Subject 120-2-64 PRODUCER CONTROLLED PROPERTY AND CASUALTY INSURERS REGULATION
The purpose of this regulation is to provide minimum
standards for contracts between controlling producers and controlled
insurers.
The contract between controlled insurer and controlling
producer must be in writing, must be approved by the board of directors, and
must contain the following minimum provisions:
| (a) |
The controlled insurer may terminate the
contract for cause, upon written notice to the controlling producer. The
controlled insurer shall suspend the authority of the controlling producer to
write business during the pendency of any dispute regarding the cause for the
termination; |
| (b) |
The Controlling
producer shall render accounts to the controlled insurer detailing all material
transactions, including information necessary to support all commissions,
charges and other fees received by, or owing to, the controlling
producer; |
| (c) |
All funds collected
for the controlled insurer's account shall be held by the controlling producer
in a fiduciary capacity, in one or more appropriately identified bank accounts
in banks that are members of the Federal Reserve System. (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); |
| (d) |
The
controlling producer shall maintain separately identifiable records of business
written for the controlled insurer; |
| (e) |
The contract shall not be assigned in
whole or in part by the controlling producer; |
| (f) |
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; |
| (g) |
The
rates and terms of the controlling producer's commissions 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
subparagraph and subparagraph (f) above, examples of comparable business"
include the same line of insurance, same kinds of insurance, same kinds of
risks, similar policy limits, and similar quality of business; |
| (h) |
If the contract provides that the
controlling producer, on insurance business placed with the insurer, is to be
compensated contingent upon the insurers profits on that business, then such
compensation shall not be determined and paid until at least five (5) years
after the premiums on liability insurance are earned and at least one (1) 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 O.C.G.A. Sec.
33-48-3(a)(4); |
| (i) |
The controlled insurer shall establish
limits on the controlling producer's writings in relation to the 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;
and |
| (j) |
The controlling producer
may negotiate but shall not bind reinsurance on behalf of the controlled
insurer on business the controlling producer places with the controlled
insurer, except that the controlling producer may bind facultative reinsurance
contracts pursuant to obligatory facultative agreements if the contract with
the controlled insurer contains under writing guidelines including, for both
reinsurance assumed and ceded, a list of reinsurers with which such automatic
agreements are in effect, the coverages and amounts or percentages that may be
reinsured and commission schedules. |
If any section or portion of a section of this Regulation or
application thereof to any insurer, producer, or circumstances is held invalid
by a court of competent jurisdiction, the remainder of the rules or the
applicability of such provisions to other insurers, producers, or
circumstances, shall not be affected thereby.
Any controlling producer or controlled insurer failing to
comply with the requirements of this Regulation shall be subject to such
penalties as prescribed by O.C.G.A. Sec.
33-48-4.
