CHAPTER 9. REINSURANCE INTERMEDIARIES
IC 27-6-9
Chapter 9. Reinsurance Intermediaries
IC 27-6-9-1
Actuary
Sec. 1. As used in this chapter, "actuary" means a person who isa member in good standing of the American Academy of Actuaries.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-2
Commissioner
Sec. 2. As used in this chapter, "commissioner" refers to theinsurance commissioner appointed under IC 27-1-1-2.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-3
Controlling person
Sec. 3. As used in this chapter, "controlling person" means anyperson, firm, association, limited liability company, or corporationwho directly or indirectly has the power to direct or cause to bedirected, the management, control, or activities of a reinsuranceintermediary.
As added by P.L.26-1991, SEC.26. Amended by P.L.8-1993,SEC.423.
IC 27-6-9-4
Insurer
Sec. 4. As used in this chapter, "insurer" means any person, firm,association or corporation duly licensed in Indiana pursuant to theapplicable provisions of the insurance law as an insurer.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-5
Licensed producer
Sec. 5. As used in this chapter, "licensed producer" means aninsurance producer, broker, or reinsurance intermediary licensedpursuant to the applicable provision of the insurance law.
As added by P.L.26-1991, SEC.26. Amended by P.L.178-2003,SEC.44.
IC 27-6-9-6
Reinsurance intermediary
Sec. 6. As used in this chapter, "reinsurance intermediary" means:
(1) a reinsurance intermediary-broker; or
(2) a reinsurance intermediary-manager.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-7
Reinsurance intermediary-broker
Sec. 7. As used in this chapter, "reinsurance intermediary-broker"
or, "RB" means any person, other than an officer or employee of theceding insurer, "firm," association, or corporation who solicits,negotiates, or places reinsurance cessions or retrocessions on behalfof a ceding insurer without the authority or power to bindreinsurance on behalf of that insurer.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-8
Reinsurance intermediary-manager
Sec. 8. (a) As used in this chapter, "reinsuranceintermediary-manager" (or, RM) means any person, firm, associationor corporation that:
(1) has authority to bind or manages all or part of the assumedreinsurance business of a reinsurer (including the managementof a separate division, department, or underwriting office); and
(2) acts as an agent for that reinsurer;
whether known as a RM, manager, or other similar term.
(b) Notwithstanding subsection (a), the following persons may notbe considered a RM, with respect to a reinsurer, for the purposes ofthis chapter:
(1) An employee of the reinsurer.
(2) A United States manager of the United States branch of analien reinsurer.
(3) An underwriting manager which, pursuant to contract:
(A) manages all or part of the reinsurance operations of thereinsurer;
(B) is under common control with the reinsurer, subject toIC 27-1-23; and
(C) whose compensation is not based on the volume ofpremiums written.
(4) The manager of a group, association, pool, or organizationof insurers which engage in joint underwriting or jointreinsurance and who are subject to examination by theinsurance commissioner of the state in which the manager'sprincipal business office is located.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-9
Reinsurer
Sec. 9. As used in this chapter, "reinsurer" means any person,firm, association, or corporation duly licensed in Indiana pursuant tothe applicable provisions of the insurance law as an insurer with theauthority to assume reinsurance.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-10
To be in violation
Sec. 10. As used in this chapter, "to be in violation" means thatthe reinsurance intermediary, insurer, or reinsurer for whom thereinsurance intermediary was acting failed to substantially comply
with the provisions of this chapter.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-11
Qualified United States financial institution
Sec. 11. As used in this chapter, "qualified United States financialinstitution" means an institution that:
(1) is organized or (in the case of a United States office of aforeign banking organization) licensed, under the laws of theUnited States or any state;
(2) is regulated, supervised, and examined by United Statesfederal or state authorities having regulatory authority overbanks and trust companies; and
(3) has been determined by:
(A) the commissioner; or
(B) the Securities Valuation Office of the NationalAssociation of Insurance Commissioners;
to meet such standards of financial condition and standing asare considered necessary and appropriate to regulate the qualityof financial institutions whose letters of credit will beacceptable to the commissioner.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-12
Reinsurance intermediary-broker; requirements
Sec. 12. No person, firm, association, or corporation may act asa RB in Indiana if the RB maintains an office either directly, or as amember or employee of a firm or association, or as an officer,director, or employee of a corporation:
(1) in Indiana, unless the RB is a licensed producer in Indiana;or
(2) in another state, unless the RB:
(A) is a licensed producer in Indiana or another state havinga law substantially similar to this chapter; or
(B) is licensed in Indiana as a nonresident reinsuranceintermediary.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-13
Reinsurance intermediary-manager; requirements
Sec. 13. No person, firm, association, or corporation may act asa RM:
(1) for a reinsurer domiciled in this state, unless the RM is alicensed producer in this state;
(2) in this state, if the RM maintains an office either directly, oras a member or employee of a firm, limited liability company,or association, or as an officer, director, or employee of acorporation in this state, unless the RM is a licensed producerin this state;
(3) in another state for a nondomestic insurer, unless the RM is: (A) a licensed producer in Indiana or another state having alaw substantially similar to this chapter; or
(B) the person is licensed in this state as a nonresidentreinsurance intermediary.
As added by P.L.26-1991, SEC.26. Amended by P.L.8-1993,SEC.424.
IC 27-6-9-14
Bond; errors and omissions policy
Sec. 14. The commissioner may require a RM subject to section13 of this chapter to:
(1) file a bond from an insurer in an amount acceptable to thecommissioner for the protection of the reinsurer; and
(2) maintain an errors and omissions policy in an amountacceptable to the commissioner.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-15
Reinsurance intermediary license; issuance; application; authorityto act; nonresidents
Sec. 15. (a) The commissioner may issue a reinsuranceintermediary license to any person, firm, association, or corporationwho has complied with the requirements of this chapter. Any licenseissued to a firm or association under this section authorizes all themembers of the firm or association and any designated employees toact as reinsurance intermediaries under the license, and all suchpersons must be named in the application and any supplementsthereto. Any license issued to a corporation under this sectionauthorizes all of the officers of the corporation, and any designatedemployees and directors of the corporation, to act as reinsuranceintermediaries on behalf of the corporation, and all such personsmust be named in the application and any supplements thereto.
(b) If the applicant for a reinsurance intermediary license is anonresident, the applicant, as a condition precedent to receiving orholding a license, must:
(1) designate the commissioner as agent for service of processin the manner, and with the same legal effect, provided for bythis chapter for designation of service of process uponunauthorized insurers; and
(2) furnish the commissioner with the name and address of aresident of Indiana upon whom notices or orders of thecommissioner or process affecting such nonresident reinsuranceintermediary may be served.
(c) A licensee who receives a license under subsection (b) shallpromptly notify the commissioner in writing of every change in itsdesignated agent for service of process, and a change in the licensee'sdesignated agent does not become effective until acknowledged bythe commissioner.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-16
Refusal to issue license; conditions; summary
Sec. 16. (a) The commissioner may refuse to issue a reinsuranceintermediary license if, in the commissioner's judgment:
(1) the applicant, anyone named on the application, or anymember, principal, officer, or director of the applicant, is nottrustworthy;
(2) any controlling person of the applicant is not trustworthy toact as a reinsurance intermediary; or
(3) any of the foregoing has given cause for revocation orsuspension of such license, or has failed to comply with anyprerequisite for the issuance of such license.
(b) Upon written request therefor, the commissioner shall furnisha summary of the basis for refusal to issue a license. A summaryfurnished under this subsection is declared confidential for thepurposes of IC 5-14-3-4(a)(1) and is not subject to inspection andcopying as a public record.
As added by P.L.26-1991, SEC.26. Amended by P.L.1-2002,SEC.110.
IC 27-6-9-17
Attorneys; exemptions
Sec. 17. Attorneys licensed to practice in Indiana, when acting intheir professional capacity, are exempt from sections 12 through 16of this chapter.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-18
Transactions between reinsurance intermediary-broker andinsurer; written authorization; contents
Sec. 18. Transactions between a RB and the insurer it representsin the capacity of RB shall only be entered into pursuant to a writtenauthorization, specifying the responsibilities of each party. Theauthorization shall, at a minimum, contain provisions stating thefollowing:
(1) The insurer may terminate the RB's authority at any time.
(2) The RB will:
(A) render accounts to the insurer accurately detailing allmaterial transactions, including information necessary tosupport all commissions, charges, and other fees received by,or owing to, the RB; and
(B) remit all funds due to the insurer within thirty (30) daysof receipt.
(3) All funds collected for the insurer's account will be held bythe RB in a fiduciary capacity in a bank which is a qualifiedUnited States financial institution.
(4) The RB will comply with section 19 of this chapter.
(5) The RB will comply with the written standards establishedby the insurer for the cession or retrocession of all risks.
(6) The RB will disclose to the insurer any relationship with
any reinsurer to which business will be ceded or retroceded.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-19
Record of transactions; contents; insurer access
Sec. 19. (a) For at least ten (10) years after the expiration of eachcontract of reinsurance transacted by the RB, the RB will keep acomplete record for each transaction showing the following:
(1) The type of contract, limits, underwriting restrictions,classes or risks and territory.
(2) Period of coverage, including effective and expiration dates,cancellation provisions, and notice required of cancellation.
(3) Reporting and settlement requirements of balances.
(4) Rate used to compute the reinsurance premium.
(5) Names and addresses of assuming reinsurers.
(6) Rates of all reinsurance commissions, including thecommissions on any retrocessions handled by the RB.
(7) Related correspondence and memoranda.
(8) Proof of placement.
(9) Details regarding retrocessions handled by the RB,including the identity of retrocessionaires and percentage ofeach contract assumed or ceded.
(10) Financial records, including but not limited to, premiumand loss accounts.
(11) When the RB procures a reinsurance contract on behalf ofa licensed ceding insurer:
(A) directly from any assuming reinsurer, written evidencethat the assuming reinsurer has agreed to assume the risk; or
(B) if placed through a representative of the assumingreinsurer, other than an employee, written evidence that thereinsurer has delegated binding authority to therepresentative.
(b) The insurer shall have access to and the right to copy and auditall accounts and records maintained by the RB related to its businessin a form usable by the insurer.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-20
Engagement of services of reinsurance intermediary-broker;employment of an individual employed by an RB; financialcondition; requirements
Sec. 20. (a) An insurer may not engage the services of any person,firm, association, or corporation to act as a RB on its behalf unlesssuch person is licensed as required by section 12 of this chapter.
(b) An insurer may not employ an individual who is employed bya RB with which it transacts business unless the RB is undercommon control with the insurer and subject to IC 27-1-23.
(c) The insurer shall annually obtain a copy of statements of thefinancial condition of each RB with which it transacts business.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-21
Transactions between reinsurance intermediary-manager andreinsurer; written contract; contents
Sec. 21. Transactions between a RM and the reinsurer itrepresents in the capacity of RM may only be entered into pursuantto a written contract, specifying the responsibilities of each party,which must be approved by the reinsurer's board of directors. At leastthirty (30) days before a reinsurer assumes or cedes business througha RM, a true copy of the approved contract must be filed with thecommissioner for approval. The contract must, at a minimum,contain provisions that state the following:
(1) The reinsurer may terminate the contract for cause uponwritten notice to the RM, and may suspend the authority of theRM to assume or cede business during the pendency of anydispute regarding the cause for termination.
(2) The RM will:
(A) render accounts to the reinsurer accurately detailing allmaterial transactions, including information necessary tosupport all commissions, charges, and other fees received by,or owing to, the RM; and
(B) remit all funds due under the contract to the reinsurer onnot less than a monthly basis.
(3) All funds collected for the reinsurer's account will be heldby the RM in a fiduciary capacity in a bank which is a qualifiedUnited States financial institution. The RM may retain no morethan three (3) months estimated claims payments and allocatedloss adjustment expenses. The RM shall maintain a separatebank account for each reinsurer that it represents.
(4) For at least ten (10) years after expiration of each contractof reinsurance transacted by the RM, the RM will keep acomplete record for each transactions showing the following:
(A) The type of contract, limits, underwriting restrictions,classes or risks, and territory.
(B) Period of coverage, including effective and expirationdates, cancellation provisions and notice required ofcancellation, and disposition of outstanding reserves oncovered 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 thecommissions on any retrocessions handled by the RM.
(G) Related correspondence and memoranda.
(H) Proof of placement.
(I) Details regarding retrocessions handled by the RM, aspermitted by section 23(d) of this chapter, including theidentity of retrocessionaires and percentage of each contractassumed or ceded.
(J) Financial records, including premium and loss accounts.
(K) When the RM places a reinsurance contract on behalf of
a ceding insurer:
(i) directly from any assuming reinsurer, written evidencethat the assuming reinsurer has agreed to assume the risk;or
(ii) if placed through a representative of the assumingreinsurer, other than an employee, written evidence thatthe reinsurer has delegated binding authority to therepresentative.
(5) The reinsurer will have access and the right to copy allaccounts and records maintained by the RM related to itsbusiness in a form usable by the reinsurer.
(6) The contract cannot be assigned in whole or in part by theRM.
(7) The RM will comply with the written underwriting andrating standards established by the insurer for the acceptance,rejection, or cession of all risks.
(8) The rates, terms, and purposes of commissions, charges, andother fees which the RM may levy against the reinsurer.
(9) If the contract permits the RM to settle claims on behalf ofthe reinsurer the following apply:
(A) All claims will be reported to the reinsurer in a timelymanner.
(B) A copy of the claim file will be sent to the reinsurer at itsrequest or as soon as it becomes known that the claim:
(i) has the potential to exceed the lesser of an amountdetermined by the commissioner or the limit set by thereinsurer;
(ii) involves a coverage dispute;
(iii) may exceed the RM's claims settlement authority;
(iv) is open for more than six (6) months; or
(v) is closed by payment of the lesser of an amount set bythe commissioner or an amount set by the reinsurer.
(C) All claim files will be the joint property of the reinsurerand RM. However, upon an order of liquidation of thereinsurer, the files shall become the sole property of thereinsurer or its estate, and the RM shall have reasonableaccess to and the right to copy the files on a timely basis.
(D) Any settlement authority granted to the RM may beterminated for cause upon the reinsurer's written notice tothe RM or upon the termination of the contract. Thereinsurer may suspend the settlement authority during thependency of the dispute regarding the cause of termination.
(10) If the contract provides for a sharing of interim profits bythe RM, that those interim profits will not be paid until one (1)year after the end of each underwriting period for propertybusiness and five (5) years after the end of each underwritingperiod for casualty business (or a later period set by thecommissioner for specified lines of insurance) and not until theadequacy of reserves on remaining claims has been verifiedunder section 23(c) of this chapter. (11) The RM will annually provide the reinsurer with astatement of its financial condition prepared by an independentcertified accountant.
(12) The reinsurer shall periodically (at least semiannually)conduct an on-site review of the underwriting and claimsprocessing operations of the RM.
(13) The RM will disclose to the reinsurer any relationship ithas with any insurer prior to ceding or assuming any businesswith that insurer pursuant to the contract.
(14) The acts of the RM shall be considered to be the acts of thereinsurer on whose behalf the RM is acting.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-22
Binding of retrocessions on behalf of reinsurers by RM; conditions;reinsurance syndicates; appointment of producers; payment ofclaims; collection of payment; settlements; employment ofreinsurer employee; sub-RMs
Sec. 22. (a) A RM may not bind retrocessions on behalf of thereinsurer, except that the RM may bind facultative retrocessionspursuant to obligatory facultative agreements if the contract with thereinsurer contains reinsurance underwriting guidelines for suchretrocessions. Guidelines referred to in this subsection must includea list of reinsurers with which the automatic agreements are in effect,and, for each such reinsurer, the coverages and amounts orpercentages that may be reinsured, and commission schedules.
(b) A RM may not commit the reinsurer to participate inreinsurance syndicates.
(c) A RM may not appoint any producer without assuring that theproducer is lawfully licensed to transact the type of reinsurance forwhich the producer is appointed.
(d) A RM may not, without prior approval of the reinsurer, pay orcommit the reinsurer to pay a claim, net of retrocessions, thatexceeds the lesser of:
(1) an amount specified by the reinsurer; or
(2) one percent (1%) of the reinsurer's policyholder's surplus asof December 31 of the last complete calendar year before thepayment or commitment.
(e) A RM may not collect any payment from a retrocessionaire orcommit the reinsurer to any claim settlement with a retrocessionairewithout prior approval of the reinsurer. If prior approval is given, areport must be promptly forwarded to the reinsurer.
(f) A RM may not jointly employ an individual who is employedby the reinsurer.
(g) A RM may not appoint a sub-RM.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-23
Engagement of services of a reinsurance intermediary-manager;statement of financial condition; loss reserves; authority to
contract; termination; board of directors
Sec. 23. (a) A reinsurer may not engage the services of anyperson, firm, association, or corporation to act as a RM on its behalfunless the person engaged is licensed as required by section 13 ofthis chapter.
(b) A reinsurer shall annually obtain a copy of statements of thefinancial condition of each RM which the reinsurer has engaged,prepared by an independent certified accountant in a form acceptableto the commissioner.
(c) If a RM establishes loss reserves, the reinsurer shall annuallyobtain the opinion of an actuary attesting to the adequacy of lossreserves established for losses incurred and outstanding on businessproduced by the RM. This opinion shall be in addition to any otherrequired loss reserve certification.
(d) Binding authority for all retrocessional contracts orparticipation in reinsurance syndicates shall rest with an officer ofthe reinsurer, who must not be affiliated with the RM.
(e) Within thirty (30) days of termination of a contract with a RM,the reinsurer shall provide written notification of the termination tothe commissioner.
(f) A reinsurer may not appoint to its board of directors anyofficer, director, employee, controlling shareholder, or subproducerof its RM. This subsection does not apply to relationships governedby IC 27-1-23.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-24
Examination by commissioner; access to records
Sec. 24. (a) A reinsurance intermediary is subject to examinationby the commissioner. The commissioner shall have access to allbooks, bank accounts, and records of the reinsurance intermediary ina form usable to the commissioner.
(b) A RM may be examined as if it were the reinsurer.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-25
Violations; penalties; review; effect on third parties
Sec. 25. (a) A reinsurance intermediary, insurer, or reinsurerfound by the commissioner, after a hearing conducted in accordancewith IC 4-21.5, to be in violation of any provision of this chapter,shall:
(1) for each separate violation, pay an administrative penalty inan amount not exceeding five thousand dollars ($5,000);
(2) be subject to revocation or suspension of its license; and
(3) if a violation was committed by the reinsuranceintermediary, the reinsurance intermediary shall makerestitution to the insurer, reinsurer, rehabilitator, or liquidatorof the insurer or reinsurer for the net losses incurred by theinsurer or reinsurer attributable to the reinsuranceintermediary's violation. (b) The decision, determination, or order of the commissionerpursuant to subsection (a) is subject to judicial review pursuant toIC 4-21.5.
(c) Nothing contained in this section shall affect the right of thecommissioner to impose any other penalties provided by law.
(d) Nothing contained in this chapter is intended to, or shall in anymanner, limit or restrict the rights of policyholders, claimants,creditors, or other third parties, or confer any rights upon thosepersons.
As added by P.L.26-1991, SEC.26.
IC 27-6-9-26
Rules for implementation and administration of chapter
Sec. 26. The commissioner may adopt rules under IC 4-22-2 forthe implementation and administration of this chapter.
As added by P.L.26-1991, SEC.26.