No producer that has control of a licensed property/casualty insurer may directly or indirectly place business with the insurer in any transaction in which the producer, at the time the business is placed, is acting as such on behalf of the insured for any compensation, commission or other thing of value, unless:

(1) There is a written contract between the controlling producer and the insurer, which contract has been approved by the board of directors of the insurer;
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Terms Used In Tennessee Code 56-6-603

  • Commissioner: means the commissioner of commerce and insurance. See Tennessee Code 56-1-102
  • Contract: A legal written agreement that becomes binding when signed.
  • controlled: means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a contract for goods or nonmanagement services, or otherwise. See Tennessee Code 56-6-602
  • Independent casualty actuary: means a casualty actuary who is a member of the American Academy of Actuaries and who is not affiliated with, nor an employee, principal, nor the direct or indirect owner of, or in any way controlled by, the insurer or producer. See Tennessee Code 56-6-602
  • insurer: means a person, firm, association or corporation duly licensed to transact a property/casualty insurance business in this state. See Tennessee Code 56-6-602
  • Producer: means an insurance broker or brokers or any other person, firm, association or corporation, when, for any compensation, commission or other thing of value, the person, firm, association or corporation acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance contract on behalf of an insured other than the person, firm, association or corporation. See Tennessee Code 56-6-602
  • signed: includes a mark, the name being written near the mark and witnessed, or any other symbol or methodology executed or adopted by a party with intention to authenticate a writing or record, regardless of being witnessed. See Tennessee Code 1-3-105
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
  • Year: means a calendar year, unless otherwise expressed. See Tennessee Code 1-3-105
(2) The producer, prior to the effective date of the policy, delivers written notice to the prospective insured disclosing the relationship between the producer and the controlled insurer. The disclosure, signed by the insured, shall be retained in the underwriting file until the filing of the report on examination covering the period in which the coverage is in effect. If the business is placed through a subproducer who is not a controlling producer, the controlling producer shall retain in the controlling producer’s records a signed commitment from the subproducer that the subproducer is aware of the relationship between the insurer and the producer and that the subproducer has or will notify the insured;
(3) All funds collected for the account of the insurer by the controlling producer must be paid, net of commissions, cancellations and other adjustments, to the insurer no less often than quarterly;
(4) In addition to any other required loss reserve certification, the controlled insurer shall annually, on April 1 of each year, file with the commissioner an opinion of an independent casualty actuary, or other independent loss reserve specialist acceptable to the commissioner, reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year end, including incurred but not reported, on business placed by the producer;
(5) The controlled insurer shall annually report to the commissioner the amount of commissions paid to the producer, the percentage the amount represents of the net premiums written and comparable amounts and percentage paid to noncontrolling producers for placements of the same kinds of insurance; and
(6) Every controlled insurer shall have an audit committee of the board of directors composed of independent directors. Prior to approval of the annual financial statement, the audit committee shall meet with management, the insurer’s independent certified public accountants, and an independent casualty actuary, or other independent loss reserve specialist acceptable to the commissioner, to review the adequacy of the insurer’s loss reserves.
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