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The Florida Senate

2014 Florida Statutes

Title XXXVII INSURANCE
Chapter 626 INSURANCE FIELD REPRESENTATIVES AND OPERATIONS Entire Chapter
SECTION 7492
Reinsurance intermediaries.
F.S. 626.7492
626.7492 Reinsurance intermediaries.—
(1) SHORT TITLE.—This section may be cited as the “Reinsurance Intermediary Act.”
(2) DEFINITIONS.—As used in this section:
(a) “Actuary” means a person who is a member in good standing of the American Academy of Actuaries.
(b) “Controlling person” means any person, firm, association, or corporation who directly or indirectly has the power to direct or cause to be directed, the management, control, or activities of the reinsurance intermediary.
(c) “Insurer” means any person duly licensed in this state pursuant to the applicable provisions of the Florida Insurance Code as an insurer.
(d) “Producer” means an agent, broker, or reinsurance intermediary licensed pursuant to the applicable provision of the Florida Insurance Code.
(e) “Reinsurance intermediary” means a reinsurance intermediary broker or a reinsurance intermediary manager.
(f) “Reinsurance intermediary broker” means any person, other than an officer or employee of the ceding insurer, who 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 the ceding insurer.
(g) “Reinsurance intermediary manager” means any 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. Notwithstanding the above, none of the following persons is a reinsurance intermediary manager with respect to the reinsurer for the purposes of this section:
1. An employee of the reinsurer;
2. A manager of the United States branch of an alien reinsurer;
3. An underwriting manager which, pursuant to contract, manages all the reinsurance operations of the reinsurer, is under common control with the reinsurer, subject to the holding company act, and whose compensation is not based on the volume of premiums written.
4. The manager of a group, association, pool, or organization of insurers which engage in joint underwriting or joint reinsurance and who are subject to examination by the insurance regulatory authority of the state in which the manager’s principal business office is located.
(h) “Reinsurer” means any person duly licensed in this state pursuant to the applicable provisions of the Florida Insurance Code as an insurer with the authority to assume reinsurance.
(i) “Violation” means failure by the reinsurance intermediary, insurer, or reinsurer for whom the reinsurance intermediary was acting to substantially comply with the provisions of this section.
(j) “Qualified United States financial institution” means an institution that:
1. 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 thereof;
2. Is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies; and
3. Has been determined by the department or the Securities Valuation Office of the National Association of Insurance Commissioners to meet the standards of financial condition and standing that are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the department.
(3) LICENSURE.—
(a) No person shall act as a reinsurance intermediary broker in this state if the reinsurance intermediary broker maintains an office either directly or as a member or employee of a firm or association, or an officer, director, or employee of a corporation:
1. In this state, unless the reinsurance intermediary broker is a licensed producer in this state; or
2. In another state, unless the reinsurance intermediary broker is a licensed producer in this state or in another state having a law substantially similar to this section or the reinsurance intermediary broker is licensed in this state as a nonresident reinsurance intermediary.
(b) No person shall act as a reinsurance intermediary manager:
1. For a reinsurer domiciled in this state, unless the reinsurance intermediary manager is a licensed producer in this state;
2. In this state, if the reinsurance intermediary manager maintains an office either directly or as a member or employee of a firm or association, or an officer, director, or employee of a corporation in this state, unless the reinsurance intermediary manager is a licensed producer in this state;
3. In another state for a nondomestic insurer, unless the reinsurance intermediary manager is a licensed producer in this state or another state having a law substantially similar to this section, or the person is licensed in this state as a nonresident reinsurance intermediary.
(c) The department may require a reinsurance intermediary manager subject to the provisions of this section to:
1. File a bond from an insurer in an amount acceptable to the department for the protection of the reinsurer; and
2. Maintain an errors and omissions insurance policy in an amount acceptable to the department.
(d) The department may issue a reinsurance intermediary license to any person who has complied with the requirements of this section. Any license issued to a person who is not an individual must authorize each member of the person and any designated employee to act as a reinsurance intermediary under the license, and each member and designated individual must be named in the application and any supplements thereto. Any license issued to a corporation must authorize any officer, and any designated employee or designated director thereof, to act as a reinsurance intermediary on behalf of the corporation, and each officer and designated employee and director must be named in the application and any supplements thereto.
(e) If the applicant for a reinsurance intermediary license is a nonresident, the applicant, as a condition precedent to receiving or holding a license, must designate the Chief Financial Officer as agent for service of process in the manner, and with the same legal effect, provided for by this section for designation of service of process upon unauthorized insurers. Such applicant shall also furnish the department with the name and address of a resident of this state upon whom notices or orders of the department or process affecting the nonresident reinsurance intermediary may be served. The licensee shall promptly notify the department in writing of each change in its designated agent for service of process, and the change shall not become effective until acknowledged by the department.
(f) The department may refuse to issue a reinsurance intermediary license if, in its judgment, the applicant, anyone named on the application, or any member, principal, officer, or director of the applicant, has demonstrated a lack of fitness and trustworthiness, or that any controlling person of the applicant is not fit or trustworthy to act as a reinsurance intermediary, or that any of the foregoing has given cause for revocation or suspension of the license, or has failed to comply with any prerequisite for the issuance of the license.
(g) Reinsurance intermediaries shall be licensed, appointed, renewed, continued, reinstated, or terminated as prescribed in this chapter for insurance representatives in general, except that they shall be exempt from the photo, education, and examination provisions. License, appointment, and other fees shall be those prescribed in s. 624.501.
(h) The grounds and procedures for refusal of a license or appointment or suspension or revocation of a license or appointment issued to a reinsurance intermediary under this section are as set forth in ss. 626.611-626.691 for insurance representatives in general.
(i) An attorney licensed in this state, when acting in a professional capacity, is exempt from this subsection.
(j) The department may develop necessary rules to carry out this section.
(4) REQUIRED CONTRACT PROVISIONS; REINSURANCE INTERMEDIARY BROKERS.—A transaction between a reinsurance intermediary broker and the insurer it represents in the capacity of a reinsurance intermediary broker may be entered into only pursuant to a written authorization specifying the responsibilities of each party. The authorization must provide, at a minimum, that:
(a) The insurer may terminate the reinsurance intermediary broker’s authority at any time.
(b) The reinsurance intermediary broker must 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 must remit all funds due to the insurer within 30 days after receipt.
(c) All funds collected for the insurer’s account will be held by the reinsurance intermediary broker in a fiduciary capacity in a bank which is a qualified United States financial institution.
(d) The reinsurance intermediary broker will comply with the provisions of subsection (5).
(e) The reinsurance intermediary broker will comply with the written standards established by the insurer for the cession or retrocession of all risks.
(f) The reinsurance intermediary broker will disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.
(5) BOOKS AND RECORDS; REINSURANCE INTERMEDIARY BROKERS.—
(a) For at least 10 years after expiration of each contract of reinsurance transacted by the reinsurance intermediary broker, the reinsurance intermediary broker must keep a complete record for each transaction showing:
1. The type of contract, limits, underwriting restrictions, classes or risks, and territory;
2. The period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation;
3. Reporting and settlement requirements of balances;
4. The rate used to compute the reinsurance premium;
5. The names and addresses of assuming reinsurers;
6. The rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary broker;
7. Related correspondence and memoranda;
8. Proof of placement;
9. Details regarding retrocessions handled by the reinsurance intermediary broker, including the identity of retrocessionaires and the percentage of each contract assumed or ceded;
10. Financial records, including, but not limited to, premium and loss accounts; and
11. If the reinsurance intermediary broker procures a reinsurance contract on behalf of a licensed ceding insurer:
a. Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or
b. If such contract is placed through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative.
(b) The insurer will have access and the right to copy and audit all accounts and records maintained by the reinsurance intermediary broker related to its business in a form usable by the insurer.
(6) DUTIES OF INSURERS USING THE SERVICES OF A REINSURANCE INTERMEDIARY BROKER.—
(a) An insurer shall not engage the services of any person to act as a reinsurance intermediary broker on its behalf unless the person is licensed pursuant to this section.
(b) An insurer may not employ an individual who is employed by a reinsurance intermediary broker with which it transacts business, unless the reinsurance intermediary broker is under common control with the insurer and subject to ss. 628.801, 628.802, and 628.803.
(c) The insurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary broker with which it transacts business.
(7) REQUIRED CONTRACT PROVISIONS; REINSURANCE INTERMEDIARY MANAGERS.—Transactions between a reinsurance intermediary manager and the reinsurer it represents in that capacity may be entered into pursuant only to a written contract specifying the responsibilities of each party, which must be approved by the reinsurer’s board of directors. At least 30 days before the reinsurer assumes or cedes business through the producer, a true copy of the approved contract must be filed with the department for approval. The contract must provide, at a minimum, that:
(a) 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.
(b) The reinsurance intermediary manager must 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 must remit all funds due under the contract to the reinsurer at least monthly.
(c) All funds collected for the reinsurer’s account must be held by the reinsurance intermediary manager in a fiduciary capacity in a bank which is a qualified United States financial institution. The reinsurance intermediary manager may retain no more than 3 months’ estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary manager shall maintain a separate bank account for each reinsurer which it represents.
(d) For at least 10 years after expiration of each contract of reinsurance transacted by the reinsurance intermediary manager, the reinsurance intermediary manager must keep a complete record of each transaction, showing:
1. The type of contract, limits, underwriting restrictions, classes or risks, and territory;
2. The period of coverage, including effective and expiration dates, cancellation provisions and notice required of cancellation, and disposition of outstanding reserves on covered risks;
3. The reporting and settlement requirements of balances;
4. The rate used to compute the reinsurance premium;
5. The names and addresses of reinsurers;
6. The rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary manager;
7. Related correspondence and memoranda;
8. Proof of placement;
9. Details regarding retrocessions handled by the reinsurance intermediary manager, as permitted by this section, including the identity of retrocessionaires and the percentage of each contract assumed or ceded;
10. Financial records, including, but not limited to, premium and loss accounts; and
11. If the reinsurance intermediary manager places a reinsurance contract on behalf of a ceding insurer:
a. Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or
b. If such contract is placed through a representative of the assuming reinsurer, other than an employee, written evidence that such reinsurer has delegated binding authority to the representative.
(e) The reinsurer shall have access to and the right to copy all accounts and records maintained by the reinsurance intermediary manager related to its business in a form usable by the reinsurer.
(f) The contract cannot be assigned in whole or in part by the reinsurance intermediary manager.
(g) The reinsurance intermediary manager will comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks.
(h) Sets forth the rates, terms, and purposes of commissions, charges, and other fees which the reinsurance intermediary manager may levy against the reinsurer.
(i) If the contract permits the reinsurance intermediary manager to settle claims on behalf of the reinsurer:
1. All claims will be reported to the reinsurer in a timely manner.
2. A copy of the claim file will be sent to the reinsurer at its request or as soon as it becomes known that the claim:
a. Has the potential to exceed the lesser of an amount determined by the department or the limit set by the reinsurer;
b. Involves a coverage dispute;
c. May exceed the reinsurance intermediary manager’s claims settlement authority;
d. Is open for more than 6 months; or
e. Is closed by payment of the lesser of an amount set by the department or an amount set by the reinsurer.
3. All claim files will be the joint property of the reinsurer and reinsurance intermediary manager provided that upon an order of liquidation of the reinsurer, the files shall become the sole property of the reinsurer or its estate; provided, further, that the reinsurance intermediary manager must have reasonable access to and the right to copy the files on a timely basis.
4. 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.
(j) If the contract provides for a sharing of interim profits by the reinsurance intermediary manager, that the interim profits will not be paid until 1 year after the end of each underwriting period for property business and 5 years after the end of each underwriting period for casualty business, or a later period set by the department for specified lines of insurance, and not until the adequacy of reserves on remaining claims has been verified pursuant to this section.
(k) The reinsurance intermediary manager must annually provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant.
(l) The reinsurer must at least semiannually conduct an onsite review of the underwriting and claims processing operations of the reinsurance intermediary manager.
(m) The reinsurance intermediary manager must disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with the insurer pursuant to this contract.
(n) Within the scope of its actual or apparent authority, the acts of the reinsurance intermediary manager shall be deemed to be the acts of the reinsurer on whose behalf it is acting.
(8) PROHIBITED ACTS.—The reinsurance intermediary manager shall not:
(a) Cede retrocessions on behalf of the reinsurer, except that the reinsurance intermediary manager may cede facultative retrocessions pursuant to obligatory facultative agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for the retrocessions. The guidelines must include a list of reinsurers with which the automatic agreements are in effect, and for each of these reinsurers, the coverages and amounts or percentages that may be reinsured, and 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 or she 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 1 percent of the reinsurer’s policyholder’s surplus as of December 31 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. If prior approval is given, a report must be promptly forwarded to the reinsurer.
(f) Jointly employ an individual who is employed by the reinsurer, unless such reinsurance intermediary manager is under common control with the reinsurer subject to ss. 628.801, 628.802, and 628.803.
(g) Appoint a sub-reinsurance intermediary manager.
(9) DUTIES OF REINSURERS USING THE SERVICES OF A REINSURANCE INTERMEDIARY MANAGER.—
(a) A reinsurer may not engage the services of any person to act as a reinsurance intermediary manager on its behalf unless the person is licensed as required by this section.
(b) The reinsurer must annually obtain a copy of statements of the financial condition of each reinsurance intermediary manager which the reinsurer has engaged prepared by an independent certified accountant in a form acceptable to the department.
(c) If a reinsurance intermediary manager establishes loss reserves, the reinsurer must 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 must be in addition to any other required loss reserve certification.
(d) Binding authority for all retrocessional contracts or participation in reinsurance syndicates must rest with an officer of the reinsurer who shall not be affiliated with the reinsurance intermediary manager.
(e) Within 30 days of termination of a contract with a reinsurance intermediary manager, the reinsurer must provide written notification of the termination to the department.
(f) A reinsurer shall not appoint to its board of directors any officer, director, employee, controlling shareholder, or subproducer of its reinsurance intermediary manager. This paragraph shall not apply to relationships governed by ss. 628.801, 628.802, and 628.803 or, if applicable, this section.
(10) EXAMINATION AUTHORITY.—
(a) A reinsurance intermediary is subject to examination by the department. The department shall have access to all books, bank accounts, and records of the reinsurance intermediary in a form usable to the department.
(b) A reinsurance intermediary manager may be examined as if it were the reinsurer.
(11) PENALTIES AND LIABILITIES.—
(a) A reinsurance intermediary found by the department, or an insurer or reinsurer found by the office, to be in violation of any provision of this section must:
1. For each separate violation pay a penalty in an amount not to exceed $5,000;
2. Be subject to revocation or suspension of its license; and
3. If a violation was committed by the reinsurance intermediary, the reinsurance intermediary must make restitution to the insurer, reinsurer, rehabilitator, or liquidator of the insurer or reinsurer for the net losses incurred by the insurer or reinsurer attributable to the violation.
(b) Nothing contained in this section shall affect the right of the office or department to impose any other penalties provided in the Florida Insurance Code.
(c) Nothing contained in this section is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, creditors, or other third parties or confer any rights to these persons.
History.—s. 41, ch. 92-146; s. 1, ch. 95-135; s. 256, ch. 97-102; s. 961, ch. 2003-261.