Title 8: Banking and Insurance
Chapter 131: LICENSING REQUIREMENTS
Sub-Chapter 002: Regulation Of Managing General Agents, Reinsurance Intermediaries, And Producer Controlled Insurers
8 V.S.A. § 4818. Contract required
§ 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.)