§ 58-9-16. Manager and reinsurer transactions. - North Carolina Statutes

§58‑9‑16.  Manager and reinsurer transactions.

(a)        Transactionsbetween a manager and the reinsurer it represents as a manager shall only beentered into pursuant to a written contract, specifying the responsibilities ofeach party, which shall be approved by the reinsurer's board of directors.  Atleast 30 days before the reinsurer assumes or cedes business through themanager, a certified copy of the approved contract shall be filed with theCommissioner for approval.  The contract shall include provisions to the effectthat:

(1)        The reinsurer mayterminate the contract for cause upon written notice to the manager.  Thereinsurer may immediately suspend the authority of the manager to assume orcede business during the pendency of any dispute regarding the cause fortermination.

(2)        The manager willrender accounts to the reinsurer accurately detailing all materialtransactions, including information necessary to support all commissions,charges, and other fees received by or owing to the manager and will remit allfunds due under the contract to the reinsurer at least once every month.

(3)        All funds collectedfor the reinsurer's account will be held by the manager in a fiduciary capacityin a qualified United States financial institution.  The manager may retain nomore than three months' estimated claims payments and allocated loss adjustmentexpenses.  The manager shall maintain a separate bank account for eachreinsurer that it represents.

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

a.         The type ofcontract, limits, underwriting restrictions, classes or risks, and territory;

b.         Period of coverage,including effective and expiration dates, cancellation provisions and noticerequired of cancellation, and disposition of outstanding reserves on coveredrisk;

c.         Reporting andsettlement requirements of balances;

d.         Rate used to computethe reinsurance premium;

e.         Names and addressesof reinsurers;

f.          Rates of allreinsurance commissions, including the commissions on any retrocessions handledby the manager;

g.         Relatedcorrespondence and memoranda;

h.         Proof of placement;

i.          Details regardingretrocessions handled by the manager, as permitted by G.S. 58‑9‑21,including the identity of retrocessionaires and percentage of each contractassumed or ceded;

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

k.         When the managerplaces a reinsurance contract on behalf of a ceding insurer:

1.         Directly from anyassuming reinsurer, written evidence that the assuming reinsurer has agreed toassume the risk; or

2.         If placed through arepresentative of the assuming reinsurer, other than an employee, writtenevidence that the reinsurer has delegated binding authority to therepresentative.

(5)        The reinsurer willhave access and the right to copy all accounts and records maintained by themanager related to its business in a form usable by the reinsurer.

(6)        The contract cannotbe assigned in whole or in part by the manager.

(7)        The manager willcomply with the written underwriting and rating standards established by theinsurer for the acceptance, rejection, or cession of all risks.

(8)        The rates, terms,and purposes of commissions, charges, and other fees that the manager may levyagainst the reinsurer shall be set forth.

(9)        If the contractpermits the manager to settle claims on behalf of the reinsurer:

a.         All claims will bereported to the reinsurer in a timely manner;

b.         A copy of the claimfile will be sent to the reinsurer at its request or as soon as it becomesknown that the claim:

1.         Has the potential toexceed an amount set by the reinsurer and approved by the Commissioner;

2.         Involves a coveragedispute;

3.         May exceed themanager's claims settlement authority;

4.         Is open for morethan six months; or

5.         Is closed by paymentof an amount set by the reinsurer and approved by the Commissioner.

c.         All claim files willbe the joint property of the reinsurer and manager.  However, upon an order ofliquidation of the reinsurer, the files shall become the sole property of thereinsurer or its estate; the manager shall have reasonable access to and theright to copy the files on a timely basis; and

d.         Any settlementauthority granted to the manager may be terminated for cause upon thereinsurer's written notice to the manager or upon the termination of thecontract.  The reinsurer may suspend the settlement authority during thependency of the dispute regarding the cause of termination.

(10)      If the contractprovides for a sharing of interim profits by the manager, the interim profitswill not be paid until one year after the end of each underwriting period forproperty business and five years after the end of each underwriting period forcasualty business and not until the adequacy of reserves on remaining claimshas been verified pursuant to G.S. 58‑9‑21.

(11)      The manager willannually provide the reinsurer with an audited statement of its financialcondition prepared by an independent certified public accountant.

(12)      The reinsurer shallat least semiannually conduct an on‑site review of the underwriting andclaims processing operations of the manager.

(13)      The manager willdisclose to the reinsurer any relationship it has with any insurer beforeceding or assuming any business with the insurer pursuant to this contract.

(14)      Within the scope ofits actual or apparent authority, the acts of the manager shall be deemed to bethe acts of the reinsurer on whose behalf it is acting.

(b)        A manager shallnot:

(1)        Cede retrocessionson behalf of the reinsurer, except that the manager may cede facultativeretrocessions pursuant to obligatory facultative agreements if the contractwith the reinsurer contains reinsurance underwriting guidelines for theretrocessions.  The guidelines shall include a list of reinsurers with whichthe automatic agreements are in effect, and for each reinsurer, the coveragesand amounts or percentages that may be reinsured, and commission schedules.

(2)        Commit the reinsurerto participate in reinsurance syndicates.

(3)        Appoint any producerwithout assuring that the producer is duly licensed to transact the type ofreinsurance for which he is appointed.

(4)        Without priorapproval of the reinsurer, pay or commit the reinsurer to pay a claimsettlement with a retrocessionaire, without prior approval of the reinsurer. If prior approval is given, a report must be promptly forwarded to thereinsurer.

(5)        Collect any paymentfrom a retrocessionaire or commit the reinsurer to any claim settlement with aretrocessionaire, without prior approval of the reinsurer.  If prior approvalis given, a report must be promptly forwarded to the reinsurer.

(6)        Jointly employ anindividual who is employed by the reinsurer unless the manager is under commoncontrol with the reinsurer under Article 19 of this Chapter.

(7)        Appoint asubmanager. (1993, c. 452, s. 22.)