Wis. Admin. Code Office of the Commissioner of Insurance Ins 47.06 - Required contract provisions-reinsurance intermediary-manager

No reinsurance intermediary-manager or reinsurer may enter into an agreement or arrangement, or amend or renew an agreement or arrangement, after August 1, 1993 for the reinsurance intermediary-manager to represent the reinsurer, or continue an agreement or arrangement in effect on August 1, 1993 after September 30, 1994, unless the agreement or arrangement is a written contract which specifies the responsibilities of each party and complies with this section, the reinsurance intermediary-manager complies with the contract, and the contract is approved by the reinsurer's board of directors, is filed with the commissioner for approval at least 30 days before the reinsurer assumes or cedes business through the reinsurance intermediary-manager, and the commissioner approves the contract. The contract shall specify the responsibilities of the reinsurance intermediary-manager, including, but not limited to, the following:

(1) The reinsurer may terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may immediately suspend the authority of the reinsurance intermediary-manager to assume or cede business during the pendency of any dispute regarding the cause for termination.

(2) The reinsurance intermediary-manager will render accounts to the reinsurer accurately detailing all material transactions, including received by, or owing to the reinsurance 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 reinsurance intermediary-manager in a fiduciary capacity in a qualified United States financial institution. The reinsurance intermediary-manager may retain no more than 3 months estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate financial institution account for each reinsurer that it represents.

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

(a) The type of contract, limits, underwriting restrictions, classes or risks and territory;

(b) Period of coverage, including effective and expiration dates, cancellation provisions and notice required of cancellation, and disposition of outstanding reserves on covered risks;

(c) Reporting and settlement requirements of balances;

(d) Rate used to compute the reinsurance premium;

(e) Names and addresses of reinsurers;

(f) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager;

(g) Related correspondence and memoranda;

(h) Proof of placement;

(i) Details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted under s. Ins 47.08(4), including the identity of retrocessionaires and percentage of each contract assumed or ceded;

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

(k) When the reinsurance intermediary-manager places a reinsurance contract on behalf of a ceding insurer:

1. Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or

2. If placed through a representative of the assuming reinsurer, other than an employe, written evidence that the reinsurer has delegated binding authority to the representative.

(5) A reinsurance intermediary-manager shall give the reinsurer it represents access to and the right to copy and audit all accounts and records maintained by the reinsurance intermediary-manager related to the reinsurer's business in a form usable by the reinsurer.

(6) The contract may not be assigned in whole or in part by the reinsurance intermediary-manager.

(7) The reinsurance intermediary-manager will comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection or cession of all risks.

(8) Rates, terms and purposes of commissions, charges and other fees which the reinsurance intermediary-manager may levy against the reinsurer.

(9) If the contract permits the reinsurance 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:

1. Has the potential to exceed the lesser of an amount equal to 3% of the reinsurer's policyholder surplus as of the end of the immediately preceding calendar year or the limit set by the reinsurer;

2. Involves a coverage dispute;

3. May exceed the reinsurance intermediary-manager's claims settlement authority;

4. Is open for more than 6 months; or

5. Is closed by payment of an amount equal to or greater than the lesser of 1% of the reinsurer's policyholder surplus as of the end of the immediately preceding calendar year or an amount set by the reinsurer;

(c) All claim files will be the joint property of 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 its estate and the reinsurance 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 reinsurance intermediary-manager may be terminated for cause upon the reinsurer's written notice to the reinsurance 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.

(10) If the contract provides for a sharing of interim profits by the reinsurance 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 order of the commissioner for specified lines of insurance, and not until the adequacy of reserves on remaining claims has been verified pursuant to s. Ins 47.08(3).

(11) The reinsurance intermediary-manager will annually provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant.

(12) The reinsurer shall at least semiannually conduct an on-site review of the underwriting and claims processing operations of the reinsurance intermediary-manager.

(13) The reinsurance intermediary-manager will disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with the insurer under the contract.

(14) Within the scope of its actual or apparent authority the acts of the reinsurance intermediary-manager are the acts of the reinsurer on whose behalf it is acting.

Notes

Wis. Admin. Code Office of the Commissioner of Insurance Ins 47.06

Cr. Register, July, 1993, No. 451, eff. 8-1-93.