# Title 26.1 — Insurance

## Chapter 26.1-31.1 — Reinsurance Intermediaries

### § 26.1-31.1-01. Definitions.

As used in this chapter:
1. "Actuary" means a person who is a member in good standing of the American
academy of actuaries.
2. "Controlling person" means any person, firm, association, corporation, or limited
liability company who directly or indirectly has the power to direct or cause to be
directed, the management, control, or activities of the reinsurance intermediary.
3. "Insurer" means any person, firm, association, or corporation duly licensed in this state
pursuant to the applicable provisions of the insurance law as an insurer.
4. "Licensed producer" means an insurance producer or reinsurance intermediary
licensed pursuant to the applicable provision of this title.
5. "Qualified United States financial institution" means an institution that:
a. Is organized or in the case of a United States office of a foreign banking
organization, is licensed, under the laws of the United States or any state thereof;
b. Is regulated, supervised, and examined by United States federal or state
authorities having regulatory authority over banks and trust companies; and
c. 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 considered necessary and appropriate to
regulate the quality of financial institutions whose letters of credit will be
acceptable to the commissioner.
6. "Reinsurance intermediary" means a reinsurance intermediary-broker or a reinsurance
intermediary-manager as these terms are defined in subsections 7 and 8.
7. "Reinsurance intermediary-broker" means any person, other than an officer or
employee of the ceding insurer, firm, association, or corporation 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 such insurer.
8. "Reinsurance intermediary-manager" means any person, firm, association,
corporation, or limited liability company 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 this definition, the following persons may not be
considered a reinsurance intermediary-manager, with respect to such reinsurer, for the
purposes of this chapter:
a. An employee of the reinsurer.
b. A United States manager of the United States branch of an alien reinsurer.
c. An underwriting manager which, pursuant to contract, manages all or part of the
reinsurance operations of the reinsurer, is under common control with the
reinsurer and subject to chapter 26.1-10, and whose compensation is not based
on the volume of premiums written.
d. 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 commissioner of the state in which the manager's
principal business office is located.
9. "Reinsurer" means any person, firm, association, or corporation duly licensed in this
state pursuant to the applicable provisions of this title as an insurer with the authority
to assume reinsurance.
10. "To be in violation" means that the reinsurance intermediary, insurer, or reinsurer for
whom the reinsurance intermediary was acting failed to substantially comply with the
provisions of this chapter.

### § 26.1-31.1-02. Licensure.

1. No person, firm, association, or corporation may 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:
a. In this state, unless the reinsurance intermediary-broker is a licensed producer in
this state; or
b. In another state, unless the reinsurance intermediary-broker is a licensed
producer in this state or another state having a law substantially similar to this law
or such reinsurance intermediary-broker is licensed in this state as a nonresident
reinsurance intermediary.
2. No person, firm, association, or corporation may act as a reinsurance
intermediary-manager:
a. For a reinsurer domiciled in this state, unless the reinsurance
intermediary-manager is a licensed producer in this state.
b. 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.
c. 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 law or the person is licensed in this state as a
nonresident reinsurance intermediary.
3. The commissioner may require a reinsurance intermediary-manager subject to
subsection 2 to:
a. File a bond in an amount from an insurer acceptable to the commissioner for the
protection of the reinsurer; and
b. Maintain an errors and omissions policy in an amount acceptable to the
commissioner.
4. a. The commissioner may issue a reinsurance intermediary license to any person,
firm, association, corporation, or limited liability company who has complied with
the requirements of this chapter. Any such license issued to a firm or association
will authorize all the members of the firm or association and any designated
employees to act as reinsurance intermediaries under the license, and all such
persons must be named in the application and any supplements thereto. Any
such license issued to a corporation must authorize all of the officers and any
designated employees and directors thereof to act as reinsurance intermediaries
on behalf of the corporation, and all such persons must be named in the
application and any supplements thereto. Any such license issued to a limited
liability company must authorize all of the managers and any designated
employees and governors thereof to act as reinsurance intermediaries on behalf
of the limited liability company, and all such persons must be named in the
application and any supplements thereto.
b. If the applicant for a reinsurance intermediary license is a nonresident, the
applicant, as a condition precedent to receiving or holding a license, shall
designate the commissioner as agent for service of process in the manner, and
with the same legal effect, provided for by this title for designation of service of
process upon unauthorized insurers. The applicant shall also furnish the
commissioner with the name and address of a resident of this state upon whom
notices or orders of the commissioner or process affecting the nonresident
reinsurance intermediary may be served. The licensee shall promptly notify the
commissioner in writing of every change in its designated agent for service of
process, and the changes do not become effective until acknowledged by the
commissioner.
5. The commissioner may refuse to issue a reinsurance intermediary license if, in the
commissioner's judgment, the applicant, anyone named on the application, or any

member, principal, officer, or director of the applicant, is not 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 the license, or has failed to comply with any prerequisite for the issuance of such
license. Upon written request therefor, the commissioner will furnish a summary of the
basis for refusal to issue a license.
6. Licensed attorneys at law of this state when acting in their professional capacity as
such are exempt from this section.
### § 26.1-31.1-03. Required contract provisions - Reinsurance intermediary-brokers.

Transactions between a reinsurance intermediary-broker and the insurer it represents in
such capacity may only be entered into, pursuant to a written authorization, specifying the
responsibilities of each party. The authorization must, at a minimum, contain provisions that:
1. The insurer may terminate the reinsurance intermediary-broker's authority at any time.
2. The reinsurance intermediary-broker will 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 thirty days of receipt.
3. 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 as defined by this chapter.
4. The reinsurance intermediary-broker will comply with section 26.1-31.1-04.
5. The reinsurance intermediary-broker will comply with the written standards established
by the insurer for the cessions or retrocession of all risks.
6. The reinsurance intermediary-broker will disclose to the insurer any relationship with
any reinsurer to which business will be ceded or retroceded.
### § 26.1-31.1-04. Books and records - Reinsurance intermediary-brokers.

1. For at least ten years after expiration of each contract of reinsurance transacted by the
reinsurance intermediary-broker, the reinsurance intermediary-broker will keep a
complete record for each transaction showing:
a. The type of contract, limits, underwriting restrictions, classes or risks, and
territory;
b. Period of coverage, including the effective date and the expiration date,
cancellation provisions and notice required of cancellation;
c. Reporting and settlement requirements of balances;
d. Rate used to compute the reinsurance premium;
e. Names and addresses of assuming reinsurers;
f. Rates of all reinsurance commissions, including the commissions on any
retrocessions handled by the reinsurance intermediary-broker;
g. Related correspondence and memoranda;
h. Proof of placement;
i. Details regarding retrocessions handled by the reinsurance intermediary-broker,
including the identity of retrocessionaires and percentage of each contract
assumed or ceded;
j. Financial records, including premium and loss accounts; and
k. When the reinsurance intermediary-broker procures a reinsurance contract on
behalf of a licensed ceding insurer:
(1) Directly from any assuming reinsurer, written evidence that the assuming
reinsurer has agreed to assume the risk; or
(2) If placed through a representative of the assuming reinsurer, other than an
employee, written evidence that the reinsurer has delegated binding
authority to the representative.
2. 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.

### § 26.1-31.1-05. Duties of insurers utilizing the services of reinsurance

intermediary-broker.
1. An insurer may not engage the services of any person, firm, association, corporation,
or limited liability company to act as a reinsurance intermediary-broker on its behalf
unless the person, firm, association, corporation, or limited liability company is
licensed as required by subsection 1 of section 26.1-31.1-02.
2. 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 chapter
26.1-10.
3. The insurer shall annually obtain a copy of statements of the financial condition of
each reinsurance intermediary-broker with which it transacts business.
### § 26.1-31.1-06. Required contract provisions - Reinsurance intermediary-managers.

Transactions between a reinsurance intermediary-manager and the reinsurer it represents
in that capacity may only be entered into pursuant to a written contract, approved by the
reinsurer's board of directors, which specifies the responsibilities of each party. At least thirty
days before the reinsurer assumes or cedes business through the producer, a true copy of the
approved contract must be filed with the commissioner for approval. The contract must, at a
minimum, contain provisions that:
1. 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.
2. The reinsurance intermediary-manager will 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 remit all funds due under the contract to the reinsurer on
not less than a monthly basis.
3. All funds collected for the reinsurer's account will be held by the reinsurance
intermediary-manager in a fiduciary capacity in a bank which is a qualified United
States financial institution as defined by this chapter. The reinsurance
intermediary-manager may retain no more than three months' estimated claims
payments and allocated loss adjustment expenses. The reinsurance
intermediary-manager shall maintain a separate bank account for each reinsurer that it
represents.
4. For at least ten years after expiration of each contract of reinsurance transacted by the
reinsurance intermediary-manager, the reinsurance intermediary-manager will keep a
complete record for each transaction showing:
a. The type of contract, limits, underwriting restrictions, classes or risks, and
territory;
b. Period of coverage, including the effective date and the expiration date,
cancellation provisions and notice required of cancellation, and disposition of
outstanding reserves on covered risks;
c. Reporting and settlement requirements of balances;
d. Rate used to compute the reinsurance premium;
e. Names and addresses of reinsurers;
f. Rate of all reinsurance commissions, including the commissions on any
retrocessions handled by the reinsurance intermediary-manager;
g. Related correspondence and memoranda;
h. Proof of placement;
i. Details regarding retrocessions handled by the reinsurance
intermediary-manager, as permitted by subsection 4 of section 26.1-31.1-08,
including the identity of retrocessionaires and percentage of each contract
assumed or ceded;
j. Financial records premium and loss accounts; and

k. When the reinsurance intermediary-manager places a reinsurance contract on
behalf of a ceding insurer:
(1) Directly from any assuming reinsurer, written evidence that the assuming
reinsurer has agreed to assume the risk; or
(2) If placed through a representative of the assuming reinsurer, other than an
employee, written evidence that the reinsurer has delegated binding
authority to the representative.
5. The reinsurer will 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.
6. The contract cannot be assigned in whole or in part by the reinsurance
intermediary-manager.
7. 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.
8. Set forth the rates, terms, and purposes of commissions, charges, and other fees
which the reinsurance intermediary-manager may levy against the reinsurer.
9. If the contract permits the reinsurance intermediary-manager to settle claims on behalf
of the reinsurer:
a. All claims will be reported to the reinsurer in a timely manner.
b. 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:
(1) Has the potential to exceed the lesser of an amount determined by the
commissioner or the limit set by the reinsurer;
(2) Involves a coverage dispute;
(3) May exceed the reinsurance intermediary-manager's claims settlement
authority;
(4) Is open for more than six months; or
(5) Is closed by payment of the lesser of an amount set by the commissioner or
an amount set by the reinsurer.
c. All claim files will be the joint property of the reinsurer and reinsurance
intermediary-manager. However, upon an order of liquidation of the reinsurer the
files become the sole property of the reinsurer or its estate. The reinsurance
intermediary-manager shall have reasonable access to and the right to copy the
files on a timely basis.
d. 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.
10. If the contract provides for a sharing of interim profits by the reinsurance
intermediary-manager, the interim profits will 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 subsection 3 of section 26.1-31.1-08.
11. The reinsurance intermediary-manager will annually provide the reinsurer with a
statement of its financial condition prepared by an independent certified public
accountant.
12. The reinsurer shall periodically and at least semiannually conduct an onsite review of
the underwriting and claims processing operations of the reinsurance
intermediary-manager.
13. The reinsurance intermediary-manager will 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.

14. The acts of the reinsurance intermediary-manager must be deemed to be the acts of
the reinsurer on whose behalf it is acting.
### § 26.1-31.1-07. Prohibited acts.

The reinsurance intermediary-manager may not:
1. Bind retrocessions on behalf of the reinsurer, except that the reinsurance
intermediary-manager may bind facultative retrocessions pursuant to obligatory
facultative agreements if the contract with the reinsurer contains reinsurance
underwriting guidelines for such retrocessions. The guidelines must include a list of
reinsurers with which the automatic agreements are in effect, and for each such
reinsurer, the coverages and amounts or percentages that may be reinsured, and
commission schedules.
2. Commit the reinsurer to participate in reinsurance syndicates.
3. Appoint any producer without assuring that the producer is lawfully licensed to transact
the type of reinsurance for which the producer is appointed.
4. 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
one percent of the reinsurer's policyholder's surplus as of December thirty-first of the
last complete calendar year.
5. 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.
6. Jointly employ an individual who is employed by the reinsurer unless such reinsurance
intermediary-manager is under common control with the reinsurer subject to chapter
26.1-10.
7. Appoint a subreinsurance intermediary-manager.
### § 26.1-31.1-08. Duties of reinsurers utilizing the services of a reinsurance

intermediary-manager.
1. A reinsurer may not engage the services of any person, firm, association, corporation,
or limited liability company to act as a reinsurance intermediary-manager on its behalf
unless such person, firm, association, corporation, or limited liability company is
licensed as required by subsection 2 of section 26.1-31.1-02.
2. The 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 public accountant, in a form acceptable to the
commissioner.
3. 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
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.
4. Binding authority for all retrocessional contracts or participation in reinsurance
syndicates rests with an officer of the reinsurer who may not be affiliated with the
reinsurance intermediary-manager.
5. Within thirty days of termination of a contract with a reinsurance
intermediary-manager, the reinsurer shall provide written notification of its termination
to the commissioner.
6. A reinsurer may not appoint to its board of directors any officer, director, employee,
controlling shareholder, or subproducer of its reinsurance intermediary-manager. This
subsection does not apply to relationships governed by chapter 26.1-10.

### § 26.1-31.1-09. Examination authority.

1. A reinsurance intermediary is subject to examination by the commissioner. The
commissioner shall have access to all books, bank accounts, and records of the
reinsurance intermediary in a form usable to the commissioner.
2. A reinsurance intermediary-manager may be examined as if it was the reinsurer.
### § 26.1-31.1-10. Penalties and liabilities.

1. If the commissioner determines that the reinsurance intermediary or any other person
has not materially complied with this chapter, or any rule or order adopted under this
chapter, after notice and opportunity to be heard, the commissioner may order:
a. For each separate violation, a penalty in an amount not exceeding five thousand
dollars;
b. Revocation or suspension of the reinsurance intermediary's license; and
c. If it was found that because of the material noncompliance the insurer or
reinsurer has suffered any loss or damage, the commissioner may maintain a civil
action brought by or on behalf of the reinsurer or insurer and its policyholders and
creditors for recovery of compensatory damages for the benefit of the reinsurer or
insurer and its policyholders and creditors or seek other appropriate relief.
2. If an order of rehabilitation or liquidation of the insurer has been entered pursuant to
chapter 26.1-06.1, and the receiver appointed under that order determines that the
reinsurance intermediary or any other person has not materially complied with this
chapter, or any rule or order adopted under this chapter, and the insurer suffered any
loss or damage as a result of the material noncompliance, the receiver may maintain a
civil action for recovery of damages or other appropriate sanctions for the benefit of
the insurer.
3. Nothing contained in this section affects the right of the commissioner to impose any
other penalties provided for in the insurance law.
4. Nothing contained in this chapter is intended to or may in any manner limit or restrict
the rights of policyholders, claimants, creditors, or other third parties.
5. The decision, determination, or order of the commissioner pursuant to subsection 1 is
subject to judicial review pursuant to chapter 28-32.
### § 26.1-31.1-11. Rules.

The commissioner may adopt reasonable rules for the implementation and administration of
the provisions of this chapter.
### § 26.1-31.1-12. Effective date.

No insurer or reinsurer may continue to utilize the services of a reinsurance intermediary
after July 7, 1991, unless utilization is in compliance with this chapter.
