Managing general agents; required contract provisions.

No person acting in the capacity of a managing general agent shall place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibility for a particular function, specifies the division of responsibilities, and contains the following minimum provisions:

(1) The insurer or managing general agent may terminate the contract for cause as provided in the contract upon written notice to the terminated party. The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination. The insurer or managing general agent must fulfill any obligations on policies, regardless of any dispute.

(2) The managing general agent shall render accounts to the insurer detailing all transactions and remit all funds due under the terms of the contract to the insurer on a monthly or more frequent basis.

(3) All funds collected for the account of the insurer shall be held by the managing general agent in a fiduciary capacity in a bank which is insured by the Federal Deposit Insurance Corporation. The account shall be used for all payment as directed by the insurer. The managing general agent may retain up to 60 days of estimated claims payments and allocated loss adjustment expenses.

(4) Separate records of business written by the managing general agent shall be maintained unless the managing general agent is a controlled or controlling person. The insurer shall have access and the right to copy all accounts and records related to its business in a form usable by the insurer, and the department and office shall have access to all books, bank accounts, and records of the managing general agent in a form usable to the department and office. The records shall be retained according to s. 626.561.

(5) The contract may not be assigned in whole or part by the managing general agent.

(6) The contract shall specify appropriate underwriting guidelines, including:

(a) The maximum annual premium volume.

(b) The basis of the rates to be charged.

(c) The types of risks which may be written.

(d) Maximum limits of liability.

(e) Applicable exclusions.

(f) Territorial limitations.

(g) Policy cancellation provisions.

(h) The maximum policy period.

(7) If the contract permits the managing general agent to settle claims on behalf of the insurer:

(a) All claims must be reported to the company in a timely manner and all claims must be adjusted by properly licensed persons.

(b) Notice shall be sent by the managing general agent to the insurer as soon as it becomes known that the claim:

1. Exceeds the limit set by the insurer;

2. Involves a coverage dispute;

3. Exceeds the managing general agent’s claims settlement authority;

4. Is open for more than 6 months; or

5. Is closed by payment of an amount set by the office or an amount set by the insurer, whichever is less.

(c) All claims files shall be the joint property of the insurer and managing general agent. However, upon an order of liquidation of the insurer the claims and related application files shall become the sole property of the insurer or its estate. The managing general agent shall have reasonable access to and the right to copy the files on a timely basis.

(d) Any settlement authority granted to the managing general agent may be terminated for cause upon the insurer’s written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.

(8) If electronic claims files exist, the contract must address the timely transmission of the data.

(9) If the contract provides for a sharing of interim profits by the managing general agent and the managing general agent has the authority to determine the amount of the interim profits by establishing the total of all loss reserves, including IBNR if any, used in calculating the interim profits, interim profits shall not be paid to the managing general agent until 1 year after the profits are earned for property insurance business and 5 years after they are earned on casualty business and not until the profits have been verified.

(10) The managing general agent shall not:

(a) Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers which are authorized, the coverages and amounts or percentages that may be reinsured, and commission schedules and that the insurer has put each reinsurer on notice of the authorization by providing the reinsurer and reinsurance intermediary, if any, with a copy of this section of the contract and that the reinsurer will send confirmation of reinsurance placement directly to the insurer and the managing general agent.

(b) Commit the insurer to participate in insurance or reinsurance syndicates.

(c) Appoint any producer without assuring that the producer is lawfully licensed to transact the type of insurance for which he or she is appointed.

(d) Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which exceeds 1 percent of the insurer’s policyholder’s surplus as of December 31 of the last completed calendar year.

(e) Collect any payment from a reinsurer or commit the insurer to any claims settlement with a reinsurer without prior approval of the insurer. If prior approval is given, a report must be promptly forwarded to the insurer.

(f) Permit its subproducer to serve on its board of directors.

(g) Appoint a submanaging general agent.

(11) An appointed managing general agent, when placing business with an insurer under this code, may charge a per-policy fee not to exceed $25. The aggregate of per-policy fees for a placement of business authorized under this section, when combined with any other per-policy fee charged by the insurer, may not result in per-policy fees that exceed the aggregate amount of $25. The per-policy fee must be a component of the insurer’s rate filing and must be fully earned.

For the purposes of this section and ss. 626.7453 and 626.7454, the term “controlling person” or “controlling” has the meaning set forth in s. 625.012(5)(b)1., and the term “controlled person” or “controlled” has the meaning set forth in s. 625.012(5)(b)2.