Section 21.27.760. Operating requirements for reinsurance intermediary managers; actions for loss.

   (a) A reinsurer may not transact business with a reinsurance intermediary manager unless there is in effect a written contract approved by the reinsurer's board of directors between the parties that establishes the responsibilities of each party, indicates each party's share of responsibility for each particular function, and specifies the division of responsibilities.
   (b) The contract required under (a) of this section must include the following provisions:
        (1) the reinsurer may terminate the contract for cause upon written notice sent by certified mail to the reinsurance intermediary manager and may suspend the underwriting authority of the reinsurance intermediary manager during a dispute regarding the cause for termination;
        (2) the reinsurance intermediary manager shall render accounts to the reinsurer detailing all transactions including information necessary to support all commissions, charges, and other fees received by or owing to the reinsurance intermediary manager and remit all money due under the contract to the insurer at least monthly;
        (3) money collected for the account of a reinsurer shall be held by the reinsurance intermediary manager as a fiduciary;
        (4) the reinsurance intermediary manager shall maintain a separate bank account for each reinsurer that it represents;
        (5) all payments on behalf of the reinsurer shall be held by the reinsurance intermediary manager as a fiduciary;
        (6) the reinsurance intermediary manager may retain not more than three months estimated claims payments and allocated loss adjustment expenses;
        (7) the reinsurance intermediary manager shall maintain separate accounts and records for each reinsurer and maintain the records in a form usable by the reinsurer; the reinsurer or its authorized representative shall have access and the right to audit and the right to copy all accounts and records related to the reinsurer's business; the director, in addition to the other authority granted in this title, shall have access to all books, bank accounts, and records of the reinsurance intermediary manager in a form usable to the director;
        (8) the contract may not be assigned in whole or in part by the reinsurance intermediary manager;
        (9) the reinsurer shall establish written underwriting and rating standards for the acceptance, rejection, or cession of all risks and the reinsurance intermediary manager shall comply with the standards;
        (10) compensation including rates, terms, purposes of commissions, charges, and other fees that the reinsurance intermediary manager may levy against the reinsurer;
        (11) if the contract permits the reinsurance intermediary manager to settle claims on behalf of the reinsurer,
             (A) written settlement authority must be provided by the reinsurer and may be terminated for cause upon the insurer's written notice by certified mail to the reinsurance intermediary manager or upon the termination of the contract; the reinsurer may suspend the settlement authority during a dispute regarding the cause of termination;
             (B) claims shall be reported to the reinsurer within 30 days;
             (C) a copy of the claim file shall be sent to the reinsurer upon request or as soon as it becomes known that the claim
                  (i) has the potential to exceed an amount determined by the director or exceeds the limit set by the insurer, whichever is less;
                  (ii) involves a coverage dispute;
                  (iii) may exceed the reinsurance intermediary manager's claims settlement authority;
                  (iv) is open for more than six months;
                  (v) involves extra contractual allegations; or
                  (vi) is closed by payment in excess of an amount set by the director or an amount set by the insurer, whichever is less;
             (D) the reinsurance intermediary manager shall comply with unfair claims settlement statutes and regulations;
             (E) transmission of electronic data at least once a month if electronic claims files are in existence;
             (F) claim files shall be the property of both the reinsurer and reinsurance intermediary manager, but upon an order of liquidation of the reinsurer, the files shall become the sole property of the reinsurer or the reinsurer's estate; the reinsurance intermediary manager shall have reasonable access to and the right to copy the files on a timely basis;
        (12) if the contract provides for sharing of interim profits by the reinsurance intermediary manager, the interim profits may not be paid until
             (A) one calendar year after the end of each underwriting period for property risks and five years after the end of each underwriting period for casualty risks;
             (B) a later period established by the director for specified kinds or classes of insurance; and
             (C) the profits have been verified under (e)(2) of this section;
        (13) the reinsurance intermediary manager may not
             (A) cede retrocessions on behalf of the reinsurer, except that the reinsurance intermediary manager may cede facultative retrocessions under obligatory agreements if the contract with the reinsurer contains reinsurance underwriting guidelines including a list of reinsurers with which automatic agreements are in effect, and, for each reinsurer, the coverage and amounts or percentages that may be reinsured, and commission schedules;
             (B) commit the reinsurer to participate in reinsurance syndicates;
             (C) 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;
             (D) pay or commit the reinsurer to pay a claim, net of retrocessions, the amount of which exceeds one percent of the reinsurer's policyholder's surplus as of December 31 of the last completed calendar year without the prior written approval of the reinsurer for the settlement and the approval is received after the reinsurer has been notified in writing that the claim settlement will exceed one percent of the reinsurer's policyholder's surplus as of December 31 of the last completed calendar year;
             (E) collect payment from a retrocessionaire or commit the reinsurer to a claim settlement with a retrocessionaire without prior written approval of the reinsurer, but if prior written approval is given, a complete report shall be forwarded to the reinsurer within 30 days;
             (F) jointly employ an individual who is employed with the reinsurer; or
             (G) delegate reinsurance intermediary manager authority to another person;
        (14) if the insurer is domiciled in this state or the reinsurance intermediary manager has a place of business in this state, a copy of the contract must be filed with and approved by the director at least 30 days before the reinsurance intermediary manager transacts business on behalf of the reinsurer; if the reinsurer is not domiciled in this state or the reinsurance intermediary manager transacts business relative to a subject resident, located, or to be performed in this state from a place of business not physically located in this state, a copy of the contract required in this section must be filed with and approved by the director at least 30 days before the reinsurance intermediary manager transacts business on behalf of the insurer in this state or relative to a subject resident, located, or to be performed in this state if the insurer or the reinsurance intermediary manager are domiciled in a state not accredited by the National Association of Insurance Commissioners; and
        (15) if the contract is not required to be approved in advance by the director, the insurer shall provide written notification to the director within 30 days of the entry into or termination of a contract with a reinsurance intermediary manager; the notice must include a statement of duties to be performed by the reinsurance intermediary manager on behalf of the reinsurer, the kinds and classes of insurance for which the reinsurance intermediary manager has authorization to act, and other information required by the director.
   (c) Binding authority for all retrocession contracts or participation in reinsurance syndicates may only rest with an officer of the reinsurer who is not affiliated with a reinsurance intermediary manager.
   (d) In a form acceptable to the director, a reinsurance intermediary manager shall annually provide and a reinsurer shall annually obtain a copy of certified financial statements of each reinsurance intermediary manager that the reinsurer has used, prepared by an independent certified public accountant.
   (e) The reinsurer shall
        (1) at least semiannually conduct an on-site review of the underwriting and claims processing operations of each reinsurance intermediary manager;
        (2) in addition to any other required loss reserve certification, 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 reinsurance intermediary manager if a reinsurance intermediary manager establishes loss reserves; the reinsurer retains an independent responsibility to determine the adequacy of its loss reserves, including those established by its reinsurance intermediary manager; and
        (3) provide written notification to the director by certified mail within 30 days of the termination of a contract with a reinsurance intermediary manager.
   (f) The reinsurance intermediary manager shall disclose to the reinsurer a relationship with an insurer before ceding or assuming risks with the insurer under the contract.
   (g) A reinsurer may not appoint to its board of directors an officer, director, employee, subagent, insurance producer, or controlling shareholder of its reinsurance intermediary manager.
   (h) Within the scope of the actual or apparent authority, the acts of the reinsurance intermediary manager are considered the acts of the reinsurer upon whose behalf it is acting.
   (i) A reinsurance intermediary manager 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 reinsurance intermediary manager caused losses or damage arising out of a violation of AS 21.27.730 - 21.27.770 to an insurer or reinsurer, the director may order the reinsurance intermediary manager to make restitution to the insurer, reinsurer, receiver, rehabilitator, or liquidator of the insurer or reinsurer for the net losses incurred by the insurer or reinsurer. Restitution ordered under this subsection is in addition to any other liability of the reinsurance intermediary manager and does not affect the rights of a policyholder, 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 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. 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 21.27.730 - 21.27.770 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 or reinsurer'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. 96 ch 67 SLA 1992; am Sec. 50 ch 62 SLA 1995; am Sec. 59, 60 ch 81 SLA 2001)