No person acting in the capacity of a MGA may place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibilities of each party with both parties sharing responsibility for a particular function, specifies the division of responsibilities, and contains the following minimum provisions:
(1) The insurer may terminate the contract for cause upon written notice to the MGA. The insurer may suspend the underwriting authority of the MGA during the pendency of a dispute regarding the cause for termination. If the contract is terminated or the MGA's underwriting authority is suspended, notification must be given by the insurer within thirty days of the action to agents or brokers who have placed business with the MGA within the last twelve months.
(2) The MGA shall render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer within thirty days.
(3) All funds collected for the account of an insurer must be held by the MGA in a fiduciary capacity in a bank which is a member of the Federal Reserve System. This account must be used for all payments on behalf of the insurer. The MGA may retain no more than ninety days estimated claims payments and allocated loss adjustment expenses.
(4) Separate records of business written by the MGA must be maintained. The insurer must have access to and the right to copy all accounts and records related to its business in a form usable by the insurer. The director or his designee must have access to all books, bank accounts, and records of the MGA in a form usable to the director or his designee. The records must be retained according to Section 38-43-250.
(5) The contract must not be assigned in whole or part by the MGA.
(6) Appropriate underwriting guidelines must be included such as:
(a) maximum annual premium volume;
(b) basis of the rates to be charged;
(c) types of risks which may be written;
(d) maximum limits of liability;
(e) applicable exclusions;
(f) territorial limitations;
(g) policy cancellation provisions;
(h) maximum policy period.
(7) The insurer must have the right to cancel or not renew a policy of insurance subject to the applicable laws and regulations.
(8) If the contract permits the MGA to settle claims on behalf of the insurer:
(a) All claims must be reported to the company in a timely manner.
(b) A copy of the claim file must be sent to the insurer at its request or as soon as it becomes known that the claim:
(i) has the potential to exceed five thousand dollars or exceeds the limit set by the company, whichever is less;
(ii) involves a coverage dispute;
(iii) may exceed the MGA's claims settlement authority;
(iv) is open for more than six months; or
(v) is closed by payment of five thousand dollars or an amount set by the company, whichever is less.
(c) All claim files are the joint property of the insurer and the MGA. However, upon an order of liquidation of the insurer the files become the sole property of the insurer or its estate. The MGA must have reasonable access to and the right to copy the files on a timely basis.
(d) Settlement authority granted to the MGA may be terminated for cause upon the insurer's written notice to the MGA or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of a dispute regarding the cause for termination. If a contract is terminated or the MGA's settlement authority is suspended, notification must be given by the insurer within thirty days of the action to agents or brokers who have placed business with the MGA within the last twelve months.
(9) Where electronic claims files are in existence, the contract must address the timely transmission of the data.
(10) If the contract provides for a sharing of interim profits by the MGA and the MGA has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments, or in another manner, interim profits must not be paid to the MGA until one year after they are earned for property insurance business and five years after they are earned on casualty business and not until the profits have been verified pursuant to Section 38-44-50.
(11) The MGA may not:
(a) bind assumed reinsurance or retrocessions on behalf of the insurer, except the MGA may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines, including, for reinsurance assumed and ceded, a list of reinsurers with which the automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules;
(b) commit the insurer to participate in insurance or reinsurance syndicates;
(c) appoint an agent without assuring that the agent is licensed lawfully to transact the type of insurance for which he is appointed;
(d) without prior approval of the insurer, pay or commit the insurer to pay a claim over five thousand dollars, net of reinsurance, or one percent of the insurer's policyholder's surplus as of December 31 of the last completed calendar year, whichever is less;
(e) collect payment from a reinsurer or commit the insurer to a claim settlement with a reinsurer, without prior approval of the insurer. If prior approval is given, a report must be forwarded promptly to the insurer;
(f) permit its agent to serve on the insurer's board of directors;
(g) jointly employ an individual who is employed with the insurer;
(h) appoint a sub-MGA.
HISTORY: 1992 Act No. 363, Section 1; 1993 Act No. 181, Section 668.