Section 21.27.620. Operating requirements for managing general agents; actions for loss.

   (a) An insurer may not transact business with a managing general agent unless
        (1) the insurer holds a certificate of authority in this state;
        (2) the managing general agent is licensed under this chapter or has filed a certification with the director certifying that the managing general agent is operating only for a foreign insurer and is licensed by its resident insurance regulator in a state that the director has determined has enacted provisions substantially similar to those contained in this chapter and the state is accredited by the National Association of Insurance Commissioners;
        (3) a written contract is in effect between the parties that establishes the responsibilities of each party, indicates both party's share of responsibility for a particular function, and specifies the division of responsibilities;
        (4) a written contract between an insurer and a managing general agent contains the following provisions:
             (A) the insurer may terminate the contract for cause upon written notice sent by certified mail to the managing general agent and may suspend the underwriting authority of the managing general agent during a dispute regarding the cause for termination;
             (B) the managing general agent shall render accounts to the insurer detailing all transactions and remit all money due under the contract to the insurer at least monthly;
             (C) all money collected for the account of an insurer shall be held by the managing general agent as a fiduciary;
             (D) all payments on behalf of the insurer shall be held by the managing general agent as a fiduciary;
             (E) the managing general agent may not retain more than three months' estimated claims payments and allocated loss adjustment expenses;
             (F) the managing general agent shall maintain separate records for each insurer in a form usable by the insurer; the insurer or its authorized representative shall have the right to audit and the right to copy all accounts and records related to the insurer's business; the director, in addition to authority granted in this title, shall have access to all books, bank accounts, and records of the managing general agent in a form usable to the director;
             (G) the contract may not be assigned in whole or in part by the managing general agent;
             (H) if the contract permits the managing general agent to do underwriting, the contract must include the following:
                  (i) the managing general agent's maximum annual premium volume;
                  (ii) the rating system and basis of the rates to be charged;
                  (iii) the types of risks that may be written;
                  (iv) maximum limits of liability;
                  (v) applicable exclusions;
                  (vi) territorial limitations;
                  (vii) policy cancellation provisions;
                  (viii) the maximum policy term; and
                  (ix) that the insurer shall have the right to cancel or not renew a policy of insurance subject to applicable state law;
             (I) if the contract permits the managing general agent to settle claims on behalf of the insurer, the contract must include the following:
                  (i) written settlement authority must be provided by the insurer and may be terminated for cause upon the insurer's written notice sent by certified mail to the managing general agent or upon the termination of the contract, but the insurer may suspend the settlement authority during a dispute regarding the cause of termination;
                  (ii) claims shall be reported to the insurer within 30 days;
                  (iii) a copy of the claim file shall be sent to the insurer upon request or as soon as it becomes known that the claim has the potential to exceed an amount determined by the director or exceeds the limit set by the insurer, whichever is less, involves a coverage dispute, may exceed the managing general agent's claims settlement authority, is open for more than six months, involves extra contractual allegations, or is closed by payment in excess of an amount set by the director or an amount set by the insurer, whichever is less;
                  (iv) each party shall comply with unfair claims settlement statutes and regulations;
                  (v) transmission of electronic data at least monthly if electronic claim files are in existence; and
                  (vi) claim files shall be the property of both the insurer and managing general agent; upon an order of liquidation of the insurer, the files shall become the sole property of the insurer or the insurer's estate; the managing general agent shall have reasonable access to and the right to copy the files on a timely basis;
             (J) if the contract provides for sharing of interim profits by the managing general agent and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves, by controlling claim payments, or in any other manner, interim profits may not be paid to the managing general agent until
                  (i) one year after they are earned for property insurance business and five years after they are earned on casualty business;
                  (ii) a later period established by the director for specified kinds or classes of insurance; and
                  (iii) not until the profits have been verified under (d) of this section;
             (K) the insurer shall provide a copy of the contract to the director within 30 days after entering into a contract with a managing general agent; and
             (L) the insurer shall provide written notification to the director within 30 days of the termination of a contract with a managing general agent.
   (b) The managing general agent may not
        (1) bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance contracts under obligatory agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which automatic agreements are in effect, the coverage and amounts or percentages that may be reinsured, and commission schedules;
        (2) commit the insurer to participate in insurance or reinsurance syndicates;
        (3) appoint a subagent unless the scope of the subagent's license as an insurance producer includes the kinds and classes of insurance for which the subagent is appointed;
        (4) pay or commit the insurer to pay a claim, net of reinsurance, the amount of which exceeds one percent of the insurer's policyholder's surplus as of December 31 of the last completed calendar year without the prior written approval of the insurer for the settlement and the approval is received after the insurer has been notified in writing that the claim settlement will exceed one percent of the insurer's policyholder's surplus as of December 31 of the last completed calendar year;
        (5) collect a payment from a reinsurer or commit the insurer to a claim settlement with a reinsurer without prior written approval of the insurer, but if prior written approval is given, a complete report must be forwarded to the insurer within 30 days;
        (6) permit a subagent to serve on the insurer's board of directors;
        (7) jointly employ an individual who is employed with the insurer; or
        (8) delegate managing general agent authority to another person.
   (c) In a form acceptable to the director, a managing general agent shall annually provide and an insurer shall annually obtain a copy of certified financial statements of each managing general agent with which the insurer has done business. The financial statements shall be prepared by an independent certified public accountant if the managing general agent, with or without authority, either separately or with affiliates, directly or indirectly produces or underwrites an amount of gross written premium equal to or more than five percent of the policy holder's surplus in a quarter or year, as reported in the insurer's last annual statement.
   (d) In addition to any other required loss reserve certification, if a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an independent qualified actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. The insurer retains an independent responsibility to determine the adequacy of its loss reserves, including those established by its managing general agents.
   (e) An insurer shall at least semiannually conduct an on-site review of the underwriting and claims processing operations of the managing general agent if the managing general agent, with or without authority, either separately or with affiliates, directly or indirectly produces or underwrites an amount of gross written premium equal to or more than five percent of the policy holder's surplus in a quarter or year, as reported in the insurer's last annual statement.
   (f) An insurer shall review its books and records quarterly to determine if a person or insurance producer has acted as its managing general agent. If an insurer determines that a person or insurance producer has acted as its managing general agent, the insurer shall promptly notify the person or insurance producer and the director of the determination and the insurer and person or insurance producer must fully comply with the provisions of this chapter within 30 days.
   (g) An insurer may not appoint to its board of directors an officer, director, employee, subagent, insurance producer, or controlling shareholder of its managing general agent.
   (h) The actual or apparently authorized acts of the managing general agent are considered the acts of the insurer upon whose behalf it is acting.
   (i) A managing general agent may be examined by the director as if it were the insurer.
   (j) If the director determines after a hearing under AS 21.06.170 - 21.06.240 that a managing general agent caused loss or damage arising out of a violation of AS 21.27.590 - 21.27.630 to an insurer, the director may order the managing general agent to make restitution to the insurer, receiver, rehabilitator, or liquidator of the insurer for the loss. Restitution ordered under this subsection is in addition to any other liability of the managing general agent and does not affect the rights of a policy holder, claimant, creditor, or third party. The director may, at the request of the insurer, maintain or bring a civil action brought by or on behalf of the insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the insurer and its policyholders and creditors or seek other appropriate relief. If an order of rehabilitation or liquidation of the insurer has been entered under AS 21.78, the receiver appointed under the order determines that a person has not materially complied with AS 21.27.590 - 21.27.630 or an order of the director, and the insurer suffers loss or damage from the noncompliance, the receiver may bring a civil action for the recovery of damages or other appropriate sanctions for the benefit of the insurer.
   (k) In addition to any other penalty provided by law, a person who violates this section is subject to the penalties provided under AS 21.27.440 and an insurer's certificate of authority may be suspended or revoked.
   (l) In this section, "transact" has the meaning given in AS 21.97.900.

Notes

History

(Sec. 94 ch 67 SLA 1992; am Sec. 95 ch 67 SLA 1992; am Sec. 47 ch 62 SLA 1995; am Sec. 51, 52 ch 81 SLA 2001; am Sec. 29 ch 80 SLA 2006)