This chapter shall be known and may be cited as the Reinsurance Intermediary Act.
The Business of InsuranceReinsurance Intermediaries
Section § 1781.1
This law section establishes the title of the chapter as the Reinsurance Intermediary Act. It serves as a designation for referencing and citing the rules within this particular chapter.
Reinsurance Intermediary Act reinsurance intermediary
Section § 1781.2
This section defines several important terms related to reinsurance activities in the state. An 'Actuary' is someone qualified to sign opinions on loss reserves and is a member of recognized actuarial organizations. A 'Controlling person' is anyone with the power to manage a reinsurance intermediary. An 'Insurer' refers to any individual or organization licensed as such by the state. A 'Licensed producer' is a licensed agent, broker, or reinsurance intermediary. A 'Qualified United States financial institution' is one regulated by the U.S. meeting certain financial standards to ensure it is suitable for managing letters of credit.
A 'Reinsurance intermediary' can be either a broker, who negotiates reinsurance without binding authority, or a manager, who can bind reinsurance and manage reinsurance operations. Some exceptions apply, such as employees of a reinsurer and certain managers. A 'Reinsurer' is an entity licensed to undertake reinsurance. Finally, a 'Violation' occurs when these parties fail to comply with the regulations set forth in this chapter.
As used in this chapter:
(a)CA Insurance Code § 1781.2(a) “Actuary” means a person who is a member in good standing of the American Academy of Actuaries, the Casualty Actuarial Society, or the Society of Actuaries, and is qualified to sign statements of actuarial opinion on loss reserves.
(b)CA Insurance Code § 1781.2(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 a reinsurance intermediary.
(c)CA Insurance Code § 1781.2(c) “Insurer” means any person, firm, association, or corporation admitted by the commissioner as an insurer in this state.
(d)CA Insurance Code § 1781.2(d) “Licensed producer” means a licensed insurance agent, broker, or reinsurance intermediary.
(e)CA Insurance Code § 1781.2(e) “Qualified United States financial institution” means an institution that meets all of the following criteria:
(1)CA Insurance Code § 1781.2(e)(1) Is organized or (in the case of a domestic office of a foreign banking organization) licensed, under the laws of the United States or any state thereof.
(2)CA Insurance Code § 1781.2(e)(2) Is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies.
(3)CA Insurance Code § 1781.2(e)(3) Has
been determined by either the commissioner or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet 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 commissioner.
(f)CA Insurance Code § 1781.2(f) “Reinsurance intermediary” means a reinsurance intermediary-broker or a reinsurance intermediary-manager.
(g)CA Insurance Code § 1781.2(g) “Reinsurance intermediary-broker” means any person, other than an officer or employee of the ceding insurer, firm, association, or corporation 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 that insurer.
(h)CA Insurance Code § 1781.2(h) “Reinsurance intermediary-manager”
means any person, firm, association, or corporation that 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. However, “reinsurance intermediary-manager” does not include any of the following:
(1)CA Insurance Code § 1781.2(h)(1) An employee of the reinsurer.
(2)CA Insurance Code § 1781.2(h)(2) A domestic manager of a United States branch of an alien reinsurer.
(3)CA Insurance Code § 1781.2(h)(3) An underwriting manager that, pursuant to contract, manages all or any portion of the reinsurance operations of the reinsurer, that is under common control with the reinsurer, that is subject to Article 4.7 (commencing with Section 1215) of Chapter 2, and the
compensation of which is not based on the volume of premiums written.
(4)CA Insurance Code § 1781.2(h)(4) The manager of a group, association, pool, or organization of insurers which engage in joint underwriting or joint reinsurance and that are subject to examination by the insurance regulatory agency or official of the state in which the manager’s principal business office is located.
(i)CA Insurance Code § 1781.2(i) “Reinsurer” means any person, firm, association, or corporation admitted in this state as an insurer with the authority to assume reinsurance.
(j)CA Insurance Code § 1781.2(j) “Violation” means the failure of a reinsurance intermediary, or an insurer or reinsurer for whom the reinsurance intermediary was acting, to comply with any provision of this chapter.
reinsurance intermediary actuary qualifications controlling person
Section § 1781.3
This law outlines the licensing requirements for reinsurance intermediary-brokers and reinsurance intermediary-managers in California. If you want to act as a reinsurance intermediary-broker and you have an office in California, you must be a licensed producer in the state. If you do not have an office in California, you can be licensed either in California or another state with similar regulations, or as a nonresident in California.
For reinsurance intermediary-managers, if you're working with a reinsurer based in California, you need to be a licensed producer in the state. Similarly, if you maintain an office in California, you must also be a licensed producer there. If working in another state for a nondomestic insurer, you must be licensed in either California or a state with similar laws, or as a nonresident in California.
The commissioner has the authority to demand certain financial protections from intermediary-managers, like fidelity bonds and errors and omissions policies. Individuals or businesses applying for a reinsurance intermediary license must meet all requirements, including application and fee submissions. The commissioner can refuse to grant a license if the applicant is deemed untrustworthy or has violated relevant guidelines.
Exemptions apply to licensed attorneys acting in their professional capacity. This law doesn't require a reinsurance intermediary-manager, who is compliant with it, to also comply with certain other California insurance regulations from a previous Senate bill.
(a)CA Insurance Code § 1781.3(a) No person, firm, association, or corporation shall act as a reinsurance intermediary-broker in this state unless licensed as follows:
(1)CA Insurance Code § 1781.3(a)(1) 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) in this state, the reinsurance intermediary-broker shall be a licensed producer in this state.
(2)CA Insurance Code § 1781.3(a)(2) If the reinsurance intermediary-broker does not maintain an office in this state, the reinsurance intermediary-broker shall be a licensed producer in this state or another state having a law substantially similar to this chapter or shall be
licensed in this state as a nonresident reinsurance intermediary.
(3)CA Insurance Code § 1781.3(a)(3) Unless denied licensure pursuant to subdivision (e), a nonresident person shall receive a reinsurance intermediary-broker license if all of the following requirements are met:
(A)CA Insurance Code § 1781.3(a)(3)(A) The person is currently licensed and in good standing in the state, territory of the United States, or province of Canada where he or she is licensed as a resident reinsurance intermediary-broker.
(B)CA Insurance Code § 1781.3(a)(3)(B) The person has submitted the proper request for licensure and has paid the fees required by paragraph (3) of subdivision (d).
(C)CA Insurance Code § 1781.3(a)(3)(C) The person has submitted or transmitted to the commissioner the application for licensure that the person submitted to the state, territory of the United States, or province of
Canada where he or she is licensed as a resident, or submitted or transmitted to the commissioner a completed National Association of Insurance Commissioners Uniform Nonresident Application.
(D)CA Insurance Code § 1781.3(a)(3)(D) The state, territory of the United States, or province of Canada where the person holds a resident reinsurance intermediary-broker license awards nonresident reinsurance intermediary-broker licenses to residents of this state on the same basis.
(b)CA Insurance Code § 1781.3(b) A person, firm, association, or corporation shall not act as a reinsurance intermediary-manager:
(1)CA Insurance Code § 1781.3(b)(1) For a reinsurer domiciled in this state, unless the reinsurance intermediary-manager is a licensed producer in this state.
(2)CA Insurance Code § 1781.3(b)(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 as an officer, director, or employee of a corporation in this state, unless the reinsurance intermediary-manager is a licensed producer in this state.
(3)CA Insurance Code § 1781.3(b)(3) In another state for a nondomestic admitted insurer, unless the reinsurance intermediary-manager is a licensed producer in this state or in another state having a law substantially similar to this chapter or the person is licensed in this state as a nonresident reinsurance intermediary.
(4)CA Insurance Code § 1781.3(b)(4) Unless denied licensure pursuant to subdivision (e), a nonresident person shall receive a reinsurance intermediary-manager license if all of the following requirements are met:
(A)CA Insurance Code § 1781.3(b)(4)(A) The person is currently licensed and in good standing in the state, territory of the United States, or province of Canada where he or she is
licensed as a resident reinsurance intermediary-manager.
(B)CA Insurance Code § 1781.3(b)(4)(B) The person has submitted the proper request for licensure and has paid the fees required by paragraph (3) of subdivision (d).
(C)CA Insurance Code § 1781.3(b)(4)(C) The person has submitted or transmitted to the commissioner the application for licensure that the person submitted to the state, territory of the United States, or province of Canada where he or she is licensed as a resident, or submitted or transmitted to the commissioner a completed National Association of Insurance Commissioners Uniform Nonresident Application.
(D)CA Insurance Code § 1781.3(b)(4)(D) The state, territory of the United States, or province of Canada where the person holds a resident reinsurance intermediary-manager license awards nonresident reinsurance intermediary-manager licenses to residents of this state on the same basis.
(c)CA Insurance Code § 1781.3(c) The commissioner may require a reinsurance intermediary-manager subject to subdivision (b) to do both of the following:
(1)CA Insurance Code § 1781.3(c)(1) File a fidelity bond issued by an admitted surety in an amount determined by the commissioner for the protection of the reinsurer.
(2)CA Insurance Code § 1781.3(c)(2) Maintain an errors and omissions policy in an amount acceptable to the commissioner.
(d)Copy CA Insurance Code § 1781.3(d)
(1)Copy CA Insurance Code § 1781.3(d)(1) The commissioner may issue a reinsurance intermediary license to any person, firm, association, or corporation that has complied with the applicable requirements of this chapter. This license, when issued to a firm or association, authorizes all the members of the firm or association and any designated employees to act as reinsurance intermediaries under the license, and all these
persons shall be named in the application and any supplements thereto. This license, when issued to a corporation, authorizes all of the officers, and any designated employees and directors thereof to act as reinsurance intermediaries on behalf of the corporation, and all these persons shall be named in the application and any supplements thereto.
(2)CA Insurance Code § 1781.3(d)(2) Any application for licensure as a reinsurance intermediary under this subdivision shall be made on a form prescribed by the commissioner and shall be accompanied by an application fee of three hundred seventy-four dollars ($374).
(e)CA Insurance Code § 1781.3(e) The commissioner may refuse to issue a reinsurance intermediary license if, in his or her judgment, the applicant, any person named on the application, or any member, principal, officer, or director of the applicant, is determined by the commissioner not to be trustworthy, or that any controlling person
of the applicant is not trustworthy to act as a reinsurance intermediary, or that any of the foregoing has given cause for revocation or suspension of a reinsurance intermediary license, or has failed to comply with any prerequisite for the issuance of a license. Upon written request therefor, the commissioner shall furnish the applicant with a summary of the basis for refusal to issue a reinsurance intermediary license, which document shall not be subject to inspection as a public record.
(f)CA Insurance Code § 1781.3(f) Licensed attorneys at law when acting in their professional capacity as such shall be exempt from this section.
(g)CA Insurance Code § 1781.3(g) A reinsurance intermediary-manager, when acting in that capacity and in compliance with this chapter, shall not be required to separately comply with Article 5.4 (commencing with Section 769.80) of Chapter 1 (if added by Senate Bill 1039 of the 1991–92 Regular Session) in order
to engage in conduct authorized by both this chapter and that article.
reinsurance intermediary-broker licensing reinsurance intermediary-manager requirements licensed producer
Section § 1781.4
This section outlines the required provisions for a written agreement between a reinsurance intermediary-broker and an insurer. It specifies that the insurer has the right to terminate the broker's authority at any time and requires the broker to provide detailed accounts of transactions, including fees and commissions, and remit owed funds within 30 days. Additionally, the broker must hold collected funds in a U.S. bank in a fiduciary capacity, comply with Section 1781.5, adhere to the insurer's standards for insured risks, and disclose any relationships with reinsurers involved in cession or retrocession of risk.
Transactions between a reinsurance intermediary-broker and the insurer it represents in that capacity shall only be entered into pursuant to a written authorization specifying the responsibilities of each party. The authorization shall, at a minimum, contain provisions specifying all of the following rights and obligations:
(a)CA Insurance Code § 1781.4(a) The insurer may terminate the reinsurance intermediary-broker’s authority at any time.
(b)CA Insurance Code § 1781.4(b) 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 30 days of receipt.
(c)CA Insurance Code § 1781.4(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)CA Insurance Code § 1781.4(d) The reinsurance intermediary-broker will comply with Section 1781.5.
(e)CA Insurance Code § 1781.4(e) The reinsurance intermediary-broker will comply with written standards established by the insurer for the cession or retrocession of all insured risks.
(f)CA Insurance Code § 1781.4(f) The reinsurance intermediary-broker will disclose to the insurer any relationship with any reinsurer to
which insured risk will be ceded or retroceded.
reinsurance intermediary-broker written authorization insurer responsibilities
Section § 1781.5
This law requires reinsurance intermediary-brokers to keep detailed records of each reinsurance transaction for at least 10 years after the contract ends. These records must include information such as the type and limits of the contract, coverage period, premiums, and commissions, among others. They must also document communication, proof of placement, and financial records. If they arrange reinsurance directly or through representatives, evidence of risk assumption and delegated authority must be included.
Additionally, insurers have the right to access, copy, and audit these records as needed.
(a)CA Insurance Code § 1781.5(a) For at least 10 years after expiration of each contract of reinsurance transacted by a reinsurance intermediary-broker, the reinsurance intermediary-broker shall keep a complete record for each transaction, including all of the following:
(1)CA Insurance Code § 1781.5(a)(1) The type of contract, limits, underwriting restriction, classes or risks, and territory.
(2)CA Insurance Code § 1781.5(a)(2) The period of coverage, including effective and expiration dates, cancellation provisions, and the notice required for cancellation.
(3)CA Insurance Code § 1781.5(a)(3) Reporting and settlement requirements for balances.
(4)CA Insurance Code § 1781.5(a)(4) The rate used to compute the reinsurance premium.
(5)CA Insurance Code § 1781.5(a)(5) The names and addresses of assuming reinsurers.
(6)CA Insurance Code § 1781.5(a)(6) The rates of all reinsurance commissions, including the commissions on any retrocession, handled by the reinsurance intermediary-broker.
(7)CA Insurance Code § 1781.5(a)(7) Related correspondence and memoranda.
(8)CA Insurance Code § 1781.5(a)(8) Proof of placement.
(9)CA Insurance Code § 1781.5(a)(9) Details regarding retrocession handled by the reinsurance intermediary-brokers, including the identity of retrocessionaires and the percentage of each contract assumed or ceded.
(10)CA Insurance Code § 1781.5(a)(10) Financial records, including, but not limited to, premium and loss accounts.
(11)CA Insurance Code § 1781.5(a)(11) If the reinsurance intermediary-broker procures a reinsurance contract on behalf of an admitted ceding insurer directly from the assuming reinsurer, the record of the transaction shall include written evidence that the assuming reinsurer has agreed to assume the risk. If the reinsurance intermediary-broker procures a reinsurance contract on behalf of an admitted ceding insurer that is placed through a representative of the assuming reinsurer, other than an employee thereof, the record of the transaction shall include written evidence that the reinsurer has delegated binding authority to the representative.
(b)CA Insurance Code § 1781.5(b) The insurer shall 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.
reinsurance intermediary-broker contract record-keeping transaction documentation
Section § 1781.6
This law states that insurance companies can't hire anyone to act as a reinsurance intermediary-broker unless they are properly licensed. If an insurer wants to work with someone who is also employed by a reinsurance intermediary-broker, the intermediary-broker must be under the insurer's control and meet specific regulations. Additionally, insurance companies must get a financial statement from each intermediary-broker they work with every year to ensure financial transparency.
(a)CA Insurance Code § 1781.6(a) An insurer shall not engage the services of any person, firm, association, or corporation to act as a reinsurance intermediary-broker on its behalf unless the person is licensed as required by subdivision (a) of Section 1781.3.
(b)CA Insurance Code § 1781.6(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 Article 4.7 (commencing with Section 1215) of Chapter 2.
(c)CA Insurance Code § 1781.6(c) The insurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-broker with which it transacts business.
insurer reinsurance intermediary-broker license requirement
Section § 1781.7
This section outlines that transactions between a reinsurance intermediary-manager and a reinsurer must involve a written contract approved by the reinsurer's board of directors. The contract must clearly define the responsibilities of each party.
The reinsurer can terminate the contract for cause, and the intermediary-manager must maintain accurate records and remit all funds owed quarterly. Funds held for the reinsurer must be in a separate, insured bank account, especially for reinsurers in financial trouble.
Records must be kept for 10 years and the reinsurer has rights to access them. The intermediary-manager must comply with underwriting standards and report claims timely if given claims settlement authority. Contracts may not be assigned, and interim profits are only shared after proving reserve adequacy.
Additionally, the intermediary-manager must disclose any insurer relationships and provide financial statements and certification annually. The reinsurer should regularly conduct onsite reviews of operations, and the intermediary-manager's actions are considered the reinsurer's actions in the context of the contract.
Transactions between a reinsurance intermediary-manager and the reinsurer it represents in that capacity shall only be entered into pursuant to a written contract specifying the responsibilities of each party, which shall be approved by the reinsurers’s board of directors. Before a reinsurer assumes or cedes business through such a producer, a true copy of the approved contract shall be filed with the commissioner. The contract shall, at a minimum, contain provisions setting forth the following terms and conditions:
(a)CA Insurance Code § 1781.7(a) The reinsurer may terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may 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)CA Insurance Code § 1781.7(b) The reinsurance intermediary-manager shall, not less than quarterly, render calendar-year-basis and underwriting-year-basis 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 not less than a quarterly basis.
(c)CA Insurance Code § 1781.7(c) All funds collected for the reinsurer’s account shall be held by the reinsurance
intermediary-manager in a fiduciary capacity in a bank the accounts of which are insured by an agency or instrumentality of the United States. The reinsurance intermediary-manager may retain no more than three months’ estimated claims payment and allocated loss adjustment expenses. Unless the funds held for each reinsurer by the reinsurance intermediary-manager in the fiduciary account are reasonably and readily ascertainable from its books of account and records, and the bank’s books of account and records, the reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer that it represents. Notwithstanding the foregoing, the reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer that it represents that is in receivership or liquidation or that the commissioner determines to be in an impaired financial condition.
(d)CA Insurance Code § 1781.7(d) For at least 10 years after 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:
(1)CA Insurance Code § 1781.7(d)(1) The type of contract, limits, underwriting restrictions, classes or risks, and territory.
(2)CA Insurance Code § 1781.7(d)(2) The period of coverage, including effective and expiration dates, cancellation provisions and notice required for cancellation, and disposition of outstanding reserves on covered risks.
(3)CA Insurance Code § 1781.7(d)(3) The reporting and settlement requirements with respect to balances.
(4)CA Insurance Code § 1781.7(d)(4) The rate used to compute the reinsurance premium.
(5)CA Insurance Code § 1781.7(d)(5) The names and addresses of reinsurers.
(6)CA Insurance Code § 1781.7(d)(6) The rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager.
(7)CA Insurance Code § 1781.7(d)(7) Related correspondence and memoranda.
(8)CA Insurance Code § 1781.7(d)(8) Proof of placement.
(9)CA Insurance Code § 1781.7(d)(9) Details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted by subdivision (d) of Section 1781.9, including the identity of retrocessionaires and the percentage of each contract assumed or ceded.
(10)CA Insurance Code § 1781.7(d)(10) Financial records, including, but not limited to, premium and loss accounts.
(11)CA Insurance Code § 1781.7(d)(11) If the reinsurance intermediary-manager places a reinsurance contract on behalf of a ceding insurer directly from the assuming reinsurer, written evidence
that the assuming reinsurer has agreed to assume the risk. If the reinsurance intermediary-manager procures a reinsurance contract on behalf of an admitted ceding insurer that is placed through a representative of the assuming insurer, other than an employee thereof, written evidence that the reinsurer has delegated binding authority to the representative.
(e)CA Insurance Code § 1781.7(e) The reinsurer shall have access 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)CA Insurance Code § 1781.7(f) The contract cannot be assigned in whole or in part by the reinsurance intermediary-manager.
(g)CA Insurance Code § 1781.7(g) 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.
(h)CA Insurance Code § 1781.7(h) The contract shall set forth the rates, terms, and purposes of commissions, charges, and other fees that the reinsurance intermediary-manager may levy against the reinsurer.
(i)CA Insurance Code § 1781.7(i) If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer, it shall contain all of the following provisions:
(1)CA Insurance Code § 1781.7(i)(1) All claims shall be reported to the reinsurer in a timely manner.
(2)CA Insurance Code § 1781.7(i)(2) 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 to the claim:
(A)CA Insurance Code § 1781.7(i)(2)(A) The claim has the potential to exceed the lesser of an amount determined by the commissioner or the limit set by the
reinsurer.
(B)CA Insurance Code § 1781.7(i)(2)(B) The claim involves a coverage dispute.
(C)CA Insurance Code § 1781.7(i)(2)(C) The claim may exceed the reinsurance intermediary-manager’s claims settlement authority.
(D)CA Insurance Code § 1781.7(i)(2)(D) The claim is open for more than six months, unless the reinsurer agrees in writing to waive this requirement, in which event the reinsurance intermediary-manager shall annually provide the reinsurer with an exhibit identifying and describing each open claim.
(3)CA Insurance Code § 1781.7(i)(3) All claim files shall be joint property of the reinsurer and the reinsurer intermediary-manager. However, upon an order of liquidation of the reinsurer, these files shall become the sole property of the reinsurer or its estate, except when the reinsurance intermediary-manager is also managing the claim files for other reinsurers. In that event,
the reinsurance intermediary-manager shall simultaneously and immediately provide the liquidator with copies of all the claim files. With respect to claim files pertaining solely to a reinsurer in liquidation, the reinsurance intermediary-manager shall have reasonable access to and the right to copy the files on a timely basis.
(4)CA Insurance Code § 1781.7(i)(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)CA Insurance Code § 1781.7(j) If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, interim profits shall not be paid until one year after the end of each underwriting period for property business and
five years after the end of each underwriting period for casualty business, or a later period set by the commissioner for specified lines of insurance, and not until the adequacy of reserves on remaining claims has been verified pursuant to subdivision (c) of Section 1781.9.
(k)CA Insurance Code § 1781.7(k) The reinsurance intermediary-manager shall annually provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant and annually shall provide the reinsurer with a certification from an independent certified public accountant that the reinsurance intermediary-manager’s allocations of premiums and losses to the reinsurer have been made on a timely and proper basis.
(l)CA Insurance Code § 1781.7(l) The reinsurer shall periodically and at least semiannually conduct an onsite review of the underwriting and claims processing operations of the reinsurance intermediary-manager.
(m)CA Insurance Code § 1781.7(m) The reinsurance intermediary-manager shall disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with the insurer pursuant to the contract.
(n)CA Insurance Code § 1781.7(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.
reinsurance intermediary-manager written contract terminating contract
Section § 1781.8
This law outlines specific actions that a reinsurance intermediary-manager is prohibited from doing. They cannot accept compensation for retrocessions or increase retrocession limits without reducing commitments.
They also cannot bind the reinsurer to reinsurance syndicates, appoint unlicensed producers, or pay claims exceeding set limits without permission. Additionally, they must not collect from or settle with retrocessionaires without approval, nor can they jointly employ anyone with the reinsurer unless under common control. Lastly, they cannot appoint a subreinsurance intermediary-manager.
The reinsurance intermediary-manager shall not do any of the following:
(a)CA Insurance Code § 1781.8(a) Directly or indirectly receive any compensation for the placement of retrocessions on behalf of the reinsurer.
(b)CA Insurance Code § 1781.8(b) Bind any retrocession which would increase the contractual limit made available to the reinsurance intermediary-manager by the reinsurer. However, the reinsurance intermediary-manager may bind retrocessions which reduce or limit the commitments made on behalf of the reinsurer by the reinsurance intermediary-manager. The reinsurance
intermediary-manager shall promptly inform the reinsurer of the terms, conditions, and retrocessionaires of such a retrocession arranged for its account.
(c)CA Insurance Code § 1781.8(c) Commit the reinsurer to participate in reinsurance syndicates.
(d)CA Insurance Code § 1781.8(d) Appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which he or she is appointed.
(e)CA Insurance Code § 1781.8(e) 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 policyholders’ surplus as of December 31 of the last complete calendar year.
(f)CA Insurance Code § 1781.8(f) 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.
(g)CA Insurance Code § 1781.8(g) Jointly employ an individual who is employed by the reinsurer, unless the reinsurance intermediary-manager is under common control with the reinsurer that is subject to Article 4.7 (commencing with Section 1215) of Chapter 2.
(h)CA Insurance Code § 1781.8(h) Appoint a subreinsurance intermediary-manager.
reinsurance intermediary-manager compensation for retrocessions binding retrocessions
Section § 1781.9
This law section outlines specific rules for reinsurers when dealing with reinsurance intermediary-managers. First, reinsurers can only hire intermediary-managers who are properly licensed. They must also acquire annual financial statements for these managers, certified by an independent accountant. If intermediary-managers are involved in setting loss reserves, an actuary must provide an opinion on these reserves' adequacy each year, unless the ceding insurer already has a certified opinion. Additionally, only a non-affiliated officer of the reinsurer can have binding authority in reinsurance syndicates. Upon terminating a contract with an intermediary-manager, the reinsurer has 30 days to notify the commissioner. Lastly, reinsurers cannot appoint certain individuals connected to the intermediary-manager to their board, unless under specific governance laws.
(a)CA Insurance Code § 1781.9(a) A reinsurer shall not engage the services of any person, firm, association, or corporation to act as a reinsurance intermediary-manager on its behalf, unless the person is licensed as required by subdivision (b) of Section 1781.3.
(b)CA Insurance Code § 1781.9(b) A reinsurer shall 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 commissioner.
(c)CA Insurance Code § 1781.9(c) 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 or losses incurred on the business produced by the reinsurance intermediary manager. This opinion shall be in addition to any other required loss reserve certification. For purposes of this section, a reinsurance intermediary-manager shall not be considered as establishing loss reserves when the reinsurance intermediary-manager only utilizes loss reserves which are the reinsurer’s share of loss reserves established by the ceding insurer, provided that the ceding insurer has obtained 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.
(d)CA Insurance Code § 1781.9(d) Binding authority for participation in reinsurance syndicates shall rest with an officer of the reinsurer who shall not be affiliated
with the reinsurance intermediary-manager.
(e)CA Insurance Code § 1781.9(e) Within 30 days of termination of a contract with a reinsurance intermediary-manager, the reinsurer shall provide written notification of the termination to the commissioner.
(f)CA Insurance Code § 1781.9(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 subdivision shall not apply to relationships governed by Article 4.7 (commencing with Section 1215) of Chapter 2.
reinsurer requirements reinsurance intermediary-manager licensing
Section § 1781.10
This law states that the commissioner can examine reinsurance intermediaries and has access to their records and bank accounts. The commissioner can treat a reinsurance intermediary-manager as if they are the reinsurer for examination purposes.
All documents and information from such examinations are confidential, similar to insurer examinations. The intermediary has to cover the cost of the examination, and their license can be revoked if they don't pay promptly.
(a)CA Insurance Code § 1781.10(a) A reinsurance intermediary shall be subject to examination by the commissioner. The commissioner shall have access to all books, bank accounts, and records of each reinsurance intermediary in a form usable to the commissioner.
(b)CA Insurance Code § 1781.10(b) A reinsurance intermediary-manager may be examined as if it were the reinsurer.
(c)CA Insurance Code § 1781.10(c) All documents and information disclosed in connection with the examination of a reinsurance
intermediary may be used by the commissioner and shall be given confidential treatment by the commissioner to the same extent as provided in Section 735.5 for documents and information disclosed in connection with the examination of an insurer.
(d)CA Insurance Code § 1781.10(d) An examination shall be at the expense of the reinsurance intermediary. The commissioner may revoke the license of the reinsurance intermediary for a refusal to promptly pay the examination expense when due.
reinsurance intermediary examination by commissioner access to records
Section § 1781.11
If a reinsurance intermediary, insurer, or reinsurer breaks the rules in this chapter, they can face penalties after a formal hearing. They might have to pay up to $5,000 for each violation and risk losing their license or authorization to operate. The Commissioner can also impose additional penalties as the law allows. This section doesn’t change the rights of policyholders, claimants, creditors, or other third parties, nor does it limit the Commissioner's established authority.
(a)CA Insurance Code § 1781.11(a) A reinsurance intermediary, insurer, or reinsurer found by the commissioner to be in violation of this chapter, after a hearing conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code by an administrative law judge either chosen under Section 11502 of the Government Code or appointed by the commissioner, shall be subject to all of the following:
(1)CA Insurance Code § 1781.11(a)(1) For each separate violation, a penalty in an amount not exceeding five thousand dollars ($5,000).
(2)CA Insurance Code § 1781.11(a)(2) Be subject to revocation or suspension of its license or certificate of authority.
(b)CA Insurance Code § 1781.11(b) Nothing contained in this section shall affect the right of the commissioner to impose or issue any other penalties or orders authorized by law.
(c)CA Insurance Code § 1781.11(c) Nothing contained in this chapter shall in any manner limit or restrict the rights of policyholders, claimants, creditors, or other third parties or confer any rights upon those persons or otherwise limit any other authority required or authorized to be exercised under this code by the commissioner.
reinsurance intermediary insurer violation reinsurer violation
Section § 1781.12
This law allows the insurance commissioner to create rules and guidelines to help put this chapter into effect and manage it properly.
The commissioner may adopt reasonable rules and regulations for the implementation and administration of this chapter.
insurance commissioner rules and regulations implementation
Section § 1781.13
Insurance companies and reinsurers in California must follow specific rules outlined in this chapter if they want to continue using reinsurance intermediaries after January 1, 1992.
No insurer or reinsurer may continue to utilize the services of a reinsurance intermediary on and after January 1, 1992, unless utilization is in compliance with this chapter.
insurance companies reinsurers reinsurance intermediaries
Section § 1781.14
If you're a reinsurance intermediary, you must provide nonprivileged documents or testimony in court or arbitration if required. However, you can challenge the order regarding the scope of documents or timing. Not complying with these orders can lead to serious consequences according to the law.
(a)CA Insurance Code § 1781.14(a) A reinsurance intermediary shall comply with any order of a court of competent jurisdiction or a duly constituted arbitration panel requiring the production of nonprivileged documents by the reinsurance intermediary, or the testimony of an employee or other individual otherwise under control of the reinsurance intermediary with respect to any reinsurance transaction for which it acted as a reinsurance intermediary.
(b)CA Insurance Code § 1781.14(b) Compliance with subdivision (a) shall be subject to the
right of the reinsurance intermediary and the parties to the transaction to object to the court or arbitration panel concerning the nature or scope of the documents or testimony or the time within which it must comply with the order. Failure to comply with the order shall be deemed to be a material noncompliance with this chapter.
reinsurance intermediary court order compliance arbitration panel
