§ 4824. Other requirements of controlling producers
(a) All provisions of chapter 101, subchapter 13 of this title, to the extent they are
not in conflict with the provisions of this subchapter, shall continue to apply to
all parties within holding company systems subject to this subchapter.
(b)(1) The controlled insurer shall provide the controlling producer with its underwriting
standards, rules, and procedures, manuals setting forth the rates to 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 conditions shall be the same as those applicable to comparable
business placed with the controlled insurer by a producer other than the controlling
producer.
(2) The rates of the commissions, charges, and other fees shall be no greater than those
applicable to comparable business placed with the controlled insurer by producers
other than controlling producers. For purposes of this subdivision and subdivision
(1) of this subsection, examples of “comparable business” include the same lines of
insurance, same kinds of insurance, same kinds of risks, similar policy limits, and
similar quality of business.
(3) If the contract provides that the controlling producer, on insurance business placed
with the insurer, is to be compensated contingent upon the insurer’s profits on that
business, then such compensation shall not be determined and paid until at least five
years after the premiums on liability insurance are earned and at least one year after
the premiums are earned on any other insurance. In no event shall the commissions
be paid until the adequacy of the controlled insurer’s reserves on remaining claims
has been independently verified pursuant to subdivision (6) of this subsection.
(4) A controlled insurer shall limit the controlling producer’s writings in relation to
the controlled insurer’s surplus and total writings. The insurer may establish a different
limit for each line or sub-line of business. The controlled insurer shall notify the
controlling producer when the applicable limit is approached and shall not accept
business from the controlling producer if the limit is reached. The controlling producer
shall not place business with the controlled insurer if it has been notified by the
controlled insurer that the limit has been reached.
(5) A controlled insurer shall have an audit committee of the board of directors composed
of independent directors. The audit committee shall annually 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.
(6) In addition to any other required loss reserve certification, a controlled insurer
shall annually, on April 1 of each year, file with the Commissioner an opinion of
an independent casualty actuary, or such 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.
(7) A controlled insurer shall annually report to the Commissioner the amount of commissions
paid to the producer, the percentage such amount represents of the net premiums written,
and comparable amounts and percentages paid to noncontrolling producers for placements
of the same kinds of insurance.
(8) A controlled insurer shall deliver written notice to the prospective insured disclosing
the relationship between the producer and the controlled insurer; except that, if
the business is placed through a subproducer who is not a controlling producer, the
controlling producer shall retain in his or her 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. (Added 1991, No. 249 (Adj. Sess.), § 18, eff. Jan. 1, 1993.)