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Subject 120-2-64 PRODUCER CONTROLLED PROPERTY AND CASUALTY INSURERS REGULATION

Rule 120-2-64-.01 Purpose

The purpose of this regulation is to provide minimum standards for contracts between controlling producers and controlled insurers.

Rule 120-2-64-.02 Required Contract Provisions

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.

Rule 120-2-64-.03 Severability

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.

Rule 120-2-64-.04 Penalties

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.