A. The provisions of this section shall apply if, in any calendar year, theaggregate amount of gross written premium on business placed with acontrolled insurer by a controlling producer is equal to or greater than fivepercent of the admitted assets of the controlled insurer, as reported in thecontrolled insurer's quarterly statement filed as of September 30 of theprior year.
B. Notwithstanding the provisions of subsection A of this section, theprovisions of subsections A, C, D and E of this section shall not apply if:
1. The controlling producer (i) places insurance only with the controlledinsurer, or only with the controlled insurer and a member or members of thecontrolled insurer's holding company system, or the controlled insurer'sparent, affiliate or subsidiary and receives no compensation based upon theamount of premiums written in connection with such insurance and (ii) acceptsinsurance placements only from nonaffiliated subproducers and not directlyfrom insureds; and
2. The controlled insurer, except for insurance business written through aresidual market facility such as the Virginia Automobile Insurance Plan, asset forth in § 38.2-2015, or the Virginia Property Insurance Association, asset forth in Chapter 27 (§ 38.2-2700 et seq.), accepts insurance businessonly from a controlling producer, a producer controlled by the controlledinsurer, or a producer that is a subsidiary of the controlled insurer.
C. A controlled insurer shall not accept business from a controlling producerand a controlling producer shall not place business with a controlled insurerunless there is a written contract between them specifying theresponsibilities of each party, which contract has been approved by the boardof directors of the insurer and contains the following minimum provisions:
1. The controlled insurer may terminate the contract for cause, upon writtennotice to the controlling producer. The controlled insurer shall suspend theauthority of the controlling producer to write business during the pendencyof any dispute regarding the cause for the termination;
2. The controlling producer shall render accounts to the controlled insurerdetailing all material transactions, including information necessary tosupport all commissions, charges and other fees received by, or owing to, thecontrolling producer;
3. The controlling producer shall remit all funds due under the terms of thecontract to the controlled insurer on at least a monthly basis. The due dateshall be fixed so that premiums or installments thereof collected shall beremitted no later than ninety days after the effective date of any policyplaced with the controlled insurer under this contract;
4. All funds collected for the controlled insurer's account shall be held bythe controlling producer in a fiduciary capacity, in one or moreappropriately identified bank accounts in banks that are members of theFederal Reserve System, in accordance with the provisions of the insurancelaw as applicable. However, funds of a controlling producer not required tobe licensed in this Commonwealth shall be maintained in compliance with therequirements of the controlling producer's domiciliary jurisdiction;
5. The controlling producer shall maintain separately identifiable records ofbusiness written for the controlled insurer;
6. The contract shall not be assigned in whole or in part by the controllingproducer;
7. The controlled insurer shall provide the controlling producer with itsunderwriting standards, rules and procedures, manuals setting forth the ratesto be charged, and the conditions for the acceptance or rejection of risks.The controlling producer shall adhere to the standards, rules, procedures,rates and conditions. The standards, rules, procedures, rates and conditionsshall be the same as those applicable to comparable business placed with thecontrolled insurer by a producer other than the controlling producer;
8. The rates and terms of the controlling producer's commissions, charges orother fees and the purposes for those charges or fees shall be specified.The rates of the commissions, charges and other fees shall be no greater thanthose applicable to comparable business placed with the controlled insurer byproducers other than controlling producers. For purposes of this subdivisionand subdivision 7 of this subsection, examples of "comparable business"include the same lines of insurance, same kinds of insurance, same kinds ofrisks, similar policy limits, and similar quality of business;
9. If the contract provides that the controlling producer, on insurancebusiness placed with the insurer, is to be compensated contingent upon theinsurer's profits on that business, then such compensation shall not bedetermined and paid until at least five years after the premiums on liabilityinsurance are earned and at least one year after the premiums are earned onany other insurance. In no event shall the commissions be paid until theadequacy of the controlled insurer's reserves on remaining claims has beenindependently verified pursuant to subdivision 1 of subsection E of thissection;
10. The contract shall place a limit on the controlling producer's writingsin relation to the controlled insurer's surplus and total writings. Theinsurer may establish a different limit for each line or sub-line ofbusiness. The controlled insurer shall notify the controlling producer whenthe applicable limit is approached and shall not accept business from thecontrolling producer if the limit is reached. The controlling producer shallnot place business with the controlled insurer if it has been notified by thecontrolled insurer that the limit has been reached; and
11. The controlling producer may negotiate but shall not bind reinsurance onbehalf of the controlled insurer on business the controlling producer placeswith the controlled insurer, except that the controlling producer may bindfacultative reinsurance contracts pursuant to obligatory facultativeagreements if the contract with the controlled insurer contains underwritingguidelines including, for both reinsurance assumed and ceded, a list ofreinsurers with which such automatic agreements are in effect, the coveragesand amounts or percentages that may be reinsured and commission schedules.
D. Every controlled insurer shall have an Audit Committee of the Board ofDirectors composed of independent directors. The Audit Committee shallannually meet with management, the insurer's independent certified publicaccountants, and an independent casualty actuary or other independent lossreserve specialist acceptable to the Commission to review the adequacy of theinsurer's loss reserves.
E. The controlled insurer shall obtain annually prior to March 1 of each yearthe following data and reports:
1. In addition to any other required loss reserve certification, an opinionof an independent casualty actuary reporting loss ratios for each line ofbusiness written and attesting to the adequacy of loss reserves establishedfor losses incurred and outstanding as of year's end (including incurred butnot reported) on business placed by the producer; and
2. The controlled insurer shall annually report to the Commission the amountof commissions paid to the producer during the preceding calendar year, thepercentage such amount represents of the net premiums written and comparableamounts and percentage paid to noncontrolling producers for placements of thesame kinds of insurance.
The data and reports required by this subsection shall be retained by theinsurer for a period of not less than five years and shall be filed with theCommission upon request.
A. The provisions of this section shall apply if, in any calendar year, theaggregate amount of gross written premium on business placed with acontrolled insurer by a controlling producer is equal to or greater than fivepercent of the admitted assets of the controlled insurer, as reported in thecontrolled insurer's quarterly statement filed as of September 30 of theprior year.
B. Notwithstanding the provisions of subsection A of this section, theprovisions of subsections A, C, D and E of this section shall not apply if:
1. The controlling producer (i) places insurance only with the controlledinsurer, or only with the controlled insurer and a member or members of thecontrolled insurer's holding company system, or the controlled insurer'sparent, affiliate or subsidiary and receives no compensation based upon theamount of premiums written in connection with such insurance and (ii) acceptsinsurance placements only from nonaffiliated subproducers and not directlyfrom insureds; and
2. The controlled insurer, except for insurance business written through aresidual market facility such as the Virginia Automobile Insurance Plan, asset forth in § 38.2-2015, or the Virginia Property Insurance Association, asset forth in Chapter 27 (§ 38.2-2700 et seq.), accepts insurance businessonly from a controlling producer, a producer controlled by the controlledinsurer, or a producer that is a subsidiary of the controlled insurer.
C. A controlled insurer shall not accept business from a controlling producerand a controlling producer shall not place business with a controlled insurerunless there is a written contract between them specifying theresponsibilities of each party, which contract has been approved by the boardof directors of the insurer and contains the following minimum provisions:
1. The controlled insurer may terminate the contract for cause, upon writtennotice to the controlling producer. The controlled insurer shall suspend theauthority of the controlling producer to write business during the pendencyof any dispute regarding the cause for the termination;
2. The controlling producer shall render accounts to the controlled insurerdetailing all material transactions, including information necessary tosupport all commissions, charges and other fees received by, or owing to, thecontrolling producer;
3. The controlling producer shall remit all funds due under the terms of thecontract to the controlled insurer on at least a monthly basis. The due dateshall be fixed so that premiums or installments thereof collected shall beremitted no later than ninety days after the effective date of any policyplaced with the controlled insurer under this contract;
4. All funds collected for the controlled insurer's account shall be held bythe controlling producer in a fiduciary capacity, in one or moreappropriately identified bank accounts in banks that are members of theFederal Reserve System, in accordance with the provisions of the insurancelaw as applicable. However, funds of a controlling producer not required tobe licensed in this Commonwealth shall be maintained in compliance with therequirements of the controlling producer's domiciliary jurisdiction;
5. The controlling producer shall maintain separately identifiable records ofbusiness written for the controlled insurer;
6. The contract shall not be assigned in whole or in part by the controllingproducer;
7. The controlled insurer shall provide the controlling producer with itsunderwriting standards, rules and procedures, manuals setting forth the ratesto be charged, and the conditions for the acceptance or rejection of risks.The controlling producer shall adhere to the standards, rules, procedures,rates and conditions. The standards, rules, procedures, rates and conditionsshall be the same as those applicable to comparable business placed with thecontrolled insurer by a producer other than the controlling producer;
8. The rates and terms of the controlling producer's commissions, charges orother fees and the purposes for those charges or fees shall be specified.The rates of the commissions, charges and other fees shall be no greater thanthose applicable to comparable business placed with the controlled insurer byproducers other than controlling producers. For purposes of this subdivisionand subdivision 7 of this subsection, examples of "comparable business"include the same lines of insurance, same kinds of insurance, same kinds ofrisks, similar policy limits, and similar quality of business;
9. If the contract provides that the controlling producer, on insurancebusiness placed with the insurer, is to be compensated contingent upon theinsurer's profits on that business, then such compensation shall not bedetermined and paid until at least five years after the premiums on liabilityinsurance are earned and at least one year after the premiums are earned onany other insurance. In no event shall the commissions be paid until theadequacy of the controlled insurer's reserves on remaining claims has beenindependently verified pursuant to subdivision 1 of subsection E of thissection;
10. The contract shall place a limit on the controlling producer's writingsin relation to the controlled insurer's surplus and total writings. Theinsurer may establish a different limit for each line or sub-line ofbusiness. The controlled insurer shall notify the controlling producer whenthe applicable limit is approached and shall not accept business from thecontrolling producer if the limit is reached. The controlling producer shallnot place business with the controlled insurer if it has been notified by thecontrolled insurer that the limit has been reached; and
11. The controlling producer may negotiate but shall not bind reinsurance onbehalf of the controlled insurer on business the controlling producer placeswith the controlled insurer, except that the controlling producer may bindfacultative reinsurance contracts pursuant to obligatory facultativeagreements if the contract with the controlled insurer contains underwritingguidelines including, for both reinsurance assumed and ceded, a list ofreinsurers with which such automatic agreements are in effect, the coveragesand amounts or percentages that may be reinsured and commission schedules.
D. Every controlled insurer shall have an Audit Committee of the Board ofDirectors composed of independent directors. The Audit Committee shallannually meet with management, the insurer's independent certified publicaccountants, and an independent casualty actuary or other independent lossreserve specialist acceptable to the Commission to review the adequacy of theinsurer's loss reserves.
E. The controlled insurer shall obtain annually prior to March 1 of each yearthe following data and reports:
1. In addition to any other required loss reserve certification, an opinionof an independent casualty actuary reporting loss ratios for each line ofbusiness written and attesting to the adequacy of loss reserves establishedfor losses incurred and outstanding as of year's end (including incurred butnot reported) on business placed by the producer; and
2. The controlled insurer shall annually report to the Commission the amountof commissions paid to the producer during the preceding calendar year, thepercentage such amount represents of the net premiums written and comparableamounts and percentage paid to noncontrolling producers for placements of thesame kinds of insurance.
The data and reports required by this subsection shall be retained by theinsurer for a period of not less than five years and shall be filed with theCommission upon request.
A. The provisions of this section shall apply if, in any calendar year, theaggregate amount of gross written premium on business placed with acontrolled insurer by a controlling producer is equal to or greater than fivepercent of the admitted assets of the controlled insurer, as reported in thecontrolled insurer's quarterly statement filed as of September 30 of theprior year.
B. Notwithstanding the provisions of subsection A of this section, theprovisions of subsections A, C, D and E of this section shall not apply if:
1. The controlling producer (i) places insurance only with the controlledinsurer, or only with the controlled insurer and a member or members of thecontrolled insurer's holding company system, or the controlled insurer'sparent, affiliate or subsidiary and receives no compensation based upon theamount of premiums written in connection with such insurance and (ii) acceptsinsurance placements only from nonaffiliated subproducers and not directlyfrom insureds; and
2. The controlled insurer, except for insurance business written through aresidual market facility such as the Virginia Automobile Insurance Plan, asset forth in § 38.2-2015, or the Virginia Property Insurance Association, asset forth in Chapter 27 (§ 38.2-2700 et seq.), accepts insurance businessonly from a controlling producer, a producer controlled by the controlledinsurer, or a producer that is a subsidiary of the controlled insurer.
C. A controlled insurer shall not accept business from a controlling producerand a controlling producer shall not place business with a controlled insurerunless there is a written contract between them specifying theresponsibilities of each party, which contract has been approved by the boardof directors of the insurer and contains the following minimum provisions:
1. The controlled insurer may terminate the contract for cause, upon writtennotice to the controlling producer. The controlled insurer shall suspend theauthority of the controlling producer to write business during the pendencyof any dispute regarding the cause for the termination;
2. The controlling producer shall render accounts to the controlled insurerdetailing all material transactions, including information necessary tosupport all commissions, charges and other fees received by, or owing to, thecontrolling producer;
3. The controlling producer shall remit all funds due under the terms of thecontract to the controlled insurer on at least a monthly basis. The due dateshall be fixed so that premiums or installments thereof collected shall beremitted no later than ninety days after the effective date of any policyplaced with the controlled insurer under this contract;
4. All funds collected for the controlled insurer's account shall be held bythe controlling producer in a fiduciary capacity, in one or moreappropriately identified bank accounts in banks that are members of theFederal Reserve System, in accordance with the provisions of the insurancelaw as applicable. However, funds of a controlling producer not required tobe licensed in this Commonwealth shall be maintained in compliance with therequirements of the controlling producer's domiciliary jurisdiction;
5. The controlling producer shall maintain separately identifiable records ofbusiness written for the controlled insurer;
6. The contract shall not be assigned in whole or in part by the controllingproducer;
7. The controlled insurer shall provide the controlling producer with itsunderwriting standards, rules and procedures, manuals setting forth the ratesto be charged, and the conditions for the acceptance or rejection of risks.The controlling producer shall adhere to the standards, rules, procedures,rates and conditions. The standards, rules, procedures, rates and conditionsshall be the same as those applicable to comparable business placed with thecontrolled insurer by a producer other than the controlling producer;
8. The rates and terms of the controlling producer's commissions, charges orother fees and the purposes for those charges or fees shall be specified.The rates of the commissions, charges and other fees shall be no greater thanthose applicable to comparable business placed with the controlled insurer byproducers other than controlling producers. For purposes of this subdivisionand subdivision 7 of this subsection, examples of "comparable business"include the same lines of insurance, same kinds of insurance, same kinds ofrisks, similar policy limits, and similar quality of business;
9. If the contract provides that the controlling producer, on insurancebusiness placed with the insurer, is to be compensated contingent upon theinsurer's profits on that business, then such compensation shall not bedetermined and paid until at least five years after the premiums on liabilityinsurance are earned and at least one year after the premiums are earned onany other insurance. In no event shall the commissions be paid until theadequacy of the controlled insurer's reserves on remaining claims has beenindependently verified pursuant to subdivision 1 of subsection E of thissection;
10. The contract shall place a limit on the controlling producer's writingsin relation to the controlled insurer's surplus and total writings. Theinsurer may establish a different limit for each line or sub-line ofbusiness. The controlled insurer shall notify the controlling producer whenthe applicable limit is approached and shall not accept business from thecontrolling producer if the limit is reached. The controlling producer shallnot place business with the controlled insurer if it has been notified by thecontrolled insurer that the limit has been reached; and
11. The controlling producer may negotiate but shall not bind reinsurance onbehalf of the controlled insurer on business the controlling producer placeswith the controlled insurer, except that the controlling producer may bindfacultative reinsurance contracts pursuant to obligatory facultativeagreements if the contract with the controlled insurer contains underwritingguidelines including, for both reinsurance assumed and ceded, a list ofreinsurers with which such automatic agreements are in effect, the coveragesand amounts or percentages that may be reinsured and commission schedules.
D. Every controlled insurer shall have an Audit Committee of the Board ofDirectors composed of independent directors. The Audit Committee shallannually meet with management, the insurer's independent certified publicaccountants, and an independent casualty actuary or other independent lossreserve specialist acceptable to the Commission to review the adequacy of theinsurer's loss reserves.
E. The controlled insurer shall obtain annually prior to March 1 of each yearthe following data and reports:
1. In addition to any other required loss reserve certification, an opinionof an independent casualty actuary reporting loss ratios for each line ofbusiness written and attesting to the adequacy of loss reserves establishedfor losses incurred and outstanding as of year's end (including incurred butnot reported) on business placed by the producer; and
2. The controlled insurer shall annually report to the Commission the amountof commissions paid to the producer during the preceding calendar year, thepercentage such amount represents of the net premiums written and comparableamounts and percentage paid to noncontrolling producers for placements of thesame kinds of insurance.
The data and reports required by this subsection shall be retained by theinsurer for a period of not less than five years and shall be filed with theCommission upon request.
