(1) A controlled insurer shall file quarterly financial statements with the Director of the Department of Consumer and Business Services.
(2) Subsections (4) to (7) of this section apply to a controlled insurer and a controlling producer if, in any calendar year, the aggregate amount of gross written premium on insurance placed with a controlled insurer by a controlling producer is equal to or greater than five percent of the allowed assets of the controlled insurer, as reported in the quarterly financial statement of the controlled insurer filed as of September 30 of the prior year.
(3) Subsections (4) to (7) of this section do not apply to a controlled insurer and a controlling producer if:
(a) The controlling producer places insurance only with the controlled insurer or only with the controlled insurer and a member or members of the holding company system of the controlled insurer or the parent, affiliate or subsidiary of the controlled insurer, and receives no compensation based upon the amount of premiums written in connection with the insurance, and accepts insurance placements only from nonaffiliated subproducers and not directly from insureds; and
(b) The controlled insurer, except for insurance written through a residual market facility, accepts insurance placements only from a controlling producer, an insurance producer controlled by the controlled insurer or an insurance producer that is a subsidiary of the controlled insurer.
(4) A controlled insurer shall not accept insurance placements from a controlling producer, and a controlling producer shall not place insurance with a controlled insurer, unless there is a written contract between the controlling producer and the insurer that complies with the requirements of this subsection. The contract must be approved by the board of directors of the insurer before it becomes effective. The contract must specify the responsibilities of each party and contain the following minimum provisions:
(a) A provision authorizing the controlled insurer to terminate the contract for cause, upon written notice to the controlling producer, and requiring the controlled insurer to suspend the authority of the controlling producer to write insurance during the pendency of any dispute regarding the cause for the termination.
(b) A provision requiring the controlling producer to 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) A provision requiring the controlling producer to remit all funds due under the terms of the contract to the controlled insurer on at least a monthly basis. The due date must be fixed so that premiums or installments thereof collected are remitted not later than the 90th day after the effective date of any policy placed with the controlled insurer under the contract.
(d) A provision requiring that all funds collected for the controlled insurer’s account be held by the controlling producer in a fiduciary capacity, in one or more appropriately identified trust accounts in accordance with ORS 744.083. ORS 744.084 does not apply for purposes of this paragraph. If a controlling producer is not required to be licensed in this state, the contract must require that the funds of the controlling producer be maintained in compliance with the requirements of the domiciliary jurisdiction of the controlling producer.
(e) A provision requiring the controlling producer to maintain separately identifiable records of insurance written for the controlled insurer.
(f) A provision prohibiting the contract from being assigned in whole or in part by the controlling producer.
(g) A provision requiring the controlled insurer to 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 provision under this paragraph must also require the controlling producer to adhere to the standards, rules, procedures, rates and conditions, and must require the standards, rules, procedures, rates and conditions to be the same as those applicable to comparable business placed with the controlled insurer by an insurance producer other than the controlling producer.
(h) A provision establishing the rates and terms of the controlling producer’s commissions, charges or other fees and the purposes for those charges or fees. The rates of the commissions, charges and other fees must not be greater than those applicable to comparable business placed with the controlled insurer by insurance producers other than controlling producers. For purposes of this paragraph and paragraph (g) 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.
(i) If the contract provides that the controlling producer, on insurance placed with the insurer, is to be compensated contingent upon the insurer’s profits on that insurance, a provision that the compensation must not be determined and paid until at least five years after the premiums on casualty insurance are earned and at least one year after the premiums are earned on any other insurance. The provision under this paragraph must also require that the commissions not be paid until the adequacy of the controlled insurer’s reserves on remaining claims has been independently verified pursuant to subsection (6) of this section.
(j) A provision establishing a limit on insurance written by the controlling producer in relation to the surplus and total insurance transacted by the controlled insurer. The insurer may establish a different limit for each line or subline of insurance. The provision under this paragraph:
(A) Must require the controlled insurer to notify the controlling producer when the applicable limit is approached and prohibit the controlled insurer from accepting insurance from the controlling producer if the limit is reached.
(B) Must prohibit the controlling producer from placing insurance with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached.
(k) A provision that the controlling producer may negotiate but shall not bind reinsurance on behalf of the controlled insurer on insurance 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 underwriting guidelines including, for reinsurance assumed and for reinsurance 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.
(5) A controlled insurer must have an audit committee of the board of directors composed of independent directors. The audit committee shall meet annually with management, the independent certified public accountants of the insurer and an independent casualty actuary or other independent loss reserve specialist acceptable to the director to review the adequacy of the loss reserves of the insurer.
(6) In addition to any other required loss reserve certification, on April 1 of each year, a controlled insurer shall file with the director an opinion of an independent casualty actuary, or an independent loss reserve specialist that is acceptable to the director, reporting loss ratios for each line of insurance written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year end, including losses incurred but not reported, on insurance placed by the insurance producer.
(7) A controlled insurer shall annually report to the director the amount of commissions paid to the insurance producer, the percentage such amount represents of the net premiums written and comparable amounts and percentage paid to noncontrolling producers for placements of the same kinds of insurance. [1993 c.447 §60; 2003 c.364 §83]
Note: See note under 732.810.
Section: Previous 732.630 732.635 732.645 732.655 732.665 732.675 732.685 732.695 732.705 732.810 732.811 732.812 732.813 732.814 732.990 NextLast modified: August 7, 2008