KRS 304.9-725: Minimum contract provisions.

Transactions between a reinsurance intermediary manager and the reinsurer it represents

in such capacity shall only be entered into pursuant to a written contract, specifying the

responsibilities of each party, which shall be approved by the reinsurer's bo ard of

directors. At least thirty (30) days before the reinsurer assumes or cedes business through

such producer, a true copy of the contract approved by the reinsurer's board of directors

shall be filed with the commissioner for approval. The contract sha ll, 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 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 shall 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 shall 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 three (3) months estimated claims payment and allocated l oss adjustment

expenses. The reinsurance intermediary manager shall maintain a separate bank

account for each reinsurer that it represents;

(4) For at least ten (10) years after expiration of each contract of reinsurance transacted

by the reinsurance inter mediary manager, the reinsurance intermediary manager

shall 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 effective and e xpiration dates, cancellation

provisions and notice required for 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) Rates 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 KRS 304.9 -735(4), including the identity of

retrocessionaires and percentage of each contract assumed or ceded;

(j) Financial records, including, but not limit ed to, 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; and

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 shall have access to and the right to copy all a ccounts and records

maintained by the reinsurance intermediary manager related to its business in a form

usable by the reinsurer;

(6) The contract shall not be assigned in whole or in part by the reinsurance

intermediary manager;

(7) The reinsurance interm ediary manager shall 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 shall be reported to the reinsurer in a timely manner;

(b) A copy of the claim file shall 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 (6) 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 shall be the joint property of the reinsurer and the reinsurance

intermediary manager. However, upon an order of liquidation of the reinsurer,

the files shall become the sole property of the reinsurer or its estate, but the

reinsurance intermediar y manager shall have reasonable access to and the

right to copy the files; and

(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, that the interim profits shall not be paid until one (1) year

after the end of each underwriting period for property business and five (5) 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 KRS 304.9-735(3);

(11) The reinsurance intermediary manager shall annually provide the reinsurer with a

statement of its financial condition prepared by an independent certified accountant;

(12) The reinsurer shall at least semiannually conduct an on -site review of the

underwriting and claims processing operations of the reinsurance intermediary

manager;

(13) The reinsurance intermediary manager shall disclose to the reinsurer any

relationship it has with any insurer prior to ceding or assuming any business with

such reinsurer pursuant to this contract; and

(14) The acts of the reinsurance intermediary manager shall be deemed to be the acts of

the reinsurer on whose behalf it is acting.