by a producer other than the controlling producer.
(h) The contract shall state the rates 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 may not be greater than those applicable to comparable business and
services placed with the controlled insurer by producers other than controlling producers. For
purposes of Subsections (3)(g) and (h), examples of "comparable business and services" include
the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits,
and similar quality of business.
(i) 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
the compensation may 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 are earned on any other
insurance. In no event may the commissions be paid until the adequacy of the controlled
insurer's reserves on remaining claims has been independently verified pursuant to Subsection
(5).
(j) The contract shall include 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 to
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 may not place business with the
controlled insurer if it has been notified by the controlled insurer that the limit has been reached.
(k) The controlling producer may negotiate but may not bind reinsurance on behalf of the
controlled insurer on business the controlling producer places with the controlled insurer.
However, 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 the
automatic agreements are in effect, the coverages and amounts or percentages that may be
reinsured, and commission schedules.
(4) Each controlled insurer shall have an audit committee of the board of directors. The
audit committee shall annually meet to review the adequacy of the insurer's loss reserves. The
committee shall meet with management, the insurer's independent certified public accountants,
and an independent casualty actuary or any other independent loss reserve specialists acceptable
to the commissioner.
(5) (a) In addition to any other required loss reserve certification, the controlled insurer
shall file with the commissioner on April 1 of each year an opinion of an independent casualty
actuary, or any other independent loss reserve specialist acceptable to the commissioner. The
opinion shall report loss ratios for each line of business written and shall attest to the adequacy of
loss reserves established for losses incurred and outstanding as of year-end on business placed by
the producer including losses incurred but not reported.
(b) The controlled insurer shall annually report to the commissioner the amount of
commissions paid to the producer, the percentage that amount represents of the net premiums
written, and comparable amounts and percentage paid to noncontrolling producers for
placements of the same kinds of insurance.
Renumbered and Amended by Chapter 298, 2003 General Session
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