

"Director" means the Director of the Department of Insurance.

"Insurer" means any person, firm, association, or corporation duly licensed in this State under the applicable provisions of law as an insurer.

"Licensed producer" means an agent, broker, or reinsurance intermediary licensed under the applicable provision of the insurance law.

"Reinsurance intermediary" means an intermediary broker or a manager.

"Intermediary broker" means any person, other than an officer or employee of the ceding insurer, firm, association, or corporation, who solicits, negotiates, or places reinsurance cessions or retrocessions on behalf of a ceding insurer without the authority or power to bind reinsurance on behalf of the insurer.

"Intermediary manager" means any person, firm, association, or corporation that has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer (including the management of a separate division, department, or underwriting office) and acts as an agent for the reinsurer. However, the following persons shall not be considered an intermediary manager, with respect to the reinsurer, for the purposes of this Act:

(1) An employee of the reinsurer.
(2) A U.S. Manager of the United States branch of an alien reinsurer.
(3) An underwriting manager that, under a contract, manages all the reinsurance operations of the reinsurer, is under common control with the reinsurer, subject to Article VIII 1/2 of the Illinois Insurance Code, and whose compensation is not based on the volume of premiums written.
(4) The manager of a group, association, pool, or organization of insurers that engage in joint underwriting or joint reinsurance and who are subject to examinations by the insurance regulatory authority of the state in which the manager's principal business office is located.

"Reinsurer" means any person, firm, association, or corporation duly licensed in this State under the applicable provisions of law as an insurer with the authority to assume reinsurance.

"To be in violation" means that the reinsurance intermediary, insurer, or reinsurer for whom the reinsurance intermediary was acting failed to substantially comply with the provisions of this Act.

"Qualified United States financial institution" means an institution that:

(1) is organized or (in the case of a U.S. office of a foreign banking organization) licensed under the laws of the United States or any state thereof;
(2) is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies; and
(3) has been determined by either the Director or the Securities Valuation Office of the National Association of Insurance Commissioners to meet the standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the Director.

(Source: P.A. 87-108.)

(215 ILCS 100/10) (from Ch. 73, par. 1610)

Sec. 10. Licensure.

(a) No person, firm, association, or corporation that maintains an office, officer, director, agent, or employee, directly or indirectly, in this State shall act as an intermediary broker unless licensed as an insurance producer in this State. No person, firm, association, or corporation that does not maintain an office, officer, director, agent, or employee in this State shall act as an intermediary broker in this State unless licensed as an insurance producer in this State, unless licensed as an insurance producer in another state that has a law substantially similar to this law, or unless licensed in this State as a nonresident reinsurance intermediary.

(b) No person, firm, association, or corporation shall act as an intermediary manager, except in compliance with this subsection, as follows:

(1) For a reinsurer domiciled in this State, unless the intermediary manager is a licensed producer in this State.
(2) In this State, if the intermediary manager maintains an office, either directly or as a member or employee of a firm or association, or an officer, director, or employee of a corporation, in this State, unless the intermediary manager is a licensed producer in this State.
(3) In another state for a nondomestic insurer, unless the intermediary manager is a licensed producer in this State or another state having a law substantially similar to this law or the person is licensed in this State as a nonresident reinsurance intermediary.

(1) file a bond in an amount and from an insurer acceptable to the Director for the protection of the reinsurer; and
(2) maintain an errors and omissions policy in an amount acceptable to the Director.

(d) The Director may issue a reinsurance intermediary license to any person, firm, association, or corporation that has complied with the requirements of this Act. Any license issued to a firm or association will authorize all the members of the firm or association and any designated employees to act as reinsurance intermediaries under the license. All of those persons shall be named in the application and any supplements thereto. Any license issued to a corporation shall authorize all of the officers and any designated employees and directors thereof to act as reinsurance intermediaries on behalf of the corporation, and all of those persons shall be named in the application and any supplements thereto.

If the applicant for a reinsurance intermediary license is a nonresident, the applicant, as a condition precedent to receiving or holding a license, shall designate the Director as agent for service of process in the manner, and with the same legal effect, provided in the Illinois Insurance Code for designation of service of process upon unauthorized insurers. The applicant shall also furnish the Director with the name and address of a resident of this State upon whom notices or orders of the Director or process affecting the nonresident reinsurance intermediary may be served. The licensee shall promptly notify the Director in writing of every change in its designated agent for service of process. The change shall not become effective until acknowledged by the Director.

(e) The Director may refuse to issue a reinsurance intermediary license if, in his judgment, the applicant, any one named on the application or any member, principal, officer, or director of the applicant is not trustworthy; or that any controlling person of the applicant is not trustworthy to act as a reinsurance intermediary; or any of the foregoing has given cause for revocation or suspension of that kind of license or has failed to comply with any prerequisite for the issuance of the license. Upon written request therefor, the Director will furnish a summary of the basis for refusal to issue a license, which document shall be privileged and not subject to the Freedom of Information Act.

(f) Licensed attorneys at law of this State, when acting in their professional capacity as an attorney, shall be exempt from this Section.

(g) All licenses issued under this Act shall terminate 24 months following the date of issuance and may be renewed by providing to the Director satisfactory evidence that the reinsurance intermediary continues to meet the requirements of this Section and upon payment of the fees specified in Section 408 of the Illinois Insurance Code.

(Source: P.A. 100-201, eff. 8-18-17.)

(215 ILCS 100/15) (from Ch. 73, par. 1615)

Sec. 15. Required contract provisions; reinsurance intermediary brokers. Transactions between an intermediary broker and the insurer it represents in that capacity shall be entered into only under a written contract, specifying the responsibilities of each party. The contract shall, at a minimum, contain provisions that:

(1) The insurer may terminate the intermediary broker's authority at any time.
(2) The intermediary broker will render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to, the intermediary broker and remit all funds due to the insurer within 30 days of receipt.
(3) All funds collected for the insurer's account will be held by the intermediary broker in a fiduciary capacity in a bank that is a qualified U.S. financial institution as defined in this Act.
(4) The intermediary broker will comply with Section 20 of this Act.
(5) The intermediary broker will comply with the written standards established by the insurer for the cession or retrocession of all risks.
(6) The intermediary broker will disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.

(Source: P.A. 87-108.)

(215 ILCS 100/20) (from Ch. 73, par. 1620)

Sec. 20. Books and records; reinsurance intermediary brokers.

(a) For at least 10 years after expiration of each contract of reinsurance transacted by it, the intermediary broker shall keep a complete record for each transaction showing:

(1) The type of contract, limits, underwriting restrictions, classes or risks, and territory.
(2) Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellations.
(3) Reporting and settlement requirements of balances.
(4) Rate used to compute the reinsurance premium.
(5) Names and addresses of assuming reinsurers.
(6) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the intermediary broker.
(7) Related correspondence and memoranda.
(8) Proof of placement.
(9) Details regarding retrocessions handled by the intermediary broker including the identity of retrocessionaires and percentage of each contract assumed or ceded.
(10) Financial records including, but not limited to, premium and loss accounts.
(11) When an intermediary broker procures a reinsurance contract on behalf of a licensed ceding insurer:

(A) directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk;
(B) 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.

(b) The insurer shall have access and the right to copy and audit all accounts and records maintained by the intermediary broker related to its business in a form usable by the insurer.

(Source: P.A. 98-756, eff. 7-16-14.)

(215 ILCS 100/25) (from Ch. 73, par. 1625)

Sec. 25. Duties of insurers utilizing the services of a reinsurance intermediary broker.

(a) An insurer shall not engage the services of any person, firm, association, or corporation to act as an intermediary broker on its behalf unless the person is licensed as required by Section 10 of this Act.

(b) An insurer may not employ an individual who is employed by an intermediary broker with which it transacts business, unless the intermediary broker is under common control with the insurer and subject to the Holding Company Act.

(c) The insurer shall annually obtain a copy of statements of the financial condition of each intermediary broker with which it transacts business.

(Source: P.A. 87-108.)

(215 ILCS 100/30) (from Ch. 73, par. 1630)

Sec. 30. Required contract provisions; reinsurance intermediary managers. Transactions between an intermediary manager and the reinsurer it represents in that capacity shall only be entered into under a written contract specifying the responsibilities of each party that shall be approved by the reinsurer's board of directors. At least 30 days before the reinsurer assumes or cedes business through the producer, a true copy of the approved contracts shall be filed with the Director 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 intermediary manager. The reinsurer may immediately suspend the authority of the intermediary manager to assume or cede business during the pendency of any dispute regarding the cause for termination.
(2) The intermediary manager will 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 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 will be held by the intermediary manager in a fiduciary capacity in a bank that is a qualified U.S. financial institution as defined in this Act. The intermediary manager may retain no more than 3 months estimated claims payments and allocated loss adjustment expenses. The intermediary manager shall maintain a separate bank account for each reinsurer that it represents.
(4) The contract cannot be assigned in whole or in part by the intermediary manager.
(5) The intermediary manager will comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks.
(6) Sets forth the rates, terms, and purposes of commissions, charges, and other fees that the intermediary manager may levy against the reinsurer.
(7) If the contract permits the intermediary manager to settle claims 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 or as soon as it becomes known that the claim:

(i) has the potential to exceed the lesser of an amount determined by the Director or the limit set by the reinsurer;
(ii) involves a coverage dispute;
(iii) may exceed the intermediary manager's claims settlement authority;
(iv) is open for more than 6 months; or
(v) is closed by payment of the lesser of an amount set by the Director or an amount set by the reinsurer.

(C) All claim files will be the joint property of the reinsurer and intermediary manager. However, upon an order of liquidation of the reinsurer the files shall become the sole property of the reinsurer or its estate; the intermediary manager shall have reasonable access to and the right to copy the files on a timely basis.
(D) Any settlement authority granted to the intermediary manager may be terminated for cause upon the reinsurer's written notice to the 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.

(8) If the contract provides for a sharing of interim profits by the intermediary manager, that the interim profits will not be paid until one year after the end of each underwriting period for property business and 5 years after the end of each underwriting period for casualty business (or a later period set by the Director for specified lines of insurance) and not until the adequacy of reserves on remaining claims has been verified according to subsection (c) of Section 45.
(9) The intermediary manager will annually provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant.
(10) The reinsurer shall periodically (at least semiannually) conduct an on-site review of the underwriting and claims processing operations of the intermediary manager.
(11) The intermediary manager will disclose to the reinsurer any relationship it has with any insurer before ceding or assuming any business with that insurer under contract.
(12) Within the scope of its actual or apparent authority, the acts of the intermediary manager shall be deemed to be the acts of the reinsurer on whose behalf it is acting.

(Source: P.A. 87-108.)

(215 ILCS 100/35) (from Ch. 73, par. 1635)

Sec. 35. Books and records; reinsurance intermediary managers.

(a) For at least 10 years after expiration of each contract of reinsurance transacted by it, the intermediary manager shall keep a complete record for each transaction showing:

(1) The type of contract, limits, underwriting restrictions, classes or risks, and territory.
(2) Period of coverage, including effective and expiration dates, cancellation provisions and notice required of cancellation, and disposition of outstanding reserves on covered risks.
(3) Reporting and settlement requirements of balances.
(4) Rate used to compute the reinsurance premium.
(5) Names and addresses of reinsurers.
(6) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the intermediary manager.
(7) Related correspondence and memoranda.
(8) Proof of placement.
(9) Details regarding retrocessions handled by the intermediary manager as permitted by subsection (d) of Section 45, including the identity of retrocessionaires and percentage of each contract assumed or ceded.
(10) Financial records including, but not limited to, premium and loss accounts.
(11) When the intermediary manager places a reinsurance contract on behalf of a ceding insurer:

(A) directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk;
(B) 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.

(b) The reinsurer will have access and the right to copy all accounts and records maintained by the intermediary manager related to its business in a form usable by the reinsurer.

(Source: P.A. 87-108.)

(215 ILCS 100/40) (from Ch. 73, par. 1640)

Sec. 40. Prohibited acts. An intermediary manager shall not:

(1) Cede retrocessions on behalf of the reinsurer, except that it may cede facultative retrocessions pursuant to obligatory facultative agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for those retrocessions. The guidelines shall include a list of reinsurers with which automatic agreements are in effect, and for each reinsurer, the coverages and amounts or percentages that may be reinsured and commission schedules.
(2) Commit the reinsurer to participate in reinsurance syndicates.
(3) Appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which he is appointed.
(4) Without prior approval of the reinsurer, pay or commit the reinsurer to pay a claim, net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer or 1% of the reinsurer's policyholder's surplus as of December 31 of the last complete calendar year.
(5) Collect any payment from a retrocessionaire or commit the reinsurer to any claim settlement with a retrocessionaire without prior approval of the reinsurer. If prior approval is given, a report must be promptly forwarded to the reinsurer.
(6) Jointly employ an individual who is employed by the reinsurer unless the intermediary manager is under common control with the reinsurer subject to Article VIII 1/2 of the Illinois Insurance Code.
(7) Appoint an intermediary sub-manager.

(Source: P.A. 87-108.)

(215 ILCS 100/45) (from Ch. 73, par. 1645)

Sec. 45. Duties of reinsurers utilizing the services of a reinsurance intermediary manager.

(a) A reinsurer shall not engage the services of any person, firm, association, or corporation to act as an intermediary manager on its behalf unless the person is licensed as required by Section 10.

(b) The reinsurer shall annually obtain a copy of statements, audited by an independent certified public accountant in a form acceptable to the Director, of the financial condition of each intermediary manager that the reinsurer has contracted.

(c) If an intermediary manager establishes loss reserves, the reinsurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the intermediary manager. This opinion shall be in addition to any other required loss reserve certification.

(d) Binding authority for all retrocessional contracts or participation in reinsurance syndicates shall rest with an officer of the reinsurer who shall not be affiliated with the intermediary manager.

(e) Within 30 days of termination of a contract with an intermediary manager, the reinsurer shall provide written notification of termination to the Director.

(f) A reinsurer shall not appoint to its board of directors, any officer, director, employee, controlling shareholder, or subproducer of its intermediary manager. This subsection shall not apply to relationships governed by the Holding Company Act.

(Source: P.A. 98-756, eff. 7-16-14.)

(215 ILCS 100/50) (from Ch. 73, par. 1650)

Sec. 50. Examination authority.

(a) A reinsurance intermediary shall be subject to examination by the Director. The Director shall have access to all books, bank accounts, and records of the reinsurance intermediary in a form usable to the Director.

(b) An intermediary manager may be examined as if it were the reinsurer.

(Source: P.A. 87-108.)

(215 ILCS 100/55) (from Ch. 73, par. 1655)

Sec. 55. Penalties and liabilities.

(a) If the Director determines that a reinsurance intermediary has not materially complied with this Act or any regulation or Order promulgated hereunder, after notice and opportunity to be heard, the Director may order a penalty in an amount not exceeding $100,000 for each separate violation and may order the revocation or suspension of the reinsurance intermediary's license. If it is found that because of the material noncompliance the insurer or reinsurer has suffered any loss or damage, the Director may maintain a civil action brought by or on behalf of the reinsurer or insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the reinsurer or insurer and its policyholders and creditors or seek other appropriate relief.

This subsection (a) shall not be construed to prevent any other person from taking civil action against a reinsurance intermediary.

(b) If an Order of Rehabilitation or Liquidation of the insurer is entered under Article XIII of the Illinois Insurance Code and the receiver appointed under that Order determines that the reinsurance intermediary or any other person has not materially complied with this Act or any regulation or Order promulgated hereunder and the insurer has suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer.

(c) The decision, determination, or order of the Director under subsection (a) of this Section shall be subject to judicial review under the Administrative Review Law.

(d) Nothing contained in this Act shall affect the right of the Director to impose any other penalties provided in the Illinois Insurance Code.

(e) Nothing contained in this Act is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, creditors, or other third parties or confer any rights to those persons.

(Source: P.A. 93-32, eff. 7-1-03.)

(215 ILCS 100/60) (from Ch. 73, par. 1660)

Sec. 60. Rules and regulations. The Director may adopt reasonable rules and regulations for the implementation and administration of the provisions of this Act.

(Source: P.A. 87-108.)

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