Ohio § 3905.63

§ 3905.63.

(A) If, in any 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 per cent of the admitted assets of the insurer, as reported in the insurer's

quarterly statement filed as of the thirtieth day of September of the immediately

preceding year, all of the following apply: (1) The controlled insurer shall not accept business from the controlling producer and

the controlling producer shall not place business with the controlled insurer, unless

there is a written contract between the 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 at least the following provisions: (a) The insurer may terminate the contract for cause, upon written notice to the producer.  The insurer shall suspend the authority of the producer to write business during

the pendency of any dispute regarding the cause of the termination. (b) The producer shall render accounts to the insurer detailing all material transactions,

including information necessary to support all commissions, charges, and other fees

received by, or owing to, the producer. (c) The producer shall remit all funds due under the terms of the contract to the insurer

on at least a monthly basis.  The due date shall be fixed so that premiums or installments thereof collected shall

be remitted no later than ninety days after the effective date of any policy placed

with the insurer under the contract. (d) All funds collected for the insurer's account shall be held by the producer, 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 any applicable

provisions of Title XXIX of the Revised Code.  Funds of a controlling producer that is not required to be licensed in this state

shall be maintained in compliance with the requirements of the producer's domiciliary

jurisdiction. (e) The producer shall maintain separate, identifiable records of business written for

the insurer. (f) The contract shall not be assigned in whole or in part by the producer. (g) The insurer shall provide the producer with copies of its underwriting standards,

rules, and procedures and manuals setting forth the rates to be charged and the conditions

for the acceptance or rejection of risks.  The producer shall adhere to these standards, rules, procedures, rates, and conditions.  The standards, rules, procedures, rates, and conditions shall be the same as those

applicable to comparable business placed with the insurer by a producer that is not

a controlling producer.  For purposes of divisions (A)(1)(g) and (h) of this section, “ comparable business ” includes the same lines of insurance, same kinds of insurance, same kinds of risks,

similar policy limits, and similar quality of business. (h) The rates and terms of the producer's commissions, charges, or other fees and the

purposes for the charges or fees.  The rates of the commissions, charges, or other fees shall not be greater than those

applicable to comparable business placed with the insurer by producers that are not

controlling producers. (i) If the contract provides that the producer's compensation on insurance business placed

with the insurer is contingent upon the insurer's profits on that business, 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 on any other insurance

are earned.  In no event shall the commissions be paid until the adequacy of the insurer's reserves

on remaining claims has been independently verified pursuant to division (A)(3) of

this section. (j) A limit on the producer's writings in relation to the insurer's surplus and total

writings.  The insurer may establish a different limit for each line or subline of business.  The insurer shall notify the producer when the applicable limit is approached and

shall not accept business from the producer if the limit is reached.  The producer shall not place business with the insurer if it has been notified by

the insurer that the limit has been reached. (k) The producer may negotiate, but shall not bind, reinsurance on behalf of the insurer

on business the producer places with the insurer, except that the producer may bind

facultative reinsurance contracts pursuant to obligatory facultative agreements if

the contract with the insurer contains underwriting guidelines including, for both

reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements

are in effect, the coverages and amounts or percentages that may be reinsured, and

commission schedules. (2) Each 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 reserves specialist acceptable to the superintendent of insurance, to review

the adequacy of the insurer's loss reserves. (3) On or before the first day of April, the controlled insurer shall annually file with

the superintendent, in addition to any other required loss reserve certification,

the opinion of an independent casualty actuary, or any other independent loss reserve

specialist acceptable to the superintendent, that reports the loss ratios for each

line of business written by the insurer and that, with respect to all business placed

with the insurer by the producer, attests to the adequacy of loss reserves established

for losses incurred and outstanding, including incurred but not reported, as of the

previous thirty-first day of December. (4) On or before the first day of April, the insurer shall annually report to the superintendent

the amount of commissions paid by the insurer to the producer, the percentage that

such amount represents of the net premiums written by the insurer, the amount of commissions

paid by the insurer to each producer that is not in control of the insurer for the

placement of the same kind of insurance, and the percentage that such amount represents

of the net premiums written by the insurer. (B) Division (A) of this section does not apply if both of the following conditions are

met: (1) The controlling producer places insurance only with the controlled insurer, with

the insurer and a member or members of the insurer's holding company system, or with

the insurer's parent, affiliate, or subsidiary;  receives no compensation that is

based on the amount of premiums written in connection with the insurance;  and accepts

insurance placed by nonaffiliated subproducers and not directly from insureds. (2) The controlled insurer, except for insurance business written through a residual

market facility, accepts insurance business only from a controlling producer, a producer

controlled by the insurer, or a producer that is a subsidiary of the insurer.