RCW 48.97.015
Business placed with a controlled
insurer -- Application of section -- Exceptions -- Written contract
required -- Audit committee -- Report to commissioner. (Effective
until July 1, 2009.)
(1)(a) This section applies in a particular
calendar year if in that calendar year the aggregate amount of
gross written premium on business placed with a controlled
insurer by a controlling broker is equal to or greater than five
percent of the admitted assets of the controlled insurer, as
reported in the controlled insurer's quarterly statement filed as
of September 30th of the prior year.
(b) Notwithstanding (a) of this subsection, this section
does not apply if:
(i) The controlling producer:
(A) Places insurance only with the controlled insurer; or
only 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 the insurance; and
(B) Accepts insurance placements only from nonaffiliated
subbrokers, and not directly from insureds; and
(ii) The controlled insurer, except for business written
through a residual market facility such as the assigned risk
plan, fair plans, or other such plans, accepts insurance business
only from a controlling broker, a broker controlled by the
controlled insurer, or a broker that is a subsidiary of the
controlled insurer.
(2) A controlled insurer may not accept business from a
controlling broker and a controlling broker may not place
business with a controlled insurer unless there is a written
contract between the controlling broker and the 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:
(a) The controlled insurer may terminate the contract for
cause, upon written notice to the controlling broker. The
controlled insurer shall suspend the authority of the controlling
broker to write business during the pendency of a dispute
regarding the cause for the termination;
(b) The controlling broker shall render accounts to the
controlling insurer detailing all material transactions,
including information necessary to support all commissions,
charges, and other fees received by, or owing to, the controlling
broker;
(c) The controlling broker shall remit all funds due under
the terms of the contract to the controlling insurer on at least
a monthly basis. The due date must be fixed so that premiums or
installments collected are remitted no later than ninety days
after the effective date of a policy placed with the controlling
insurer under this contract;
(d) The controlling broker shall hold all funds collected
for the controlled insurer's account 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
applicable provisions of this title. However, funds of a
controlling broker not required to be licensed in this state must
be maintained in compliance with the requirements of the
controlling broker's domiciliary jurisdiction;
(e) The controlling broker shall maintain separately
identifiable records of business written for the controlled
insurer;
(f) The contract shall not be assigned in whole or in part
by the controlling broker;
(g) The controlled insurer shall provide the controlling
broker 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 controlling broker
shall adhere to the standards, rules, procedures, rates, and
conditions that are the same as those applicable to comparable
business placed with the controlled insurer by a broker other
than the controlling broker;
(h) The rates of the controlling broker's commissions,
charges, and other fees must be no greater than those applicable
to comparable business placed with the controlled insurer by
brokers other than controlling brokers. For purposes of (g) and
(h) 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 broker, on
insurance business placed with the insurer, is to be compensated
contingent upon the insurer's profits on that business, then the
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 may the commissions be paid until the
adequacy of the controlled insurer's reserves on remaining claims
has been independently verified under subsection (3) of this
section;
(j) The insurer may establish a different limit on the
controlling broker's writings in relation to the controlled
insurer's surplus and total writings for each line or subline of
business. The controlled insurer shall notify the controlling
broker when the applicable limit is approached and may not accept
business from the controlling broker if the limit is reached. The controlling broker may not place business with the controlled
insurer if it has been notified by the controlled insurer that
the limit has been reached; and
(k) The controlling broker may negotiate but may not bind
reinsurance on behalf of the controlled insurer on business the
controlling broker places with the controlled insurer, except
that the controlling broker may bind facultative reinsurance
contracts under 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 the automatic agreements are in effect, the
coverages and amounts of percentages that may be reinsured, and
commission schedules.
(3) 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.
(4)(a) In addition to any other required loss reserve
certification, the controlled insurer shall, annually, on April
1st 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 losses incurred but not
reported, on business placed by the broker; and
(b) The controlled insurer shall annually report to the
commissioner the amount of commissions paid to the producer, the
percentage that amount represents of the net premiums written,
and comparable amounts and percentages paid to noncontrolling
brokers for placements of the same kinds of insurance.
[1993 c 462 § 19.]
RCW 48.97.015
Business placed with a controlled
insurer -- Application of section -- Exceptions -- Written contract
required -- Audit committee -- Report to commissioner. (Effective
July 1, 2009.)
(1)(a) This section applies in a particular
calendar year if in that 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 percent of the admitted assets of the controlled insurer, as
reported in the controlled insurer's quarterly statement filed as
of September 30th of the prior year.
(b) Notwithstanding (a) of this subsection, this section
does not apply if:
(i) The controlling producer:
(A) Places insurance only with the controlled insurer; or
only 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 the insurance; and
(B) Accepts insurance placements only from nonaffiliated
subproducers, and not directly from insureds; and
(ii) The controlled insurer, except for business written
through a residual market facility such as the assigned risk
plan, fair plans, or other such plans, 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.
(2) A controlled insurer may not accept business from a
controlling producer and a controlling producer may not place
business with a controlled insurer unless there is a written
contract between the controlling producer and the 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:
(a) 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 a dispute
regarding the cause for the termination;
(b) The controlling producer shall render accounts to the
controlling 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) The controlling producer shall remit all funds due under
the terms of the contract to the controlling insurer on at least
a monthly basis. The due date must be fixed so that premiums or
installments collected are remitted no later than ninety days
after the effective date of a policy placed with the controlling
insurer under this contract;
(d) The controlling producer shall hold all funds collected
for the controlled insurer's account 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
applicable provisions of this title. However, funds of a
controlling producer not required to be licensed in this state
must be maintained in compliance with the requirements of the
controlling producer's domiciliary jurisdiction;
(e) The controlling producer shall maintain separately
identifiable records of business written for the controlled
insurer;
(f) The contract shall not be assigned in whole or in part
by the controlling producer;
(g) The controlled insurer shall 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 controlling
producer shall adhere to the standards, rules, procedures, rates,
and conditions that are the same as those applicable to
comparable business placed with the controlled insurer by a
producer other than the controlling producer;
(h) The rates of the controlling producer's commissions,
charges, and other fees must be no greater than those applicable
to comparable business placed with the controlled insurer by
producers other than controlling producers. For purposes of (g)
and (h) 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 business placed with the insurer, is to be
compensated contingent upon the insurer's profits on that
business, then the 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 may the commissions
be paid until the adequacy of the controlled insurer's reserves
on remaining claims has been independently verified under
subsection (3) of this section;
(j) The insurer may establish a different limit on the
controlling producer's writings in relation to the controlled
insurer's surplus and total writings for each line or subline of
business. The controlled insurer shall notify the controlling
producer when the applicable limit is approached and may not
accept business from the controlling producer if the limit is
reached. The controlling producer may not place business with
the controlled insurer if it has been notified by the controlled
insurer that the limit has been reached; and
(k) The controlling producer may negotiate but may 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 under 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 the automatic agreements are in effect, the
coverages and amounts of percentages that may be reinsured, and
commission schedules.
(3) 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.
(4)(a) In addition to any other required loss reserve
certification, the controlled insurer shall, annually, on April
1st 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 losses incurred but not
reported, on business placed by the producer; and
(b) The controlled insurer shall annually report to the
commissioner the amount of commissions paid to the producer, the
percentage that amount represents of the net premiums written,
and comparable amounts and percentages paid to noncontrolling
producers for placements of the same kinds of insurance.
[2008 c 217 § 76; 1993 c 462 § 19.]
NOTES:
Severability -- Effective date -- 2008 c 217: See notes following RCW 48.03.020.