CHAPTER 26.1-26.5INSURANCE BROKER CONTROLLED INSURER26.1-26.5-01. Definitions. As used in this chapter:1."Accredited state" means a state in which the insurance department or regulatory<br>agency has qualified as meeting the minimum financial regulatory standards<br>promulgated and established from time to time by the national association of<br>insurance commissioners.2."Control" or "controlled" has the meaning ascribed in chapter 26.1-10.3."Controlled insurer" means a licensed insurer which is controlled, directly or<br>indirectly, by an insurance broker.4."Controlling insurance broker" means an insurance broker who, directly or indirectly,<br>controls an insurer.5."Insurance broker" means an insurance broker or brokers or any other person, firm,<br>association, or corporation, when, for any compensation, commission, or other thing<br>of value, such person, firm, association, or corporation acts or aids in any manner in<br>soliciting, negotiating, or procuring the making of any insurance contract on behalf of<br>an insured other than the person, firm, association, or corporation.6."Licensed insurer" or "insurer" means any person, firm, association, or corporation<br>duly licensed to transact a property and casualty insurance business in this state.<br>The following, inter alia, are not licensed insurers for the purposes of this chapter:a.All risk retention groups as definedintheSuperfundAmendmentsReauthorization Act of 1986 [Pub. L. 99-499; 100 Stat. 1613] and the Risk<br>Retention Act [15 U.S.C. 3901 et seq.] and chapter 26.1-46.b.All residual market pools and joint underwriting authorities or associations.c.All captive insurers.For the purposes of this chapter, captive insurers areinsurance companies owned by another organization whose exclusive purpose<br>is to insure risks of the parent organization and affiliated companies or, in the<br>case of groups and associations, insurance organizations owned by the<br>insureds whose exclusive purpose is to insure risks to member organizations or<br>group members and their affiliates.26.1-26.5-02.Applicability.This chapter applies to licensed insurers as defined insection 26.1-26.5-01, either domiciled in this state or domiciled in a state that is not an accredited<br>state having in effect a substantially similar law.All provisions of the Insurance HoldingCompany Act, to the extent they are not superseded by this chapter, continue to apply to all<br>parties within holding company systems subject to this chapter.26.1-26.5-03. Minimum standards.1.a.The provisions of this section apply if, in any calendar year, the aggregate<br>amount of gross written premium on business placed with a controlled insurer<br>by a controlling insurance broker is equal to or greater than five percent of the<br>admitted assets of the controlled insurer, as reported in the controlled insurers'<br>quarterly statement filed as of September thirtieth of the prior year.b.Notwithstanding subdivision a, the provisions of this section do not apply if:Page No. 1(1)The controlling insurance broker places insurance only with the controlled<br>insurer, or only with the controlled insurer and a member or members of<br>the controlled insurer's holding company system, or the controlled<br>insurer's parent, affiliate, or subsidiary and receives no compensation<br>based upon the amount of premiums written in connection with such<br>insurance; and accepts insurance placements only from nonaffiliated<br>insurance brokers, and not directly from insureds.(2)The controlled insurer, except for insurance business written through a<br>residual market facility, accepts insurance business only from a<br>controlling insurance broker, an insurance broker controlled by the<br>controlled insurer, or an insurance broker that is a subsidiary of the<br>controlled insurer.2.A controlled insurer may not accept business from a controlling insurance broker<br>and a controlling insurance broker may not place business with a controlled insurer<br>unless there is a written contract between the controlling insurance broker and the<br>insurer specifying the responsibilities of each party, which contract has been<br>approved by the board of directors of the insurer and contains the following<br>minimum provisions:a.The controlled insurer may terminate the contract for cause, upon written notice<br>to the controlling insurance broker. The controlled insurer shall suspend the<br>authority of the controlling insurance broker to write business during the<br>pendency of any dispute regarding the cause for the termination.b.The controlling insurance broker shall render accounts to the controlled insurer<br>detailing all material transactions, including information necessary to support all<br>commissions, charges, and other fees received by, or owing to, the controlling<br>insurance broker.c.The controlling insurance broker shall remit all funds due under the terms of the<br>contract to the controlled insurer on at least a monthly basis. The due date<br>must be fixed so that premiums or installments thereof collected shall be<br>remitted no later than ninety days after the effective date of any policy placed<br>with the controlled insurer under this contract.d.All funds collected for the controlled insurer's account must be held by the<br>controlling insurance broker in a fiduciary capacity, in one or more appropriately<br>identified bank accounts in banks that are members of the federal reserve<br>system, in accordance with the provisions of the insurance law as applicable.<br>However, funds of a controlling insurance broker not required to be licensed in<br>this state must be maintained in compliance with the requirements of the<br>controlling insurance broker's domiciliary jurisdiction.e.The controlling insurance broker shall maintain separately identifiable records<br>of business written for the controlled insurer.f.The contract may not be assigned, in whole or in part, by the controlling<br>insurance broker.g.The controlled insurer shall provide the controlling insurance broker with its<br>underwriting standards, rules and procedures, manuals setting forth the rates to<br>be charged, and the conditions for the acceptance or rejection of risks. The<br>controlling insurance broker shall adhere to the standards, rules, procedures,<br>rates, and conditions. The standards, rules, procedures, rates, and conditions<br>must be the same as those applicable to comparable business placed with the<br>controlled insurer by an insurance broker other than the controlling insurance<br>broker.Page No. 2h.The rates and terms of the controlling insurance broker's commissions,<br>charges, or other fees and the purposes for those charges or fees. The rates of<br>the commissions, charges, and other fees must be no greater than those<br>applicable to comparable business placed with the controlled insurer by<br>insurance brokers other than controlling insurance brokers. For purposes of<br>this subdivision and subdivision g, examples of "comparable business" include<br>the same lines of insurance, same kinds of insurance, same kinds of risks,<br>similar policy limits, and similar quality of business.i.If the contract provides that the controlling insurance broker, on insurance<br>business placed with the insurer, is to be compensated contingent upon the<br>insurer's profits on that business, then such compensation may not be<br>determined and paid until at least five years after the premiums on liability<br>insurance are earned and at least one year after the premiums are earned on<br>any other insurance.In no event may the commissions be paid until theadequacy of the controlled insurer's reserves on remaining claims has been<br>independently verified pursuant to subdivision a of subsection 4.j.A limit on the controlling insurance broker's writings in relation to the controlled<br>insurer's surplus and total writings. The insurer may establish a different limit<br>for each line or subline of business.The controlled insurer shall notify thecontrolling insurance broker when the applicable limit is approached and may<br>not accept business from the controlling insurance broker if the limit is reached.<br>The controlling insurance broker may not place business with the controlled<br>insurer if it has been notified by the controlled insurer that the limit has been<br>reached.k.The controlling insurance broker may negotiate but may not bind reinsurance<br>on behalf of the controlled insurer on business the controlling insurance broker<br>places with the controlled insurer, except that the controlling insurance broker<br>may bind facultative reinsurance contracts pursuant to obligatory facultative<br>agreements if the contract with the controlled insurer contains underwriting<br>guidelines including, for both reinsurance assumed and ceded, a list of<br>reinsurers with which such automatic agreements are in effect, the coverages<br>and amounts or percentages that may be reinsured, and commission<br>schedules.3.Every controlled insurer shall have an audit committee of the board of directors<br>composed of independent directors. The audit committee shall annually meet with<br>management, the insurer's independent certified public accountants, and an<br>independent casualty actuary or other independent loss reserve specialist<br>acceptable to the commissioner to review the adequacy of the insurer's loss<br>reserves.4.a.In addition to any other required loss reserve certification, the controlled insurer<br>shall annually, on April first of each year, file with the commissioner an opinion<br>of an independent casualty actuary, or such other independent loss reserve<br>specialist acceptable to the commissioner, reporting loss ratios for each line of<br>business written and attesting to the adequacy of loss reserves established for<br>losses incurred and outstanding as of yearend, including incurred but not<br>reported, on business placed by the insurance broker.b.The controlled insurer shall annually report to the commissioner the amount of<br>commissions paid to the insurance broker, the percentage such amount<br>represents of the net premiums written, and comparable amounts and<br>percentage paid to noncontrolling insurance brokers for placements of the<br>same kinds of insurance.Page No. 326.1-26.5-04. Disclosure. The insurance broker, prior to the effective date of the policy,shall deliver written notice to the prospective insured disclosing the relationship between the<br>insurance broker and the controlled insurer, except that, if the business is placed through an<br>insurance broker who is not a controlling insurance broker, the controlling insurance broker shall<br>retain a signed commitment from the insurance broker that the insurance broker is aware of the<br>relationship between the insurer and the insurance broker and that the insurance broker has or<br>will notify the insured.26.1-26.5-05. Liability of controlling insurance broker in the event of insolvency ofcontrolled insurer.If the commissioner has reason to believe that a controlling insurancebroker has committed or is committing an act which could be determined to be a violation, and<br>that the violation substantially contributed to the insolvency of a controlled insurer, the<br>commissioner or receiver may maintain a civil action against the controlling insurance broker for<br>all damages caused by the insurance broker's acts.26.1-26.5-06. Administrative penalties and actions by the commissioner.1.In addition to any other remedies provided herein, whenever it appears to the<br>commissioner that a person has committed or is committing an act that could be<br>determined to be a violation, the commissioner may institute a proceeding under<br>chapter 28-32. After the hearing, the commissioner may order any or all of the<br>following:a.That the person permanently cease and desist from committing the acts found<br>to be in violation of this chapter.b.Payment of a penalty of not more than ten thousand dollars for each and every<br>act or violation.c.That the controlling insurance broker cease placing business with the controlled<br>insurer.2.If it is found, after hearing, that the controlling broker or any other person has not<br>materially complied with this chapter and that the controlled insurer or any<br>policyholder thereof has suffered any loss or damage, the commissioner may<br>maintain a civil action or intervene in an action brought by or on behalf of the insurer<br>or policyholder for recovery of compensatory damages for the benefit of the insurer<br>or policyholder or other appropriate relief.3.If an order for liquidation or rehabilitation of the controlled insurer has been entered<br>pursuant to chapter 26.1-06.1, and the receiver appointed under that order believes<br>that the controlling insurance broker or any other person has not materially complied<br>with this chapter, or any rule or order adopted hereunder, and the insurer suffered<br>any loss or damage therefrom, the receiver may maintain a civil action for recovery<br>of damages or other appropriate sanctions for the benefit of the insurer.4.Nothing contained in this section affects the right of the commissioner to impose any<br>other penalties provided for in the insurance law.5.Nothing contained in this section is intended to or in any manner alters or affects the<br>rights of policyholders, claimants, creditors, or other third parties.26.1-26.5-07.Effective date.Within sixty days of August 1, 1993, each controlledinsurer and each controlling insurance broker must comply with the provisions of sections<br>26.1-26.5-03 and 26.1-26.5-04.Page No. 4Document Outlinechapter 26.1-26.5 insurance broker controlled insurer
CHAPTER 26.1-26.5INSURANCE BROKER CONTROLLED INSURER26.1-26.5-01. Definitions. As used in this chapter:1."Accredited state" means a state in which the insurance department or regulatory<br>agency has qualified as meeting the minimum financial regulatory standards<br>promulgated and established from time to time by the national association of<br>insurance commissioners.2."Control" or "controlled" has the meaning ascribed in chapter 26.1-10.3."Controlled insurer" means a licensed insurer which is controlled, directly or<br>indirectly, by an insurance broker.4."Controlling insurance broker" means an insurance broker who, directly or indirectly,<br>controls an insurer.5."Insurance broker" means an insurance broker or brokers or any other person, firm,<br>association, or corporation, when, for any compensation, commission, or other thing<br>of value, such person, firm, association, or corporation acts or aids in any manner in<br>soliciting, negotiating, or procuring the making of any insurance contract on behalf of<br>an insured other than the person, firm, association, or corporation.6."Licensed insurer" or "insurer" means any person, firm, association, or corporation<br>duly licensed to transact a property and casualty insurance business in this state.<br>The following, inter alia, are not licensed insurers for the purposes of this chapter:a.All risk retention groups as definedintheSuperfundAmendmentsReauthorization Act of 1986 [Pub. L. 99-499; 100 Stat. 1613] and the Risk<br>Retention Act [15 U.S.C. 3901 et seq.] and chapter 26.1-46.b.All residual market pools and joint underwriting authorities or associations.c.All captive insurers.For the purposes of this chapter, captive insurers areinsurance companies owned by another organization whose exclusive purpose<br>is to insure risks of the parent organization and affiliated companies or, in the<br>case of groups and associations, insurance organizations owned by the<br>insureds whose exclusive purpose is to insure risks to member organizations or<br>group members and their affiliates.26.1-26.5-02.Applicability.This chapter applies to licensed insurers as defined insection 26.1-26.5-01, either domiciled in this state or domiciled in a state that is not an accredited<br>state having in effect a substantially similar law.All provisions of the Insurance HoldingCompany Act, to the extent they are not superseded by this chapter, continue to apply to all<br>parties within holding company systems subject to this chapter.26.1-26.5-03. Minimum standards.1.a.The provisions of this section apply if, in any calendar year, the aggregate<br>amount of gross written premium on business placed with a controlled insurer<br>by a controlling insurance broker is equal to or greater than five percent of the<br>admitted assets of the controlled insurer, as reported in the controlled insurers'<br>quarterly statement filed as of September thirtieth of the prior year.b.Notwithstanding subdivision a, the provisions of this section do not apply if:Page No. 1(1)The controlling insurance broker places insurance only with the controlled<br>insurer, or only with the controlled insurer and a member or members of<br>the controlled insurer's holding company system, or the controlled<br>insurer's parent, affiliate, or subsidiary and receives no compensation<br>based upon the amount of premiums written in connection with such<br>insurance; and accepts insurance placements only from nonaffiliated<br>insurance brokers, and not directly from insureds.(2)The controlled insurer, except for insurance business written through a<br>residual market facility, accepts insurance business only from a<br>controlling insurance broker, an insurance broker controlled by the<br>controlled insurer, or an insurance broker that is a subsidiary of the<br>controlled insurer.2.A controlled insurer may not accept business from a controlling insurance broker<br>and a controlling insurance broker may not place business with a controlled insurer<br>unless there is a written contract between the controlling insurance broker and the<br>insurer specifying the responsibilities of each party, which contract has been<br>approved by the board of directors of the insurer and contains the following<br>minimum provisions:a.The controlled insurer may terminate the contract for cause, upon written notice<br>to the controlling insurance broker. The controlled insurer shall suspend the<br>authority of the controlling insurance broker to write business during the<br>pendency of any dispute regarding the cause for the termination.b.The controlling insurance broker shall render accounts to the controlled insurer<br>detailing all material transactions, including information necessary to support all<br>commissions, charges, and other fees received by, or owing to, the controlling<br>insurance broker.c.The controlling insurance broker shall remit all funds due under the terms of the<br>contract to the controlled insurer on at least a monthly basis. The due date<br>must be fixed so that premiums or installments thereof collected shall be<br>remitted no later than ninety days after the effective date of any policy placed<br>with the controlled insurer under this contract.d.All funds collected for the controlled insurer's account must be held by the<br>controlling insurance broker in a fiduciary capacity, in one or more appropriately<br>identified bank accounts in banks that are members of the federal reserve<br>system, in accordance with the provisions of the insurance law as applicable.<br>However, funds of a controlling insurance broker not required to be licensed in<br>this state must be maintained in compliance with the requirements of the<br>controlling insurance broker's domiciliary jurisdiction.e.The controlling insurance broker shall maintain separately identifiable records<br>of business written for the controlled insurer.f.The contract may not be assigned, in whole or in part, by the controlling<br>insurance broker.g.The controlled insurer shall provide the controlling insurance broker with its<br>underwriting standards, rules and procedures, manuals setting forth the rates to<br>be charged, and the conditions for the acceptance or rejection of risks. The<br>controlling insurance broker shall adhere to the standards, rules, procedures,<br>rates, and conditions. The standards, rules, procedures, rates, and conditions<br>must be the same as those applicable to comparable business placed with the<br>controlled insurer by an insurance broker other than the controlling insurance<br>broker.Page No. 2h.The rates and terms of the controlling insurance broker's commissions,<br>charges, or other fees and the purposes for those charges or fees. The rates of<br>the commissions, charges, and other fees must be no greater than those<br>applicable to comparable business placed with the controlled insurer by<br>insurance brokers other than controlling insurance brokers. For purposes of<br>this subdivision and subdivision g, examples of "comparable business" include<br>the same lines of insurance, same kinds of insurance, same kinds of risks,<br>similar policy limits, and similar quality of business.i.If the contract provides that the controlling insurance broker, on insurance<br>business placed with the insurer, is to be compensated contingent upon the<br>insurer's profits on that business, then such compensation may not be<br>determined and paid until at least five years after the premiums on liability<br>insurance are earned and at least one year after the premiums are earned on<br>any other insurance.In no event may the commissions be paid until theadequacy of the controlled insurer's reserves on remaining claims has been<br>independently verified pursuant to subdivision a of subsection 4.j.A limit on the controlling insurance broker's writings in relation to the controlled<br>insurer's surplus and total writings. The insurer may establish a different limit<br>for each line or subline of business.The controlled insurer shall notify thecontrolling insurance broker when the applicable limit is approached and may<br>not accept business from the controlling insurance broker if the limit is reached.<br>The controlling insurance broker may not place business with the controlled<br>insurer if it has been notified by the controlled insurer that the limit has been<br>reached.k.The controlling insurance broker may negotiate but may not bind reinsurance<br>on behalf of the controlled insurer on business the controlling insurance broker<br>places with the controlled insurer, except that the controlling insurance broker<br>may bind facultative reinsurance contracts pursuant to obligatory facultative<br>agreements if the contract with the controlled insurer contains underwriting<br>guidelines including, for both reinsurance assumed and ceded, a list of<br>reinsurers with which such automatic agreements are in effect, the coverages<br>and amounts or percentages that may be reinsured, and commission<br>schedules.3.Every controlled insurer shall have an audit committee of the board of directors<br>composed of independent directors. The audit committee shall annually meet with<br>management, the insurer's independent certified public accountants, and an<br>independent casualty actuary or other independent loss reserve specialist<br>acceptable to the commissioner to review the adequacy of the insurer's loss<br>reserves.4.a.In addition to any other required loss reserve certification, the controlled insurer<br>shall annually, on April first of each year, file with the commissioner an opinion<br>of an independent casualty actuary, or such other independent loss reserve<br>specialist acceptable to the commissioner, reporting loss ratios for each line of<br>business written and attesting to the adequacy of loss reserves established for<br>losses incurred and outstanding as of yearend, including incurred but not<br>reported, on business placed by the insurance broker.b.The controlled insurer shall annually report to the commissioner the amount of<br>commissions paid to the insurance broker, the percentage such amount<br>represents of the net premiums written, and comparable amounts and<br>percentage paid to noncontrolling insurance brokers for placements of the<br>same kinds of insurance.Page No. 326.1-26.5-04. Disclosure. The insurance broker, prior to the effective date of the policy,shall deliver written notice to the prospective insured disclosing the relationship between the<br>insurance broker and the controlled insurer, except that, if the business is placed through an<br>insurance broker who is not a controlling insurance broker, the controlling insurance broker shall<br>retain a signed commitment from the insurance broker that the insurance broker is aware of the<br>relationship between the insurer and the insurance broker and that the insurance broker has or<br>will notify the insured.26.1-26.5-05. Liability of controlling insurance broker in the event of insolvency ofcontrolled insurer.If the commissioner has reason to believe that a controlling insurancebroker has committed or is committing an act which could be determined to be a violation, and<br>that the violation substantially contributed to the insolvency of a controlled insurer, the<br>commissioner or receiver may maintain a civil action against the controlling insurance broker for<br>all damages caused by the insurance broker's acts.26.1-26.5-06. Administrative penalties and actions by the commissioner.1.In addition to any other remedies provided herein, whenever it appears to the<br>commissioner that a person has committed or is committing an act that could be<br>determined to be a violation, the commissioner may institute a proceeding under<br>chapter 28-32. After the hearing, the commissioner may order any or all of the<br>following:a.That the person permanently cease and desist from committing the acts found<br>to be in violation of this chapter.b.Payment of a penalty of not more than ten thousand dollars for each and every<br>act or violation.c.That the controlling insurance broker cease placing business with the controlled<br>insurer.2.If it is found, after hearing, that the controlling broker or any other person has not<br>materially complied with this chapter and that the controlled insurer or any<br>policyholder thereof has suffered any loss or damage, the commissioner may<br>maintain a civil action or intervene in an action brought by or on behalf of the insurer<br>or policyholder for recovery of compensatory damages for the benefit of the insurer<br>or policyholder or other appropriate relief.3.If an order for liquidation or rehabilitation of the controlled insurer has been entered<br>pursuant to chapter 26.1-06.1, and the receiver appointed under that order believes<br>that the controlling insurance broker or any other person has not materially complied<br>with this chapter, or any rule or order adopted hereunder, and the insurer suffered<br>any loss or damage therefrom, the receiver may maintain a civil action for recovery<br>of damages or other appropriate sanctions for the benefit of the insurer.4.Nothing contained in this section affects the right of the commissioner to impose any<br>other penalties provided for in the insurance law.5.Nothing contained in this section is intended to or in any manner alters or affects the<br>rights of policyholders, claimants, creditors, or other third parties.26.1-26.5-07.Effective date.Within sixty days of August 1, 1993, each controlledinsurer and each controlling insurance broker must comply with the provisions of sections<br>26.1-26.5-03 and 26.1-26.5-04.Page No. 4Document Outlinechapter 26.1-26.5 insurance broker controlled insurer
CHAPTER 26.1-26.5INSURANCE BROKER CONTROLLED INSURER26.1-26.5-01. Definitions. As used in this chapter:1."Accredited state" means a state in which the insurance department or regulatory<br>agency has qualified as meeting the minimum financial regulatory standards<br>promulgated and established from time to time by the national association of<br>insurance commissioners.2."Control" or "controlled" has the meaning ascribed in chapter 26.1-10.3."Controlled insurer" means a licensed insurer which is controlled, directly or<br>indirectly, by an insurance broker.4."Controlling insurance broker" means an insurance broker who, directly or indirectly,<br>controls an insurer.5."Insurance broker" means an insurance broker or brokers or any other person, firm,<br>association, or corporation, when, for any compensation, commission, or other thing<br>of value, such person, firm, association, or corporation acts or aids in any manner in<br>soliciting, negotiating, or procuring the making of any insurance contract on behalf of<br>an insured other than the person, firm, association, or corporation.6."Licensed insurer" or "insurer" means any person, firm, association, or corporation<br>duly licensed to transact a property and casualty insurance business in this state.<br>The following, inter alia, are not licensed insurers for the purposes of this chapter:a.All risk retention groups as definedintheSuperfundAmendmentsReauthorization Act of 1986 [Pub. L. 99-499; 100 Stat. 1613] and the Risk<br>Retention Act [15 U.S.C. 3901 et seq.] and chapter 26.1-46.b.All residual market pools and joint underwriting authorities or associations.c.All captive insurers.For the purposes of this chapter, captive insurers areinsurance companies owned by another organization whose exclusive purpose<br>is to insure risks of the parent organization and affiliated companies or, in the<br>case of groups and associations, insurance organizations owned by the<br>insureds whose exclusive purpose is to insure risks to member organizations or<br>group members and their affiliates.26.1-26.5-02.Applicability.This chapter applies to licensed insurers as defined insection 26.1-26.5-01, either domiciled in this state or domiciled in a state that is not an accredited<br>state having in effect a substantially similar law.All provisions of the Insurance HoldingCompany Act, to the extent they are not superseded by this chapter, continue to apply to all<br>parties within holding company systems subject to this chapter.26.1-26.5-03. Minimum standards.1.a.The provisions of this section apply if, in any calendar year, the aggregate<br>amount of gross written premium on business placed with a controlled insurer<br>by a controlling insurance broker is equal to or greater than five percent of the<br>admitted assets of the controlled insurer, as reported in the controlled insurers'<br>quarterly statement filed as of September thirtieth of the prior year.b.Notwithstanding subdivision a, the provisions of this section do not apply if:Page No. 1(1)The controlling insurance broker places insurance only with the controlled<br>insurer, or only with the controlled insurer and a member or members of<br>the controlled insurer's holding company system, or the controlled<br>insurer's parent, affiliate, or subsidiary and receives no compensation<br>based upon the amount of premiums written in connection with such<br>insurance; and accepts insurance placements only from nonaffiliated<br>insurance brokers, and not directly from insureds.(2)The controlled insurer, except for insurance business written through a<br>residual market facility, accepts insurance business only from a<br>controlling insurance broker, an insurance broker controlled by the<br>controlled insurer, or an insurance broker that is a subsidiary of the<br>controlled insurer.2.A controlled insurer may not accept business from a controlling insurance broker<br>and a controlling insurance broker may not place business with a controlled insurer<br>unless there is a written contract between the controlling insurance broker and the<br>insurer specifying the responsibilities of each party, which contract has been<br>approved by the board of directors of the insurer and contains the following<br>minimum provisions:a.The controlled insurer may terminate the contract for cause, upon written notice<br>to the controlling insurance broker. The controlled insurer shall suspend the<br>authority of the controlling insurance broker to write business during the<br>pendency of any dispute regarding the cause for the termination.b.The controlling insurance broker shall render accounts to the controlled insurer<br>detailing all material transactions, including information necessary to support all<br>commissions, charges, and other fees received by, or owing to, the controlling<br>insurance broker.c.The controlling insurance broker shall remit all funds due under the terms of the<br>contract to the controlled insurer on at least a monthly basis. The due date<br>must be fixed so that premiums or installments thereof collected shall be<br>remitted no later than ninety days after the effective date of any policy placed<br>with the controlled insurer under this contract.d.All funds collected for the controlled insurer's account must be held by the<br>controlling insurance broker in a fiduciary capacity, in one or more appropriately<br>identified bank accounts in banks that are members of the federal reserve<br>system, in accordance with the provisions of the insurance law as applicable.<br>However, funds of a controlling insurance broker not required to be licensed in<br>this state must be maintained in compliance with the requirements of the<br>controlling insurance broker's domiciliary jurisdiction.e.The controlling insurance broker shall maintain separately identifiable records<br>of business written for the controlled insurer.f.The contract may not be assigned, in whole or in part, by the controlling<br>insurance broker.g.The controlled insurer shall provide the controlling insurance broker with its<br>underwriting standards, rules and procedures, manuals setting forth the rates to<br>be charged, and the conditions for the acceptance or rejection of risks. The<br>controlling insurance broker shall adhere to the standards, rules, procedures,<br>rates, and conditions. The standards, rules, procedures, rates, and conditions<br>must be the same as those applicable to comparable business placed with the<br>controlled insurer by an insurance broker other than the controlling insurance<br>broker.Page No. 2h.The rates and terms of the controlling insurance broker's commissions,<br>charges, or other fees and the purposes for those charges or fees. The rates of<br>the commissions, charges, and other fees must be no greater than those<br>applicable to comparable business placed with the controlled insurer by<br>insurance brokers other than controlling insurance brokers. For purposes of<br>this subdivision and subdivision g, examples of "comparable business" include<br>the same lines of insurance, same kinds of insurance, same kinds of risks,<br>similar policy limits, and similar quality of business.i.If the contract provides that the controlling insurance broker, on insurance<br>business placed with the insurer, is to be compensated contingent upon the<br>insurer's profits on that business, then such compensation may not be<br>determined and paid until at least five years after the premiums on liability<br>insurance are earned and at least one year after the premiums are earned on<br>any other insurance.In no event may the commissions be paid until theadequacy of the controlled insurer's reserves on remaining claims has been<br>independently verified pursuant to subdivision a of subsection 4.j.A limit on the controlling insurance broker's writings in relation to the controlled<br>insurer's surplus and total writings. The insurer may establish a different limit<br>for each line or subline of business.The controlled insurer shall notify thecontrolling insurance broker when the applicable limit is approached and may<br>not accept business from the controlling insurance broker if the limit is reached.<br>The controlling insurance broker may not place business with the controlled<br>insurer if it has been notified by the controlled insurer that the limit has been<br>reached.k.The controlling insurance broker may negotiate but may not bind reinsurance<br>on behalf of the controlled insurer on business the controlling insurance broker<br>places with the controlled insurer, except that the controlling insurance broker<br>may bind facultative reinsurance contracts pursuant to obligatory facultative<br>agreements if the contract with the controlled insurer contains underwriting<br>guidelines including, for both reinsurance assumed and ceded, a list of<br>reinsurers with which such automatic agreements are in effect, the coverages<br>and amounts or percentages that may be reinsured, and commission<br>schedules.3.Every controlled insurer shall have an audit committee of the board of directors<br>composed of independent directors. The audit committee shall annually meet with<br>management, the insurer's independent certified public accountants, and an<br>independent casualty actuary or other independent loss reserve specialist<br>acceptable to the commissioner to review the adequacy of the insurer's loss<br>reserves.4.a.In addition to any other required loss reserve certification, the controlled insurer<br>shall annually, on April first of each year, file with the commissioner an opinion<br>of an independent casualty actuary, or such other independent loss reserve<br>specialist acceptable to the commissioner, reporting loss ratios for each line of<br>business written and attesting to the adequacy of loss reserves established for<br>losses incurred and outstanding as of yearend, including incurred but not<br>reported, on business placed by the insurance broker.b.The controlled insurer shall annually report to the commissioner the amount of<br>commissions paid to the insurance broker, the percentage such amount<br>represents of the net premiums written, and comparable amounts and<br>percentage paid to noncontrolling insurance brokers for placements of the<br>same kinds of insurance.Page No. 326.1-26.5-04. Disclosure. The insurance broker, prior to the effective date of the policy,shall deliver written notice to the prospective insured disclosing the relationship between the<br>insurance broker and the controlled insurer, except that, if the business is placed through an<br>insurance broker who is not a controlling insurance broker, the controlling insurance broker shall<br>retain a signed commitment from the insurance broker that the insurance broker is aware of the<br>relationship between the insurer and the insurance broker and that the insurance broker has or<br>will notify the insured.26.1-26.5-05. Liability of controlling insurance broker in the event of insolvency ofcontrolled insurer.If the commissioner has reason to believe that a controlling insurancebroker has committed or is committing an act which could be determined to be a violation, and<br>that the violation substantially contributed to the insolvency of a controlled insurer, the<br>commissioner or receiver may maintain a civil action against the controlling insurance broker for<br>all damages caused by the insurance broker's acts.26.1-26.5-06. Administrative penalties and actions by the commissioner.1.In addition to any other remedies provided herein, whenever it appears to the<br>commissioner that a person has committed or is committing an act that could be<br>determined to be a violation, the commissioner may institute a proceeding under<br>chapter 28-32. After the hearing, the commissioner may order any or all of the<br>following:a.That the person permanently cease and desist from committing the acts found<br>to be in violation of this chapter.b.Payment of a penalty of not more than ten thousand dollars for each and every<br>act or violation.c.That the controlling insurance broker cease placing business with the controlled<br>insurer.2.If it is found, after hearing, that the controlling broker or any other person has not<br>materially complied with this chapter and that the controlled insurer or any<br>policyholder thereof has suffered any loss or damage, the commissioner may<br>maintain a civil action or intervene in an action brought by or on behalf of the insurer<br>or policyholder for recovery of compensatory damages for the benefit of the insurer<br>or policyholder or other appropriate relief.3.If an order for liquidation or rehabilitation of the controlled insurer has been entered<br>pursuant to chapter 26.1-06.1, and the receiver appointed under that order believes<br>that the controlling insurance broker or any other person has not materially complied<br>with this chapter, or any rule or order adopted hereunder, and the insurer suffered<br>any loss or damage therefrom, the receiver may maintain a civil action for recovery<br>of damages or other appropriate sanctions for the benefit of the insurer.4.Nothing contained in this section affects the right of the commissioner to impose any<br>other penalties provided for in the insurance law.5.Nothing contained in this section is intended to or in any manner alters or affects the<br>rights of policyholders, claimants, creditors, or other third parties.26.1-26.5-07.Effective date.Within sixty days of August 1, 1993, each controlledinsurer and each controlling insurance broker must comply with the provisions of sections<br>26.1-26.5-03 and 26.1-26.5-04.Page No. 4Document Outlinechapter 26.1-26.5 insurance broker controlled insurer
