§4818. Contract required

Link to law: http://legislature.vermont.gov/statutes/section/08/131/04818
Published: 2015

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The Vermont Statutes Online



Title

08

:
Banking and Insurance






Chapter

131

:
LICENSING REQUIREMENTS






Subchapter

002
:
REGULATION OF MANAGING GENERAL AGENTS, REINSURANCE INTERMEDIARIES, AND PRODUCER CONTROLLED INSURERS










 

§

4818. Contract required

(a) No person

shall transact business with a managing general agent, a reinsurance

intermediary-manager, or a controlling producer as qualified by section 4816 of

this title unless there is in force a written contract between the parties

which sets forth the respective responsibilities of each party and where both

parties share responsibility for a particular function, specifies the division

of such responsibilities. The contract must be approved by the board of

directors of a reinsurer represented by a reinsurance intermediary-manager or

the board of directors of a controlled insurer. At least 30 days before such

reinsurer assumes or cedes business through such manager, or reinsurance

intermediary, a true copy of the approved contract shall be filed with the

Commissioner for approval.

(b) The contract

required under subsection (a) of this section shall contain the following

minimum provisions:

(1) The contract

may be terminated by the insurer or reinsurer for cause upon written notice.

(2) The

authority to write business, underwrite, assume, or cede business, or settle

claims may be suspended by the insurer or reinsurer during the pendency of any

dispute regarding the cause for termination.

(3) All funds

due under the contract shall be remitted not less than monthly together with an

accounting; however, the due date shall be fixed so that premiums or

installments thereof collected shall be remitted no later than 90 days after

the effective date of any policy for which the funds are collected.

(4) All funds

collected for an insurer or reinsurer under the contract shall be held in a

fiduciary capacity in a financial institution approved by the Commissioner;

however, funds of a controlling producer not required to be licensed in this

State shall be maintained in compliance with the requirements of the

controlling producer's domiciliary jurisdiction.

(5) Separate

records of all business written under the contract shall be maintained. The

contracting insurer or reinsurer shall have access to and the right to copy all

accounts and records related to its business in a form usable by the insurer or

reinsurer.

(6) The contract

may not be assigned in whole or in part.

(7) The required

use of underwriting, rating, or reinsurance underwriting standards formulated

by the insurer or reinsurer when underwriting or reinsurance underwriting

authority is transferred to a party to the contract.

(8) The required

use of a claims handling or settlement procedure formulated by the insurer or

reinsurer when claims handling or settlement authority is transferred to a

party to the contract.

(9) The insurer

shall have the right to cancel or nonrenew any policy of insurance subject to

any applicable laws and regulations.

(10) The

required use of written standards established by the insurer for the cession or

retrocession of all risks when ceding or retroceding authority is transferred

to a party to the contract.

(11) The

managing general agent, reinsurance intermediary-manager, or controlling

producer shall not bind or cede reinsurance on behalf of the insurer,

reinsurer, or controlled insurer, except for facultative reinsurance contracts

pursuant to obligatory facultative agreements if the contract contains

reinsurance underwriting guidelines for reinsurance ceded and assumed. The

guidelines must list the reinsurers with which such automatic agreements are in

effect, the coverages and amounts or percentages that may be reinsured and

commission schedules.

(c) Transactions

between a reinsurance intermediary broker and the insurer it represents in such

capacity shall only be entered into pursuant to a written authorization

specifying the responsibilities of each party. The authorization shall, at a

minimum, provide that:

(1) The insurer

may terminate the reinsurance intermediary broker's authority at any time.

(2) The

reinsurance intermediary broker will render accounts to the insurer accurately

detailing all material transactions, including information necessary to support

all commissions, charges, and other fees received by or owing to the

reinsurance intermediary broker, and remit all funds due to the insurer within

30 days of receipt.

(3) All funds

collected for the insurer's account will be held by the reinsurance

intermediary broker in a fiduciary capacity in a financial institution approved

by the Commissioner.

(4) The

reinsurance intermediary broker will comply with subsection 4821(c) of this

title.

(5) The

reinsurance intermediary broker will comply with the written standards

established by the insurer for the cession or retrocession of all risks.

(6) The

reinsurance intermediary broker will disclose to the insurer any relationship

with any reinsurer to which business will be ceded or retroceded. (Added 1991,

No. 249 (Adj. Sess.), § 18, eff. Jan. 1, 1993; amended 1993, No. 12, § 8, eff.

April 26, 1993; 2005, No. 122 (Adj. Sess.), § 1.)
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