Louisiana Revised Statutes 22:1727 – Required contract provisions for reinsurance intermediary-managers
Terms Used In Louisiana Revised Statutes 22:1727
- Contract: A legal written agreement that becomes binding when signed.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Fiduciary: A trustee, executor, or administrator.
- Insurer: shall mean any authorized insurer as defined in Louisiana Revised Statutes 22:1722
- Reinsurance intermediary-manager: shall mean any person who has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer, including the management of a separate division, department, or underwriting office, and acts as an agent for such reinsurer, whether known as a reinsurance intermediary-manager, manager, or other similar term. See Louisiana Revised Statutes 22:1722
- Reinsurer: shall mean any person duly licensed in this state, pursuant to the applicable provisions of this Code, as an insurer with the authority to assume reinsurance. See Louisiana Revised Statutes 22:1722
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
A. Any transactions between a reinsurance intermediary-manager and the reinsurer represented in its capacity shall be entered into only pursuant to a written contract, specifying the responsibilities of each party, which shall be approved by the board of directors of the reinsurer. At least thirty days before the reinsurer assumes or cedes business through the producer, a true copy of the approved contract shall be filed with the commissioner for approval. The contract shall, at a minimum, provide that:
(1) The reinsurer may terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may immediately suspend the authority of the reinsurance intermediary-manager to assume or cede business while any dispute regarding the cause for termination is pending.
(2) The reinsurance intermediary-manager shall render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to the reinsurance intermediary-manager, and remit all funds due under the contract to the reinsurer at least monthly.
(3) All funds collected for the account of the reinsurer shall be held by the reinsurance intermediary-manager in a fiduciary capacity in a bank which is a qualified United States financial institution as defined herein. The reinsurance intermediary-manager may retain no more than three months estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer that it represents.
(4) For at least ten years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, the reinsurance intermediary-manager shall keep a complete record for each transaction showing:
(a) The type of contract, limits, underwriting restrictions, classes or risks and territory.
(b) Period of coverage, including effective and expiration dates, cancellation provisions and notice required of cancellation, and disposition of outstanding reserves on covered risks.
(c) Reporting and settlement requirements of balances.
(d) Rate used to compute the reinsurance premium.
(e) Names and addresses of reinsurers.
(f) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager.
(g) Related correspondence and memoranda.
(h) Proof of placement.
(i) Details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted by La. Rev. Stat. 22:1729(D), including the identity of retrocessionaires and percentage of each contract assumed or ceded.
(j) Financial records, including but not limited to premium and loss accounts.
(k) When the reinsurance intermediary-manager places 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.
(ii) If placed through a representative of the assuming reinsurer, other than an employee, written evidence that such reinsurer has delegated binding authority to the representative.
(5) The reinsurer will have access to and the right to copy all accounts and records maintained by the reinsurance intermediary-manager related to its business in a form usable by the reinsurer.
(6) The contract cannot be assigned in whole or in part by the reinsurance intermediary-manager.
(7) The reinsurance intermediary-manager shall comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks.
(8) The contract sets forth the rates, terms, and purposes of commissions, charges, and other fees which the reinsurance intermediary-manager may levy against the reinsurer.
B. If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer:
(1) All claims shall be reported to the reinsurer in a timely manner.
(2) A copy of the claim file shall be sent to the reinsurer at its request or as soon as it becomes known that the claim:
(a) Has the potential to exceed the lesser of:
(i) An amount determined by the commissioner; or
(ii) The limit set by the reinsurer;
(b) Involves a coverage dispute;
(c) May exceed the claims settlement authority of the reinsurance intermediary-manager;
(d) Is open for more than six months; or
(e) Is closed by payment of the lesser of:
(i) An amount set by the commissioner; or
(ii) An amount set by the reinsurer.
(3) All claim files shall be the joint property of the reinsurer and the reinsurance intermediary-manager. However, upon an order of liquidation of the reinsurer, such files shall become the sole property of the reinsurer or its estate. The reinsurance intermediary-manager shall have reasonable access to and the right to copy such files on a timely basis.
(4) Any settlement authority granted to the reinsurance intermediary-manager may be terminated for cause upon the written notice by the reinsurer to the reinsurance intermediary-manager or upon the termination of the contract. The reinsurer may suspend such settlement authority while any dispute regarding the cause of termination is pending.
C. If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, that such interim profits shall not be paid until one year after the end of each underwriting period for property business and five years after the end of each underwriting period for casualty business, or for such longer period as may be specified by the commissioner, and not until the adequacy of reserves on remaining claims has been verified pursuant to La. Rev. Stat. 22:1729(C).
D. The reinsurance intermediary-manager shall annually provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant.
E. The reinsurer shall conduct an on-site review of the underwriting and claims processing operations of the reinsurance intermediary-manager, at least semiannually.
F. The reinsurance intermediary-manager shall disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with the insurer pursuant to the contract.
G. Within the scope of its actual or apparent authority, the acts of the reinsurance intermediary-manager shall be deemed to be the acts of the reinsurer on whose behalf it is acting.
Acts 1992, No. 811, §1; Redesignated from La. Rev. Stat. 22:1210.26 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009; Acts 2011, No. 94, §1, eff. Jan. 1, 2012.