Oklahoma § 36-1674

§ 36-1674.

Required contract provisions - Producers and insurers

affected - Audit Committees - Reporting requirements.

A. Applicability of section.

1. The provisions of this section shall apply 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 percent (5%) of the admitted assets

of the controlled insurer, as reported in the controlled insurers'

quarterly statement filed as of September 30 of the prior year.

2. Notwithstanding paragraph 1 of this subsection, the

provisions of this section shall not apply if:

a.

the controlling producer:

(1) 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 such

insurance, and

(2) accepts insurance placements only from

nonaffiliated subproducers, and not directly from

insureds, and

b.

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 controlled insurer, or a

producer that is a subsidiary of the controlled

insurer.

B. Required contract provisions. A controlled insurer shall

not accept business from a controlling producer and a controlling

producer shall not place business with a controlled insurer unless

there is a written contract between the controlling producer and the

Oklahoma Statutes - Title 36. Insurance

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:

1. 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 any dispute regarding the

cause for the termination;

2. The controlling producer shall render accounts to the

controlled insurer detailing all material transactions, including

information necessary to support all commissions, charges and other

fees received by, or owing to, the controlling producer;

3. The controlling producer shall remit all funds due under the

terms of the contract to the controlled 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 (90) days after the effective date of any policy placed with

the controlled insurer under this contract;

4. All funds collected for the controlled insurer's account

shall be held by the controlling 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 the

provisions of the insurance law as applicable. However, funds of a

controlling producer not required to be licensed in this state shall

be maintained in compliance with the requirements of the controlling

producer's domiciliary jurisdiction;

5. The controlling producer shall maintain separately

identifiable records of business written for the controlled insurer;

6. The contract shall not be assigned in whole or in part by

the controlling producer;

7. 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. The standards, rules, procedures, rates and conditions

shall be the same as those applicable to comparable business placed

with the controlled insurer by a producer other than the controlling

producer;

8. The rate and terms of the controlling producer's

commissions, charges or other fees and the purposes for those

charges or fees. The rates of the commissions, charges and other

fees shall be no greater than those applicable to comparable

business placed with the controlled insurer by producers other than

controlling producers. For purposes of this paragraph and paragraph

7 of this subsection, examples of "comparable business" include the

Oklahoma Statutes - Title 36. Insurance

same lines of insurance, same kinds of insurance, same kinds of

risks, similar policy limits, and similar quality of business;

9. 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 such

compensation shall not be determined and paid until at least five

(5) years after the premiums on liability insurance are earned and

at least one (1) year after the premiums are earned on any other

insurance. In no event shall the commissions be paid until the

adequacy of the controlled insurer's reserves on remaining claims

has been independently verified pursuant to subsection D of this

section;

10. A limit on the controlling producer's writings in relation

to the controlled insurer's surplus and total writings. The insurer

may establish a different limit for each line or subline of

business. The controlled insurer shall notify the controlling

producer when the applicable limit is approached and shall not

accept business from the controlling producer if the limit is

reached. The controlling producer shall not place business with the

controlled insurer if it has been notified by the controlled insurer

that the limit has been reached; and

11. The controlling producer may negotiate but shall 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

pursuant to 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 such automatic agreements are in effect, the coverages and

amounts of percentages that may be reinsured and commission

schedules.

C. Audit Committee. 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 licensed public accountant or a certified public

accountant holding a permit to practice in this state 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.

D. Reporting requirements.

1. In addition to any other required loss reserve

certification, the controlled insurer shall annually, on April 1 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,

Oklahoma Statutes - Title 36. Insurance

including incurred but not reported losses, on business placed by

the producer; and

2. The controlled insurer shall annually report to the

Commissioner the amount of commissions paid to the producer, the

percentage such amount represents of the net premiums written and

comparable amounts and percentage paid to noncontrolling producers

for placements of the same kinds of insurance.

Added by Laws 1992, c. 178, § 16, eff. Sept. 1, 1992. Amended by

Laws 2015, c. 298, § 10, eff. Nov. 1, 2015.