Idaho State Statutes - Idaho Attorney Directory

(1) The provisions of this section:
(a) Shall apply if, in any calendar year, the aggregate amount of gross
written premium on business placed with a controlled insurer by a
controlling broker 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.
(b) Notwithstanding paragraph (a) of this subsection, the provisions of
this section shall not apply if:
(i) The controlling broker:
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
subbrokers, and not directly from insureds; and
(ii) The controlled insurer, except for insurance business written
through a residual market facility, accepts insurance business only
from a controlling broker, a broker controlled by a controlled
insurer, or a broker that is a subsidiary of the controlled insurer.
(2) Required contract provisions. A controlled insurer shall not accept
business from a controlling broker and a controlling broker shall not place
business with a controlled insurer unless there is a written contract between
the controlling broker and the 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:
(a) The controlled insurer may terminate the contract for cause, upon
written notice to the controlling broker. The controlled insurer shall
suspend the authority of the controlling broker to write business during
the pendency of any dispute regarding the cause for the termination;
(b) The controlling broker 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 broker;
(c) The controlling broker 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;
(d) All funds collected for the controlled insurer's account shall be
held by the controlling broker in a fiduciary capacity, in one (1) 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 broker not required to
be licensed in this state shall be maintained in compliance with the
requirements of the controlling broker's domiciliary jurisdiction;
(e) The controlling broker shall maintain separately identifiable records
of business written for the controlled insurer;
(f) The contract shall not be assigned in whole or in part by the
controlling broker;
(g) The controlled insurer shall provide the controlling broker 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 broker 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 broker other than the
controlling broker;
(h) The rates and terms of the controlling broker'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
brokers other than controlling brokers. For purposes of this subsection
and subsection (2) (g) of this section, examples of "comparable business"
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 broker, 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 (4) (a) of this section;
(j) A limit on the controlling broker'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 broker when the applicable limit is
approached and shall not accept business from the controlling broker if
the limit is reached. The controlling broker shall not place business with
the controlled insurer if it has been notified by the controlled insurer
that the limit has been reached; and
(k) The controlling broker may negotiate but shall not bind reinsurance
on behalf of the controlled insurer on business the controlling broker
places with the controlled insurer, except that the controlling broker 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 or percentages that may be reinsured and
commission schedules.
(3) 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 independent
certified public accountants, and an independent casualty actuary or other
independent loss reserve specialist acceptable to the director to review the
adequacy of the insurer's loss reserves.
(4) Reporting requirements.
(a) In addition to any other required loss reserve certification, the
controlled insurer shall annually, on April 1 of each year, file with the
director an opinion of an independent casualty actuary (or such other
independent loss reserve specialist acceptable to the director) 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 (including incurred but not reported) on business placed by
the broker; and
(b) The controlled insurer shall annually report to the director the
amount of commissions paid to the broker, the percentage such amount
represents of the net premiums written and comparable amounts and
percentage paid to noncontrolling brokers for placements of the same kinds
of insurance.

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