N.J. Stat. tit. 17, ch. 22E

in effect

N.J. Stat. § 17:22E-1 Definitions

1. As used in this act: "Commissioner" means the Commissioner of Insurance. "Controlling person" means a person which directly or indirectly has the power to direct, or cause to be directed, the management, control or activities of the reinsurance intermediary. "Insurer" means: (1) A corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance pursuant to Subtitle 3 of Title 17 of the Revised Statutes or Subtitle 3 of Title 17B of the New Jersey Statutes; (2) A medical service corporation operating pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.); (3) A hospital service corporation operating pursuant to P.L.1938, c.366 (C.17:48-1 et seq.); (4) A health service corporation operating pursuant to P.L.1985, c.236 (C.17:48E-1 et al.); and (5) A dental service corporation operating pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.). "Producer" means a person engaged in the business of an insurance agent, insurance broker or insurance consultant pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.). "Reinsurance intermediary" means a reinsurance intermediary-broker or a reinsurance intermediary-manager. "Reinsurance intermediary-broker" means a person, other than an officer or employee of the ceding insurer, which 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 that insurer. "Reinsurance intermediary-manager" means a person which 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 that reinsurer whether known as a reinsurance intermediary-manager, manager or other similar term, except that the following persons shall not be considered a reinsurance intermediary-manager, with respect to that reinsurer, for the purposes of this act: (1) An employee of the reinsurer; (2) A United States manager of a United States branch of an alien reinsurer; (3) 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, subject to P.L.1970, c.22 (C.17:27A-1 et seq.), and whose compensation is not solely based on the volume of premiums written; (4) 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 or other similar regulatory officer of the state in which the manager's principal business office is located; (5) A licensed attorney-at-law who negotiates contracts or provides general financial counsel provided no commission or brokerage fee is provided. "Reinsurer" means any person which engages in the activity of insuring part or all of an insurance risk from an originating or ceding insurer. "To be in violation" means that a reinsurance intermediary, or the insurer or reinsurer for which the reinsurance intermediary was acting, failed to substantially comply with the provisions of this act. "Qualified United States financial institution" means an institution that: (1) Is organized, or in the case of a branch or agency office of a foreign banking organization in the United States, licensed, under the laws of the United States or any state thereof; (2) Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies; and (3) Has been determined by either the commissioner, or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner. L.1993,c.244,s.1.

N.J. Stat. § 17:22E-2 Licensing of intermediary-broker, intermediary-manager

2. a. No person shall act as a reinsurance intermediary-broker or reinsurance intermediary-manager in this State unless licensed as a producer in this State. b. No insurer or reinsurer shall continue to utilize the services of a reinsurance intermediary on and after the effective date of this act unless utilization is in compliance with this act. L.1993,c.244,s.2.

N.J. Stat. § 17:22E-3 Requirements for intermediary-manager

3. The commissioner may require a reinsurance intermediary-manager to: a. File a bond in an amount and 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. L.1993,c.244,s.3.

N.J. Stat. § 17:22E-4 Authorization to act as reinsurance intermediary

4. a. The commissioner shall authorize a person to act as a reinsurance intermediary if that person has complied with the requirements of this act. Such authorization to a firm or association shall authorize all the members of the firm or association and any designated employees to act as reinsurance intermediaries under the authorization, and all those persons shall be named in the application and any supplements thereto. An authorization to a corporation shall authorize all of the officers, and any designated employees and directors thereof, to act as reinsurance intermediaries on behalf of the corporation, and all those persons shall be named in the application and any supplements thereto. b. If the applicant seeking authorization to act as a reinsurance intermediary is a nonresident, the applicant, as a condition precedent to receiving or holding such authorization, shall designate the commissioner as agent for service of process; and also shall 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 such nonresident reinsurance intermediary may be served. The person shall within 30 days notify the commissioner in writing of every change in its designated agent for service of process, and such change shall not become effective until acknowledged by the commissioner. L.1993,c.244,s.4.

N.J. Stat. § 17:22E-5 Refusal of authorization

5. The commissioner may refuse to authorize a person to act as a reinsurance intermediary if, in his judgment, the person, 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 these persons have given cause for revocation or suspension of that authorization, or have failed to comply with any prerequisite for that authorization. Upon written request therefor, the commissioner shall furnish a summary of the basis for refusal of such authorization, which document shall be privileged and not subject to P.L.1963, c.73 (C.47:1A-1 et seq.). L.1993,c.244,s.5.

N.J. Stat. § 17:22E-6 Written contract required for transactions between reinsurance intermediary-broker, insurer

6. Transactions between a reinsurance intermediary-broker and the insurer it represents in that capacity shall only be entered into pursuant to a written contract, specifying the responsibilities of each party. The contract shall, at a minimum, provide that: a. The insurer may terminate the reinsurance intermediary-broker's authority at any time; b. The reinsurance intermediary-broker shall 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 30 days of receipt; c. All funds collected for the insurer's account shall be held by the reinsurance intermediary-broker in a fiduciary capacity in a qualified United States financial institution; d. The reinsurance intermediary-broker shall comply with sections 7 and 8 of this act; e. The reinsurance intermediary-broker shall comply with the written standards established by the insurer for the cession or retrocession of all risks; and f. The reinsurance intermediary-broker shall disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded. L.1993,c.244,s.6.

N.J. Stat. § 17:22E-7 Records of transactions

7. For at least 10 years after the expiration of each contract of reinsurance transacted by the reinsurance intermediary-broker, the reinsurance intermediary-broker 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 expiration dates, 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, but not limited to, premium and loss accounts; and k. When the reinsurance intermediary-broker procures a reinsurance contract on behalf of a ceding licensed 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 assuming reinsurer has delegated binding authority to the representative. L.1993,c.244,s.7.

N.J. Stat. § 17:22E-8 Access to intermediary-broker records by insurer

8. The insurer shall 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. L.1993,c.244,s.8.

N.J. Stat. § 17:22E-9 Authorization as reinsurance intermediary-broker required

9. An insurer shall not engage the services of any person to act as a reinsurance intermediary-broker on its behalf unless that person is authorized pursuant to section 4 of this act. L.1993,c.244,s.9.

N.J. Stat. § 17:22E-10 Employment restrictions

10. An insurer shall 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 P.L.1970, c.22 (C.17:27A-1 et seq.). L.1993,c.244,s.10.

N.J. Stat. § 17:22E-11 Annual statement of financial condition to insurer

11. A reinsurance intermediary-broker shall annually send a copy of statements of its financial condition to each insurer with which it transacts business. L.1993,c.244,s.11.

N.J. Stat. § 17:22E-12 Written contract required for transactions between reinsurance intermediary-manager and reinsurer

12. Transactions between a reinsurance intermediary-manager and the reinsurer it represents in that 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 board of directors. At least 30 days before the reinsurer assumes or cedes business through a reinsurance intermediary-manager, a true copy of the approved contract shall be filed with the commissioner for approval. The contract shall, at a minimum, provide that: a. The reinsurer may immediately 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; b. 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; c. All funds collected for the reinsurer's account shall be held by the reinsurance intermediary-manager in a fiduciary capacity in a qualified United States financial institution. The reinsurance intermediary-manager shall not retain 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; d. For at least 10 years after the expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, the reinsurance intermediary-manager shall keep a complete record for each transaction showing: (1) The type of contract, limits, underwriting restrictions, classes or risks and territory; (2) Period of coverage, including effective and expiration dates, cancellation provisions and notice required of cancellation, and disposition of outstanding reserves on covered risks; (3) Reporting and settlement requirements of balances; (4) Rate used to compute the reinsurance premium; (5) Names and addresses of reinsurers; (6) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager; (7) Related correspondence and memoranda; (8) Proof of placement; (9) Details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted by section 17 of this act, including the identity of retrocessionaires and percentage of each contract assumed or ceded; (10) Financial records, including, but not limited to, premium and loss accounts; and (11) When the reinsurance intermediary-manager places a reinsurance contract on behalf of a ceding insurer: (a) Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or (b) If placed through a representative of the assuming reinsurer, other than an employee, written evidence that such reinsurer has delegated binding authority to the representative; e. The reinsurer shall 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; f. The contract shall not be assigned in whole or in part by the reinsurance intermediary-manager; g. The reinsurance intermediary-manager shall comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection or cession of all risks; h. The rates, terms and purposes of commissions, charges and other fees which the reinsurance intermediary-manager may levy against the reinsurer shall be set forth; i. If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer: (1) All claims shall be reported to the reinsurer in a timely manner; (2) 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: (a) Has the potential to exceed the lesser of an amount determined by the commissioner or the limit set by the reinsurer; (b) Involves a coverage dispute; (c) May exceed the reinsurance intermediary-manager's claims settlement authority; (d) Is open for more than six months; or (e) Is closed by payment of the lesser of an amount set by the commissioner or an amount set by the reinsurer; (3) All claims files shall be the joint property of the reinsurer and reinsurance intermediary-manager. However, upon an order of liquidation of the reinsurer, the claims files shall become the sole property of the reinsurer or its estate, except that the reinsurance intermediary-manager shall have reasonable access to and the right to copy the files on a timely basis; (4) 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; j. If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, those interim profits shall 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 section 16 of this act; k. The reinsurance intermediary-manager shall annually provide the reinsurer with a statement of its financial condition prepared by an independent certified public accountant; l. The reinsurer shall at least biannually conduct a procedural audit of the underwriting and claims processing operations of the reinsurance intermediary-manager; m. The reinsurance intermediary-manager shall disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with the insurer pursuant to a contract; n. Within the scope of its actual or apparent authority, the acts of the reinsurance intermediary-manager shall be deemed to be the acts of the reinsurer on whose behalf it is acting; and o. Any addendum to the contract shall be approved by the reinsurer's board of directors and shall be filed with the commissioner within 30 days of approval by the board of directors for the commissioner's approval. No addendum to the contract shall take effect until approved by the commissioner. L.1993,c.244,s.12.

N.J. Stat. § 17:22E-13 Prohibitions for reinsurance intermediary-manager

13. The reinsurance intermediary-manager shall not: a. Cede retrocessions on behalf of the reinsurer, except that the reinsurance intermediary-manager may cede facultative retrocessions pursuant to obligatory faculative agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for such retrocessions. The guidelines shall include a list of reinsurers with which such automatic agreements are in effect, and for each such reinsurer, the coverages and amounts or percentages that may be reinsured, and commission schedules; b. Commit the reinsurer to participate in reinsurance syndicates; c. Appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which he is appointed; d. 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 policyholders' surplus as of December 31 of the last complete calendar year; e. 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 shall be promptly forwarded to the reinsurer; f. Jointly employ an individual who is employed by the reinsurer unless the reinsurance intermediary-manager is under common control with the reinsurer subject to P.L.1970, c.22 (C.17:27A-1 et seq.); and g. Appoint a sub-reinsurance intermediary-manager. L.1993,c.244,s.13.

N.J. Stat. § 17:22E-14 Authorization as reinsurance intermediary-manager required

14. A reinsurer shall not engage the services of any person to act as a reinsurance intermediary-manager on its behalf unless such person is authorized pursuant to section 4 of this act. L.1993,c.244,s.14.

N.J. Stat. § 17:22E-15 Annual statement of financial condition to reinsurer

15. A reinsurance intermediary-manager shall annually send a copy of statements of its financial condition to each reinsurer with which it transacts business. Such statements shall be prepared by an independent certified public accountant in a form acceptable to the commissioner. L.1993,c.244,s.15.

N.J. Stat. § 17:22E-16 Adequacy of loss reserves

16. If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall annually, or more frequently at the commissioner's discretion, 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. The loss reserve opinion shall be in the format and otherwise satisfy all requirements established by the commissioner for loss reserve opinions required to be submitted by licensed insurers in this State. This opinion shall be in addition to any other loss reserve certification required in this State. L.1993,c.244,s.16.

N.J. Stat. § 17:22E-17 Binding authority for retrocessional contracts, reinsurance syndicates

17. Binding authority for all retrocessional contracts or participation in reinsurance syndicates shall rest with an officer of the reinsurer who shall not be affiliated with the reinsurance intermediary-manager. L.1993,c.244,s.17.

N.J. Stat. § 17:22E-18 Written notice of contract termination

18. Within 15 days of termination of a contract with a reinsurance intermediary-manager, the reinsurer shall provide written notification of that termination to the commissioner. Notice of termination shall be on a form prescribed by the commissioner and shall indicate the date of termination and the reason therefor. Agency appointment shall not terminate until notice of termination has been received by the commissioner. L.1993,c.244,s.18.

N.J. Stat. § 17:22E-19 Restrictions on appointment of board of directors

19. A reinsurer shall not appoint to its board of directors any officer, director, employee, controlling shareholder or subproducer of its reinsurance intermediary-manager. This section shall not apply to relationships governed by P.L.1970, c.22 (C.17:27A-1 et seq.) or, if applicable, any laws governing business transacted by producer-controlled property and casualty insurers in this State. L.1993,c.244,s.19.

N.J. Stat. § 17:22E-20 Examination of reinsurance intermediary

20. A reinsurance intermediary shall be 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 by the commissioner. A reinsurance intermediary-manager may be examined as if it were the reinsurer. L.1993,c.244,s.20.

N.J. Stat. § 17:22E-21 Violations; penalties

21. a. If the commissioner finds, after notice and opportunity for a hearing, that a reinsurance intermediary, insurer or reinsurer is in violation of any provision of this act, the commissioner may refuse to issue or renew its license, or may revoke or suspend its license. b. In addition or as an alternative to any other penalty, the commissioner may: (1) Impose a penalty of not more than $5,000 for a first violation, and not more than $10,000 for each subsequent violation, and in appropriate circumstances order restitution of moneys owed to any person and reimbursement of the costs of investigation and prosecution; (2) If a violation was committed by the reinsurance intermediary, order the restitution to the insurer, reinsurer or rehabilitator or liquidator of the insurer or reinsurer for the net losses incurred by the insurer or reinsurer attributable to such violation. c. If the commissioner finds that the interests of the public require that immediate action be taken prior to completion of the hearing, the making of a determination and the entry of a final order, he may enter an appropriate order to be effective pending completion of the hearing and entry of a final order. These orders may be entered on ex parte proofs if the proofs indicate that the commissioner's withholding of any action until completion of a full hearing will be harmful to the public interest. Orders issued pursuant to this subsection shall be subject to an application to vacate upon 10 days' notice, and a preliminary hearing on the ex parte order shall be held in any event within 20 days after it is entered. In the alternative, or in addition, the commissioner is authorized to institute a proceeding in the Superior Court, to be conducted in a summary manner, for an injunction against specified acts or conduct in aid of the proceedings pending before him, including temporary injunctions and interim restraints. d. Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided by the laws of this State. L.1993,c.244,s.21.

N.J. Stat. § 17:22E-22 Rights not restricted, limited

22. Nothing contained in this act is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, creditors or other third parties or confer any rights to such persons. L.1993,c.244,s.22.

N.J. Stat. § 17:22E-23 Rules, regulations

23. The commissioner may promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), as may be necessary to effectuate the purposes of this act. L.1993,c.244,s.23.

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