Section 626.7491 - Business transacted with producer controlled property and casualty insurer(1) SHORT TITLE.-This section may be cited as the "Business Transacted with Producer Controlled Property or Casualty Insurer Act."(2) DEFINITIONS.-As used in this section: (a) "Accredited state" means a state in which the department or agency which regulates insurance has qualified as meeting the minimum financial regulatory standards adopted and established from time to time by the National Association of Insurance Commissioners (NAIC).(b) "Control" or "controlled" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a contract for goods or nonmanagement services, or otherwise. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 10 percent or more of the outstanding voting securities of any other person. No person shall be deemed to control another person solely by reason of being an officer or director of such other person.(c) "Controlled insurer" means a licensed insurer which is controlled, directly or indirectly, by a producer.(d) "Controlling producer" means a producer who, directly or indirectly, controls an insurer.(e) "Licensed insurer" or "insurer" means any person, firm, association, or corporation licensed to transact a property or casualty insurance business in this state. The following are not licensed insurers for the purposes of this section:1. Any risk retention group as defined in:a. The Superfund Amendments Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (1986);b. The Risk Retention Act, 15 U.S.C. ss. 3901 et seq. (1982 and Supp. 1986); or2. Any residual market pool or joint underwriting authority or association; and3. Any captive insurance company as defined in s. 628.901.(f) "Producer" means an insurance agent or agents or any other person who, for any compensation, commission, or other thing of value, acts or aids in any manner in soliciting, negotiating, or procuring the making of any insurance contract on behalf of an insured other than the person.(3) APPLICABILITY.-This section shall apply to licensed insurers domiciled in this state or domiciled in a state that is not an accredited state having in effect a law substantially similar to this section. The provisions of ss. 628.801 - 628.803, to the extent they are not superseded by this section, shall continue to apply to all parties within holding company systems subject to this section.(4) MINIMUM STANDARDS.- (a) The provisions of this section apply if, in any calendar year, the aggregate amount of gross written premiums on business placed with a controlled insurer by a controlling producer is equal to or greater than 5 percent of the admitted assets of the controlled insurer, as reported in the controlled insurer's annual statement filed as of December 31 of the prior year.(b) Notwithstanding the provisions of paragraph (a), the provisions of this subsection and subsections (5), (6), and (7) do not apply if: 1. The controlling producer places insurance only with the controlled insurer, or only with the controlled insurer and any 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;2. The controlling producer accepts insurance placements only from nonaffiliated subproducers and not directly from insureds; and3. The controlled insurer, except for insurance business written through a risk apportionment plan as provided in s. 627.351, 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.(5) 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 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 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.(b) 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.(c) The controlling producer shall remit all funds due under the terms of the contract to the controlled insurer, at least monthly. The due date shall be fixed so that premiums, or installments thereof, collected shall be remitted no later than 90 days after the effective date of any policy placed with the controlled insurer under such contract.(d) 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 applicable provisions of the Florida Insurance Code. However, funds of a controlling producer not required to be licensed in this state shall be maintained in compliance with the requirements of the jurisdiction of the controlling producer's domicile.(e) The controlling producer 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 producer.(g) 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.(h) The contract must specify 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 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 (g), 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 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 5 years after the premiums on liability insurance are earned and at least 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 paragraph (7)(a).(j) The contract must specify 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 after 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.(k) 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 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 or percentages that may be reinsured, and commission schedules.(6) 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 office to review the adequacy of the insurer's loss reserves.(7) REPORTING REQUIREMENTS.-(a) In addition to any other required loss reserve certification, the controlled insurer shall, on April 1 of each year, file with the office the opinion of an independent casualty actuary, or such other independent loss reserve specialist acceptable to the office, 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 the year end, including incurred but not reported losses, on business placed by the producer.(b) The controlled insurer shall annually report to the office the amount of commissions paid to the producer, the percentage such amount represents of the net premiums written, and comparable amounts and percentages paid to noncontrolling producers for placements of the same kinds of insurance.(8) PENALTIES.- (a) If the department believes that the controlling producer or any other person has not materially complied with this section, or any rule adopted or order issued hereunder, the department may order the controlling producer to cease placing business with the controlled insurer.(b) If, due to such material noncompliance, the controlled insurer or any policyholder thereof has suffered any loss or damage, the department or office may maintain a civil action or intervene in an action brought by or on behalf of the insurer or policyholder for recovery of compensatory damages for the benefit of the insurer or policyholder or other appropriate relief.(c) If an order for liquidation or rehabilitation of the controlled insurer has been entered pursuant to chapter 631 and the receiver appointed under such order believes that the controlling producer or any other person has not materially complied with this section or any rule adopted or order issued hereunder and the insurer has suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer.(d) Nothing contained in this section shall affect the right of the department or office to impose any other penalties provided for in the Florida Insurance Code.(e) Nothing contained in this section is intended to or shall in any manner alter or affect the rights of policyholders, claimants, creditors, or other third parties.(9) DISCLOSURE REQUIREMENT.-A property or casualty insurer that is controlled by a producer may not accept business from such producer in any transaction unless the producer, prior to the effective date of the policy, delivers written notice, signed by the insured, to the prospective insured disclosing the relationship between the insurer and the controlling producer. The disclosure must be retained in the underwriting file until the filing of the report on examination covering the period in which the coverage is in effect; however, if the business is placed through a subproducer who is not a controlling producer, the controlling producer and the controlled insurer shall retain in its records a signed commitment from the subproducer that the subproducer is aware of the relationship between the insurer and the producer and that the subproducer has or will notify the insured.s.40, ch. 92-146; s.11, ch. 93-410; s.960, ch. 2003-261; s.35, ch. 2012-151.