Sec. 38a-91b. Controlling insurers. Applicability. Minimum provisions.
Sec. 38a-91b. Controlling insurers. Applicability. Minimum provisions. (a) (1)
The provisions of this section shall apply if, in any calendar year, the aggregate amount
of gross written premium on business placed with a controlled insurer by a controlling
producer is equal to or greater than five per cent of the admitted assets of the controlled
insurer, as reported in the controlled insurers' quarterly statement filed as of September
thirtieth of the prior year.
(2) Notwithstanding subdivision (1) of this subsection, the provisions of this section
shall not apply if:
(A) The controlling producer (i) places insurance only with the controlled insurer,
or with the controlled insurer and a member or members of the controlled insurer's
holding company system, or the controlled insurer's parent, affiliate or subsidiary and
receives no compensation based upon the amount of premiums written in connection
with such insurance; and (ii) accepts insurance placements only from nonaffiliated subproducers and not directly from insureds; and
(B) The controlled insurer, except for insurance business written through a residual
market facility accepts insurance business only from a controlling producer, a producer
controlled by the controlled insurer or a producer that is a subsidiary of the controlled
insurer.
(b) A controlled insurer shall not accept business from a controlling producer and
a controlling producer shall not place business with a controlled insurer unless there is
a written contract between the controlling producer and the controlled insurer specifying
the responsibilities of each party, which contract has been approved by the board of
directors of the insurer and contains the following minimum provisions:
(1) 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;
(2) 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;
(3) The controlling producer shall remit all funds due under the terms of the contract
to the controlled insurer on at least a monthly basis. The due date shall be fixed so that
premiums or installments thereof collected shall be remitted no later than ninety days
after the effective date of any policy placed with the controlled insurer under this contract;
(4) 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, in accordance
with the provisions of the insurance law as applicable. 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) The controlling producer shall maintain separate identifiable records of business
written for the controlled insurer;
(6) The contract shall not be assigned in whole or in part by the controlling producer;
(7) The controlled insurer shall provide to the controlling producer 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;
(8) 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 (7) 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;
(9) If the contract provides the controlling producer, on insurance business placed
with the insurer, 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 (1) of subsection (d) of this section;
(10) The insurer may establish a different limit for each line or subline 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; and
(11) 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 underwriting 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.
(c) Every 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.
(d) (1) In addition to any other required loss reserve certification, the controlled
insurer shall annually, on April first 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
controlling producer; and
(2) The controlled insurer shall annually report to the commissioner the amount of
commissions paid to the controlling 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.
(P.A. 92-112, S. 10, 35.)
History: (Revisor's note: In codifying public act 92-112 the words "The rates and terms of the controlling producer's
commissions, charges or other fees and the purposes for those commissions, charges or fees.", and the words "A limit on
the controlling producer's writings in relation to the controlled insurer's surplus and total writings.", were deleted editorially
by the Revisors from the beginning of Subsecs. (b)(8) and (b)(10), respectively, since they were clearly Subdiv. catchlines,
a form not traditionally used in the general statutes. These catchlines were inadvertently included when this legislation
was imported from another jurisdiction and substitute House Bill 5189 was being drafted).