Ohio Administrative Code
Title 3901 - Department of Insurance
Chapter 3901-3 - Acquisitions and Mergers; Insurance Holding Company Systems
Section 3901-3-09 - Requirements for domestic insurers employing the services of reinsurance intermediaries
Universal Citation: OH Admin Code 3901-3-09
Current through all regulations passed and filed through September 16, 2024
(A) Purpose
The purpose of this rule is to establish minimum contractual terms between domestic insurers, domestic reinsurers and reinsurance intermediaries. This rule also establishes standards for business assumed by domestic reinsurers through reinsurance intermediaries as reported in their annual statement.
The rule also sets out the information reinsurers and reinsurance intermediaries must maintain for the purpose of examination under section 3901.07 of the Revised Code as "documents of ... other persons that are relevant to [an] examination."
(B) Authority
This rule is promulgated pursuant to the authority vested in the superintendent under sections 3901.041 and 3901.07 of the Revised Code, and division (B) of section 3901.77 of the Revised Code.
(C) Definitions
As used in this rule:
(1) "Insurer" means a person licensed to
operate or to do business in this state under Chapter 1751. of the Revised Code
or Title XXXIX of the Revised Code, who is domiciled in the state of
Ohio.
(2)
"Person" means a person, firm, association or corporation.
(3)
"Qualified United States Financial Institution" means an institution that meets
all of the following conditions:
(a) The
institution is organized or, in the case of a United States office of a foreign
banking organization, licensed, under the laws of the United States or any
state of the United States;
(b) The
institution is regulated, supervised, and examined by authorities of the United
States or any state of the United States having regulatory authority over banks
and trust companies;
(c) The
institution has been determined by either the superintendent of insurance, or
the
"Securities Valuation Office of the National Association of
Insurance Commissioners" (NAIC), to meet such standards of financial
condition and standing as are considered necessary and appropriate to regulate
the quality of financial institutions whose letters of credit will be
acceptable to the superintendent.
(4) "Reinsurance
intermediary" means a reinsurance intermediary-broker or a reinsurance
intermediary-manager.
(5) "Reinsurance
intermediary-broker" means a person, other than an officer or employee of the
ceding insurer, that solicits, negotiates, or places reinsurance cessions or
retrocessions on behalf of a ceding insurer without the authority or power to
bind reinsurance on behalf of such insurer.
(6)
(a) "Reinsurance intermediary-manager" means
a person who has authority to bind or manages all or part of the assumed
reinsurance business of a reinsurer, including the management of a separate
division, department, or underwriting office; and acts as an agent for the
reinsurer whether known as a reinsurance intermediary-manager, manager or other
similar term.
(b) "Reinsurance
intermediary-manager" does not include any of the following:
(i) An employee of the reinsurer;
(ii) A United States manager of the United
States branch of an alien reinsurer;
(iii) An underwriting manager that, pursuant
to contract, manages all or part of the
reinsurance operations of the reinsurer, is under common control with the
reinsurer, subject to sections
3901.32 to
3901.37 of the Revised Code, and
whose compensation is not based on the volume of premiums written;
(iv) The manager of a group, association,
pool or organization of insurers that engages in joint underwriting or joint
reinsurance and that are subject to examination by the insurance regulatory
authority of the state in which the manager's principal business office is
located.
(7) "Reinsurer" means
a person licensed in this state pursuant to Title XXXIX of the Revised Code as
an insurer with the authority to assume reinsurance, who is domiciled in the
state of Ohio.
(D) Required contract provisions between an insurer and a reinsurance intermediary-broker.
Transactions between the reinsurance intermediary-broker and the insurer it represents may only be entered into pursuant to a written authorization which specifies the responsibilities of each party. The authorization, at a minimum, shall provide all of the following:
(1)
The insurer may terminate the reinsurance
intermediary-broker's authority at any time.
(2)
The reinsurance
intermediary-broker shall 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 thirty days
after receipt.
(3)
All funds collected for the insurer's account shall be
held by the reinsurance intermediary-broker in a fiduciary capacity in a bank
which is a "Qualified United States Financial Institution".
(4)
The reinsurance
intermediary-broker shall comply with the written standards established by the
insurer for the cession or retrocession of all risks.
(5)
The reinsurance
intermediary-broker shall disclose to the insurer any relationship with any
reinsurer to which business will be ceded or retroceded.
(6)
The reinsurance
intermediary-broker shall agree to maintain for at least ten years after the
expiration of each contract of reinsurance transacted a complete record of each
transaction showing all of the following:
(a)
The type of
contract, limits, underwriting restrictions, classes or risks, and
territory;
(b)
Period of coverage, including effective and expiration
dates, cancellation provisions, and notice required of
cancellation;
(c)
Reporting and settlement requirements of
balances;
(d)
Rate used to compute the reinsurance
premium;
(e)
Names and addresses of assuming
reinsurers;
(f)
Rates of all reinsurance commissions, including the
commissions on any retrocessions handled by the reinsurance
intermediary-broker;
(g)
Related correspondence and memoranda;
(h)
Proof of
placement;
(i)
Details regarding retrocessions handled by the
reinsurance intermediary-broker including the identity of retrocessionaires and
percentage of each contract assumed or ceded;
(j)
Financial
records, including premium and loss accounts;
(k)
Written
evidence:
(i)
That the assuming reinsurer has agreed to assume the risk, where the
reinsurance intermediary-broker, on behalf of a domestic ceding insurer,
procures a reinsurance contract directly from the assuming reinsurer;
or
(ii)
That the assuming reinsurer has delegated binding
authority to the representative, where the reinsurance intermediary-broker, on
behalf of a domestic ceding insurer, procures a reinsurance contract placed
through a representative, other than an employee, of the assuming
reinsurer.
(7)
The reinsurance
intermediary-broker shall agree to provide the ceding insurer with access, the
right to copy, and the right to audit all accounts and records maintained by
the reinsurance intermediary-broker related to the insurer's business in a form
usable by the insurer.
(8)
The reinsurance intermediary-broker agrees to provide
annually to the insurer copies of statements of the reinsurance
intermediary-broker's financial condition prepared by an independent certified
public accountant.
(E) Prohibited acts - insurer
(1) No insurer shall employ a
reinsurance intermediary-broker that is not licensed by an insurance regulatory
authority of any state of the United States of America as a reinsurance
intermediary-broker.
(2) No insurer
shall jointly employ an individual who also is employed by a reinsurance
intermediary-broker with which the insurer transacts business, unless the
reinsurance intermediary-broker is under common control with the insurer and
subject to sections 3901.32 to
3901.37 of the Revised
Code.
(F) Required contract provisions between a reinsurer and a reinsurance intermediary-manager.
Transactions between a reinsurance intermediary-manager and the reinsurer it represents in the capacity of a reinsurance intermediary-manager shall be entered into only pursuant to a written contract, specifying the responsibilities of each party. The contract shall be approved by the reinsurer's board of directors. The reinsurer shall maintain a copy of the approved contract for review at the request of the superintendent of insurance. The contract, at a minimum, shall provide all of the following:
(1) The reinsurer may terminate the contract
for cause upon written notice to the reinsurance intermediary-manager. The
reinsurer may immediately suspend the authority of the reinsurance
intermediary-manager to assume or cede business during the pendency of any
dispute regarding the cause for termination.
(2) The reinsurance intermediary-manager
shall render accounts to the reinsurer accurately detailing all material
transactions, including information necessary to support all commissions,
charges, and other fees received by, or owing to,
the reinsurance intermediary-manager, and shall remit all funds due under
the contract to the reinsurer on at least a monthly basis.
(3) Any funds collected for the reinsurer's
account shall be held by the reinsurance intermediary-manager in a fiduciary
capacity in a bank that is a "Qualified United States
Financial Institution". The reinsurance intermediary-manager shall retain
no more than three months' estimated claims payments and allocated loss
adjustment expenses. The reinsurance intermediary-manager shall maintain a
separate bank account for each reinsurer it represents.
(4) For at least ten years after the
expiration of each contract of reinsurance transacted by the reinsurance
intermediary-manager, the reinsurance intermediary-manager shall keep a
complete record for each transaction showing all of the following:
(a) The type of contract, limits,
underwriting restrictions, classes or risks, and territory;
(b) Period of coverage, including effective
and expiration dates, cancellation provisions, and notice required of
cancellation, and disposition of outstanding reserves on covered
risks;
(c) Reporting and settlement
requirements of balances;
(d) Rate
used to compute the reinsurance premium;
(e) Names and addresses of
reinsurers;
(f) Rates of all
reinsurance commissions, including the commissions on any retrocessions handled
by the reinsurance intermediary-manager;
(g) Related correspondence and
memoranda;
(h) Proof of
placement;
(i) Details regarding
retrocessions handled by the reinsurance intermediary-manager pursuant to
paragraph (F)(14) of this rule, including the identity of retrocessionaires and
percentage of each contract assumed or ceded;
(j) Financial records, including premium and
loss accounts;
(k)
(i) Written evidence that the assuming
reinsurer has agreed to assume the risk, where the reinsurance
intermediary-manager, on behalf of a ceding insurer, places a reinsurance
contract directly from the assuming reinsurer; or
(ii) Written evidence that the assuming
reinsurer has delegated binding authority to the representative, where the
reinsurance intermediary-manager, on behalf of a ceding insurer, places a
reinsurance contract through a representative, other than an employee, of the
assuming reinsurer.
(5) The reinsurer shall have access to and
the right to copy all accounts and records maintained by the reinsurance
intermediary-manager related to the reinsurer's business in a form usable by
the reinsurer.
(6) The contract
cannot be assigned in whole or in part by the reinsurance
intermediary-manager.
(7) The
reinsurance intermediary-manager shall comply with the written underwriting and
rating standards established by the insurer for the acceptance, rejection, or
cession of all risks.
(8)
The rates, terms, and purposes of commissions,
charges, and other fees that the reinsurance intermediary-manager may levy
against the reinsurer.
(9) If the
contract permits the reinsurance intermediary-manager to settle claims on
behalf of the reinsurer:
(a) All claims shall
be reported to the insurer in a timely manner;
(b) A copy of the claim file shall be sent to
the reinsurer at its request or as soon as it becomes known that any of the
following applies:
(i) The claim has the
potential to exceed the limit set by the reinsurer;
(ii) The claim involves a coverage
dispute;
(iii) The claim may exceed
the reinsurance intermediary-manager's claims settlement authority;
(iv) The claim is open for more than six
months;
(v) The claim is closed by
payment of an amount set by the reinsurer.
(c) All claim files shall be the joint
property of the reinsurer and the reinsurance intermediary-manager. However,
upon an order of rehabilitation or liquidation of the reinsurer such files
shall become the sole property of the reinsurer or its estate, but the
reinsurance intermediary-manager shall have reasonable access to and the right
to copy the files on a timely basis.
(d) Any settlement authority granted to the
reinsurance intermediary-manager may be terminated for cause upon the
reinsurer's written notice to the reinsurance intermediary-manager or upon the
termination of the contract. The reinsurer may suspend the settlement authority
during the pendency of the dispute regarding the cause of
termination.
(10) If the
contract provides for a sharing of interim profits by the reinsurance
intermediary-manager, the interim profits shall not be paid until one year
after the end of each underwriting period for property business, five years
after the end of each underwriting period for casualty business, and not until
the adequacy of reserves on remaining claims has been verified pursuant to
paragraph (F)(15) of this rule.
(11) The reinsurance intermediary-manager
shall annually provide the reinsurer with a statement of its financial
condition prepared by an independent certified public accountant.
(12) The reinsurer shall periodically, but at
least semi-annually, conduct an on-site review of the underwriting and claims
processing operations of the reinsurance intermediary-manager.
(13) The reinsurance intermediary-manager
shall disclose to the reinsurer any relationship it has with any insurer prior
to ceding or assuming any business with such insurer pursuant to the
contract.
(14) Binding authority
for all retrocessional contracts or participation in reinsurance syndicates
shall rest with an officer of the reinsurer. The officer shall not be
affiliated with the reinsurance intermediary-manager.
(15) If a reinsurance intermediary-manager
establishes loss reserves, the reinsurer shall annually obtain the opinion of
an actuary attesting to the adequacy of loss reserves established for losses
incurred and outstanding on business produced by the reinsurance
intermediary-manager. This opinion shall be in addition to any other required
loss reserve certification. As used in this paragraph, "actuary" means a person
who is a member in good standing of the "American Academy of
Actuaries".
(16) Within the
scope of its actual or apparent authority the acts of the reinsurance
intermediary-manager are deemed to be the acts of the reinsurer on whose behalf
it is acting.
(17) The reinsurance
intermediary-manager shall
maintain a
bond for the protection of the reinsurer in an amount, and from an insurer,
acceptable to the superintendent of insurance.
(18) The reinsurer shall require the
reinsurance intermediary-manager to maintain an errors and omissions
policy.
(G) Prohibited acts - reinsurer
(1) No reinsurer shall
employ a reinsurance intermediary-manager that is not licensed by an insurance
regulatory authority of any state of the United States of America, as a reinsurance intermediary-manager.
(2) No reinsurer shall permit its reinsurance
intermediary-manager to do any of the following:
(a) Cede retrocessions on behalf of the
reinsurer. However, the reinsurance intermediary-manager may cede facultative
retrocessions pursuant to obligatory facultative agreements if the contract
with the reinsurer contains reinsurance underwriting guidelines for such
retrocessions. The guidelines shall include all of the following:
(i) A list of reinsurers with which automatic
agreements are in effect;
(ii) For
each such reinsurer, the coverages and amounts or percentages that may be
reinsured;
(iii) Commission
schedules.
(b) Commit
the reinsurer to participate in reinsurance syndicates.
(c) Appoint any producer without assuring
that the producer is lawfully licensed to transact the type of reinsurance for
which he is appointed.
(d) Without
prior approval of the reinsurer, pay or commit the reinsurer to pay a claim,
net of retrocessions, that exceeds the lesser of an amount specified by the
reinsurer or one per cent of the reinsurer's policyholder's surplus as of the
thirty-first day of December of the last complete calendar year.
(e) Collect any payment from a
retrocessionaire or commit the reinsurer to any claim settlement with a
retrocessionaire, without prior approval of the reinsurer.
(f) Jointly employ an individual who is
employed by the reinsurer unless the reinsurance intermediary-manager is under
common control with the reinsurer subject to sections
3901.32 to
3901.37 of the Revised
Code.
(g) Appoint a sub-reinsurance
intermediary-manager.
(3) A reinsurer shall not appoint to its
board of directors, any officer, director, employee, controlling shareholder or
subproducer of its reinsurance intermediary-manager.
(H) Severability
If any paragraph, term or provision of this rule be adjudged invalid for any reason, the judgment shall not affect, impair or invalidate any other paragraph, term or provision of this rule, but the remaining paragraphs, terms and provisions shall be and continue in full force and effect.
Effective: 10/29/2015
Five Year
Review (FYR) Dates: 08/14/2015 and
08/31/2020
Promulgated
Under: 119.03
Statutory
Authority: 3901.041,
3901.07,
3901.77
Rule
Amplifies: 3901.07,
3901.77
Prior
Effective Dates: 1/1/1993, 4/13/2006
Disclaimer: These regulations may not be the most recent version. Ohio may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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