§431:9B-106  Required contract provisions;reinsurance intermediary-managers.  Transactions between a reinsuranceintermediary-manager and the reinsurer it represents in that capacity shallonly be entered into pursuant to a written contract, specifying theresponsibilities of each party that shall be approved by the reinsurer's boardof directors.  At least thirty days before the reinsurer assumes or cedesbusiness through the reinsurance intermediary-manager, a true copy of theapproved contract shall be filed with the commissioner for approval.  Thecontract, at a minimum, shall provide that:

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

(2)  The reinsurance intermediary-manager will renderaccounts to the reinsurer accurately detailing all material transactions,including information necessary to support all commissions, charges, and otherfees received by or owing to the reinsurance intermediary-manager, and remitall funds due under the contract to the reinsurer on not less than a monthlybasis;

(3)  All funds collected for the reinsurer's accountwill be held by the reinsurance intermediary-manager in a fiduciary capacityand deposited in a bank that is a qualified United States financialinstitution.  The reinsurance intermediary-manager may retain no more thanthree months estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account foreach reinsurer that it represents;

(4)  For at least ten years after expiration of eachcontract of reinsurance transacted by the reinsurance intermediary-manager, thereinsurance intermediary-manager will keep a complete record for eachtransaction showing:

(A)  The type of contract, limits, underwritingrestrictions, classes or risks, and territory;

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

(C)  Reporting and settlement requirements of balances;

(D)  Rate used to compute the reinsurancepremium;

(E)  Names and addresses of reinsurers;

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

(G)  Related correspondence and memoranda;

(H)  Proof of placement;

(I)  Details regarding retrocessions handled bythe reinsurance intermediary-manager, as permitted by section 431:9B-108(d),including the identity of retrocessionaires and percentage of each contractassumed or ceded;

(J)  Financial records, including but notlimited to, premium and loss accounts; and

(K)  When the reinsurance intermediary-managerplaces a reinsurance contract on behalf of a ceding insurer:

(i)  Directly from any assuming reinsurer,written evidence that the assuming reinsurer has agreed to assume the risk; or

(ii)  If placed through a representative of theassuming reinsurer, other than an employee, written evidence that the reinsurerhas delegated binding authority to the representative;

(5)  The reinsurer will have access and the right tocopy all accounts and records maintained by the reinsuranceintermediary-manager related to its business in a form usable by the reinsurer;

(6)  The contract cannot be assigned in whole or inpart by the reinsurance intermediary-manager;

(7)  The reinsurance intermediary-manager will complywith the written underwriting and rating standards established by the insurerfor the acceptance, rejection, or cession of all risks;

(8)  Sets forth the rates, terms, and purposes ofcommissions, charges, and other fees that the reinsurance intermediary-managermay levy against the reinsurer;

(9)  If the contract permits the reinsuranceintermediary-manager to settle claims on behalf of the reinsurer:

(A)  All claims shall be reported to thereinsurer in a timely manner;

(B)  A copy of the claim file shall be sent tothe reinsurer at its request or as soon as it becomes known that the claim:

(i)  Has the potential to exceed the lesser ofan amount determined by the commissioner or the limit set by the reinsurer;

(ii)  Involves a coverage dispute;

(iii)  May exceed the reinsuranceintermediary-manager's claims settlement authority;

(iv)  Is open for more than six months; or

(v)  Is closed by payment of the lesser of anamount set by the commissioner or an amount set by the reinsurer;

(C)  All claim files shall be the jointproperty of the reinsurer and reinsurance intermediary-manager.  However, uponan order of liquidation of the reinsurer, the files shall become the soleproperty of the reinsurer or its estate; the reinsurance intermediary-managershall have reasonable access to  and the right to copy the files on a timelybasis; and

(D)  Any settlement authority granted to thereinsurance intermediary-manager may be terminated for cause upon thereinsurer's written notice to the reinsurance intermediary-manager or upon thetermination of the contract.  The reinsurer may suspend the settlementauthority during the pendency of the dispute regarding the cause oftermination;

(10)  If the contract provides for a sharing of interimprofits by the reinsurance intermediary-manager, that such interim profitsshall 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 (or a later period set by the commissioner for specifiedlines of insurance) and not until the adequacy of reserves on remaining claimshas been verified pursuant to section 431:9B-108(c);

(11)  The reinsurance intermediary-manager shallannually provide the reinsurer with a statement of its financial conditionprepared by an independent certified accountant;

(12)  The reinsurer shall at a minimum semiannuallyconduct an on-site review of the underwriting and claims processing operationsof the reinsurance intermediary-manager;

(13)  The reinsurance intermediary-manager shalldisclose to the reinsurer any relationship it has with any insurer prior toceding or assuming any business with the insurer pursuant to the contract; and

(14)  Within the scope of its actual or apparentauthority the acts of the reinsurance intermediary-manager shall be deemed tobe the acts of the reinsurer on whose behalf it is acting. [L 1992, c 176, ptof §6; am L 1993, c 6, §19 and c 321, §13]