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DISTINCT LEGAL ISSUES AFFECTING REINSURANCE INTERMEDIARIES

1. Reinsurance Generally 

Reinsurance is a contract by which one insurance company, the “reinsurer”, agrees to indemnify another insurance company, the “ceding insurer”, in whole or in part against loss or liability arising from an insurance contract issued by the ceding insurer. As such, reinsurance is a method by which the ceding insurer distributes all or part of its potential losses to the reinsurer in order to reduce its loss exposure under any policy or policies it has issued. The ceding insurer allots to the reinsurer the liability which in its judgment may exceed the amount its financial structure should safely assume on one risk. In this way, reinsurance benefits insurance companies and the public interest by (a) increasing an insurance company’s capacity to accept new risks and allowing it to write risks that might otherwise be beyond its capacity, (b) stabilizing an insurance company’s operating results, (c) enabling the spread of catastrophic risks, and (d) allowing greater competition among insurers.

An insurer is not obligated to reinsure its insurance policies. However, if the insurer chooses to purchase reinsurance protection, it does so for its benefit alone, and not the benefit of the policyholder. The reinsurance contract is a completely separate and unrelated transaction from the policyholder’s perspective. In fact, the policyholder usually is not even aware of the existence of the reinsurer. And a reinsurer typically is not a party to negotiations between the ceding insurer and its insured over the terms and conditions of the underlying insurance policy. Writing the insurance contract and managing the account is the responsibility of the insurer alone. The ceding insurer is almost always the only party to deal directly with the policyholder and, despite the reinsurance, the ceding insurer remains fully liable to the policyholder with respect to its obligations under the insurance policy.

The investigation and management of insurance claims by the policyholders continues to be the sole responsibility of the ceding insurer, unless the reinsurer agrees otherwise. The reinsurer is not required to reimburse the ceding insurer for its portion of the responsibilities on an insurance claim until the ceding insurer has determined that the claim is covered by the underlying policy. In fact, the reinsurer “may not second guess the [insurer’s] good faith decision to pay any claim that is arguably subject to coverage.”[1] As a result, a contract of primary insurance (between a policyholder and a primary insurer) is known as a “contract of liability.” The risk assumed by the reinsurer is of a more limited nature, constituting a “contract of indemnity” with the obligation to indemnify only to the ceding insurer and not the policyholder.[2]

Retrocessionaires represent the third level of insurance. Reinsurers (as “retrocedents”) retrocede a portion or all of the risks they incur to retrocessionaires. Retrocessionaires function essentially as reinsurers for reinsurance companies. Retrocessionaires may join retrocessionaire pools which function the same as a reinsurance pool. It is the custom of the reinsurance and retrocession industry that the parties to reinsurance agreements owe one another a duty of utmost good faith.[3] This Article will discuss the various regulatory principles applicable to the intermediaries of these relationships in light of this contemporaneous duty.

2. The Role of Reinsurance Intermediaries 

A ceding insurer may procure reinsurance either by dealing directly with various reinsurers or through a reinsurance intermediary or broker who will negotiate the reinsurance contract with the reinsurer on behalf of the ceding insurer. In dealing directly with reinsurers or retrocessionaires, without intermediaries, the ceding insurer must observe certain standards in those dealings such as providing certain disclosures to the reinsurer. The court, in Compagnie De Reassurance D’Ile De France, imposed certain disclosure obligations on the reinsurer, New England Reinsurance Corporation (“NERCO”), who was seeking to reinsure by retrocession certain risks to a retrocessionaire without going through an intermediary. The court found that:

In effecting a contract of reinsurance, it is incumbent upon the original insurer to communicate to the reinsurer all facts of which it has knowledge which are material to the risk, and where it states as a fact something untrue, with intent to deceive, or where it states a fact positively as true without knowing it to be true, and which tends to mislead, the policy is avoided where such statement or fact materially affects the risk; also, any undue concealment or intentional withholding of facts material to the risk, which ought in good conscience to be communicated by the original insurer, avoids the contract, without regard to whether the knowledge or information with respect to material facts was acquired by the original insurer previously or subsequently to the writing of the original contract.[4]

The court observed that “a reinsurer like NERCO, having obtained by treaty the power to impose significant risks and liabilities upon plaintiff retrocessionaires, owed to them the utmost good faith in its dealings under the treaties.”[5] NERCO thus owed the retrocessionaires a duty to exercise good faith and to disclose all material facts.[6] As such, it was incumbent upon the retrocedent to communicate to the reinsurer all facts of which it had knowledge which were material to the risk which ought, in good conscience, to be communicated.

Alternatively, the reinsurance relationship can be established through reinsurance intermediaries. A reinsurance intermediary advises his or her client of the best available reinsurance program and places the client with the reinsurers at competitive prices and terms.[7] The use of a reinsurance intermediary relieves the ceding company of the necessity of all direct dealing and negotiations on the acceptance and execution of the reinsurance contract.[8] Reinsurance intermediaries, essentially acting as brokers in the reinsurance market, are crucial because they facilitate the process of placing reinsurance contracts by connecting  ceding insurers with reinsurers, providing expert market knowledge, negotiating terms, and ensuring proper risk disclosure, which ultimately should allow ceding insurers to effectively manage their risk portfolios and access necessary reinsurance coverage across diverse markets.

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In this issue...

NEW MEXICO’S ILLUSORY MINIMUM LIMITS FOR UNINSURED AND UNDERINSURED MOTORIST COVERAGE

Posted on 8/21/2025
This article will discuss several recent appellate decisions that have further complicated this coverage by declaring that minimum limits UIM coverage is illusory, but the coverage may still be sold by insurers with proper disclosure.

EVOLUTION OF THE FLORIDA RESIDENTIAL PROPERTY INSURANCE MARKET

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EVOLUTION OF THE FLORIDA RESIDENTIAL PROPERTY INSURANCE MARKET

Posted on 8/21/2025
Many factors have affected the Florida homeowner’s insurance market over the past several decades – some helpful, some harmful. This Article will discuss just five of these factors.

NEW MEXICO’S ILLUSORY MINIMUM LIMITS FOR UNINSURED AND UNDERINSURED MOTORIST COVERAGE

Posted on 8/21/2025
This article will discuss several recent appellate decisions that have further complicated this coverage by declaring that minimum limits UIM coverage is illusory, but the coverage may still be sold by insurers with proper disclosure.

DISTINCT LEGAL ISSUES AFFECTING REINSURANCE INTERMEDIARIES

Posted on 8/21/2025
Reinsurance is a contract which one insurance company, the “reinsurer”, agrees to indemnify another insurance company, “ceding insurer”, in whole or in part against loss or liability arising from an insurance contract issued by the ceding insurer.

DISTINCT LEGAL ISSUES AFFECTING REINSURANCE INTERMEDIARIES

Posted on 8/21/2025
Reinsurance is a contract which one insurance company, the “reinsurer”, agrees to indemnify another insurance company, “ceding insurer”, in whole or in part against loss or liability arising from an insurance contract issued by the ceding insurer.

3. The Regulation of Reinsurance Intermediaries, Coupled with Common Law Principles 

In 1976, New York became the first state to regulate reinsurance intermediaries when it enacted its intermediary licensing law.[9] In 1982, the New York Superintendent of Insurance adopted Regulation 98 to complement certain provisions of that law.[10] In 1990, the National Association of Insurance Commissioners (“NAIC”) adopted the Reinsurance Intermediary Model Act (“NAIC Model Act”),[11] based principally on the New York statutory scheme and Regulation 98.[12] Since then, the NAIC Model Act has been enacted in full or as modified in all other states and the District of Columbia.[13]

A. Licensure

Every state requires that a person or entity obtain a license to act as a reinsurance intermediary.[14] The NAIC Model Act recognizes two types of reinsurance intermediaries: reinsurance brokers and reinsurance managers. A “reinsurance broker” is a person “who solicits, negotiates or places reinsurance cessions or retrocessions on behalf of a ceding insurer without acting as a reinsurance manager on behalf of the insurer.”[15] In contrast, a “reinsurance manager” is a person who has authority to bind or who manages all or part of the assumed reinsurance business of a reinsurer and acts as an agent for the reinsurer.[16] Thus, while reinsurance brokers are retained to provide services to ceding insurers, reinsurance managers essentially provide services to reinsurers as managing general agents or underwriters.

Most state insurance laws and regulations generally follow the NAIC Model Act when describing the activity for which licensure is required. Typically, a person, firm, association or corporation must be licensed as a producer (or reinsurance intermediary if resident intermediary licensure is available) in a state if they act as a reinsurance broker in the state and maintain an office in the state. If the reinsurance broker does not maintain an office in the state, the reinsurance broker must either be licensed as (a) a producer in another state with “substantially similar” requirements for reinsurance intermediaries, or (b) a nonresident reinsurance intermediary.[17]

The NAIC Model Act facilitates a nonresident intermediary license application if (a) the person is currently licensed in good standing as a resident reinsurance intermediary or producer in their home state, and (b) the person’s home state awards nonresident licenses to residents of the subject state on the same basis.[18]

The reinsurance manager license requirements generally match the reinsurance broker licensing requirements, while also recognizing the distinct agency relationship between the reinsurance manager and the reinsurer. For instance, a person must be licensed as a producer (or reinsurance intermediary if resident intermediary licensure is available) in the state if they are acting as a reinsurance manager for a reinsurer domiciled in that state. Further, the reinsurance manager acting in another state for a nondomestic insurer must either be licensed as (a) a producer in another state with “substantially similar” requirements for licensing reinsurance intermediaries, or (b) a nonresident reinsurance intermediary. The insurance commissioner may require a resident reinsurance manager to file a bond in an amount acceptable to the commissioner for the protection of the reinsurer, and maintain an errors and omissions policy in an amount acceptable to the commissioner.[19]

A license issued to a firm or association will authorize all of the members of the firm or association and any designated employees to act as reinsurance intermediaries under the license. A license issued to a corporation will authorize all of the officers, and any designated employees and directors of the corporation to act as reinsurance intermediaries on behalf of the corporation. A nonresident reinsurance intermediary license can be issued to a person who is currently licensed as a resident reinsurance intermediary or insurance producer and in good standing in their home state, along with an application and applicable fees.[20]

As a general rule, an individual employee will not be liable for the business decisions made on behalf of the employer under the common law. However, corporate officers and directors who directed the employee or who participated in the misconduct may be individually liable. In other words, although corporate officers may not be held liable for mere nonfeasance, the omission of an act which a person ought to do, they may be liable for malfeasance, the improper performance of an act.[21] Similarly, a court is permitted to disregard the separateness of legal entities only in rare situations where it is necessary to prevent gross inequity, and when there is evidence of a (a) fraudulent or injurious consequence of the intercorporate relationship, or (b) confused intermingling of activity with substantial disregard of the separate nature of the corporate entities, or serious ambiguity about the manner and capacity in which the various corporations and their respective representatives were acting.[22]

B. Standard of Care

The Sixth Circuit, in Cherokee Insurance Company ex rel. Weed v. E.W. Blanch Company, opined that the reinsurance broker must exercise “due care” when examining the financial strength of the reinsurer they recommend to the ceding insurer.[23] It has been said that “[t]he task of the reinsurance broker is much more complicated and sophisticated than that of the ordinary retail insurance broker.”[24] On the other hand, a reinsurance broker “is not a guarantor of the financial condition or solvency of the company from which [the reinsurance broker] obtains the insurance.”[25]

In Cherokee Insurance Company, the court found that the entire industry relied heavily on state insurance regulators and credit ratings issued by the A.M. Best Company to review and analyze the financial condition of insurance companies in depth. The court found that Blanch complied with these customary industry standards by relying on A.M Best ratings and state regulator assessments to evaluate the financial health of certain reinsurers.[26] To find otherwise, said the court, would be tantamount to finding that the entire brokerage industry was negligent in relying on, e.g., rating services to evaluate reinsurers.[27] Reinsurance brokers, moreover, have no authority to audit the books of reinsurance markets, and can hardly be expected to detect false reporting or other fraudulent activity.

New York adopted a rule requiring that intermediaries inquire as to the financial condition of a reinsurer in the case of an unauthorized reinsurer.  New York’s Regulation 98 provides as follows:

If the reinsurance intermediary places reinsurance on behalf of a licensed ceding insurer with an unauthorized reinsurer, which is not an accredited reinsurer or which has not placed adequate funds with the ceding insurer pursuant to section 1301(a)(15) of the Insurance Law, he shall inquire into the financial condition of the assuming unauthorized reinsurer and in connection with such inquiry disclose such findings to the ceding insurer and make available to the ceding insurer a copy of the most recent financial statement. Notwithstanding the above, the ceding insurer may assume the obligation under this subdivision by releasing the intermediary in writing from his obligations under this subdivision.[28]

C. Agency

Within the scope of its actual or apparent authority the acts of the reinsurance manager will be deemed to be the acts of the reinsurer on whose behalf it is acting.[29] This statutory characterization resolves a frequent dispute as to the scope of the reinsurance manager’s authority if it could be said that the manager was authorized to act for the reinsurer in the first instance.  To determine whether an agency relationship exists, courts look to the terms of the agreement in light of the allegations asserting the relationship. A party seeking to rely on an agency relationship has the burden of establishing it. An essential element to establish an agency relationship is the ability of the principal to control the conduct of the agent.[30] So, for example, in Mutual Benefit Life Insurance Company v. Zimmerman, the reinsurers alleged that the manager went beyond the scope of his authority in accepting non-accident medical business via a multiple employer trust.[31]

Over the years, courts have often been called upon to address the issue of whether the reinsurance intermediary is acting as a broker for the ceding insurer or as a manager for the reinsurer. Courts have generally found that the reinsurance intermediary serves as the ceding insurer’s agent in the context of direct reinsurance.[32]

Frequently, the ceding and reinsuring companies involved in a reinsurance transaction do not know each other’s identities, and this may be true even after the transaction has been consummated, and even after a substantial loss has been incurred and paid. The insurance companies involved rely to a large extent upon the knowledge, skill, integrity and bookkeeping of the reinsurance broker.[33]

At common law, courts often tried to identify a special relationship among the parties to establish agency. For instance:

Under Pennsylvania law, to allege a claim for breach of fiduciary duty, a plaintiff must establish that a fiduciary or confidential relationship existed between the plaintiff and the defendant… A confidential relationship exists ‘whenever the relative position of the parties is such that one has power and means to take advantage of or exercise undue influence over the other.”[34]

The court faced this question in the case of In re Pritchard & Baird, Inc., in which the court held that the reinsurance intermediary was an agent of the ceding insurer. In this regard, the court wrote:

Here, ESLIC [the ceding insurer] and P & B [the intermediary] entered into an agreement whereby P & B would secure reinsurers who would accept reinsurance on terms and conditions set by ESLIC. During all negotiations leading to the acceptance and execution of the treaty ESLIC made all final decisions as to the terms and conditions of the reinsurance treaty, the ceding commissions to be paid and the limits of the treaty. The reinsurance was offered to the reinsurers on a take it or leave it basis. There is no doubt that P & B was acting as ESLIC's agent for the purpose of ceding the reinsurance, as the reinsurers had no right to negotiate terms or conditions and, indeed, their participation in the treaty was subject to the conditions set by ESLIC ….

The contention that P & B acted as a dual agent has no support in the facts before the Court. There is no indication that any of the reinsurers had the right to, or did control any of the actions of P & B; nor did P & B consent to act in any manner subject to the reinsurers control. In the absence of the element of control, no agency relationship can be sustained…

It is the conclusion of this Court that P & B, as the named intermediary in the all risk reinsurance treaty under consideration, not only acted as the agent of ESLIC for the purpose of ceding reinsurance, but acted also as its agent for the receipt and transmission of all premium-loss-contingent commission monies due under the treaty.[35]

Thus, the court held that the intermediary (P & B) was the ceding insurer’s (ESCLIC’s) agent and, as such, the ceding insurer’s payment of premium to the intermediary did not constitute payment to the reinsurers. The ceding insurer effectively bore the credit risk of its payment to the intermediary.

In response, the industry developed a specific clause for inclusion in reinsurance contracts, to reallocate the credit risk of payment to the intermediary from the intermediary to the reinsurer. One such intermediary clause provides as follows:

(Intermediary Name) is hereby recognized as the Intermediary negotiating this Contract for all business hereunder.  All communications (including but not limited to notices, statements, premium, return premium, commissions, taxes, losses, loss adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through (intermediary Name and Address).  Payments by the Company to the Intermediary shall be deemed to constitute payment to the Reinsurer.  Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company.[36]

Under such a clause, payment by the ceding insurer to the reinsurance intermediary is payment to the reinsurer, while payment by the reinsurer to the intermediary (e.g., loss payments) is not payment to the ceding insurer unless the payment is actually received by the ceding insurer.

D. Required Contract Provisions 

i. Reinsurance Brokers

All states now require that transactions between a reinsurance broker and the ceding insurer they represent be entered into pursuant to a written authorization,[37] specifying the responsibilities of each party.[38] However, a reinsurer generally does not have a direct contractual relationship with the original policyholder unless the terms of the reinsurance agreement create such a relationship.[39]

The authorization set forth in the insurer-broker agreement must, at a minimum, include provisions to assure the accountability of the reinsurance broker to the ceding insurer. First, the authorization must provide that the ceding insurer may terminate the reinsurance broker’s authority at any time.[40] Second, the authorization must require that the reinsurance broker render accounts to the ceding insurer accurately detailing all material transactions, including information necessary to support all commissions, charges and other fees received by, or owing to, the reinsurance broker, and remit all funds due the ceding insurer within thirty days of receipt.[41] Third, all funds collected for the ceding insurer’s account are to be held by the reinsurance intermediary in a fiduciary capacity in a bank that is a “qualified U.S. financial institution.”[42] Fourth, the reinsurance broker must comply with the books and records provisions of the intermediary law applicable to reinsurance brokers.[43] Fifth, the reinsurance broker must comply with the written standards established by the ceding insurer for the cession or retrocession of all risks.[44] Sixth, the reinsurance broker must disclose to the ceding insurer any relationship with any reinsurer to which business will be ceded or retroceded.[45] The authorization may include additional provisions regulating the relationship as long as the additional provisions are not inconsistent with the foregoing required provisions.

ii. Reinsurance Managers

The NAIC Model Act similarly requires that transactions between a reinsurance manager and the reinsurer it represents be entered into pursuant to a written contract, specifying the responsibilities of each party. Here, though, the reinsurer’s board of directors must approve the contract. Further, at least thirty days before the reinsurer assumes or cedes business through the intermediary, the board-approved contract must be filed with the commissioner for approval.[46]

The commissioner will review the contract to determine whether, at a minimum, it includes provisions addressing various rights of the reinsurer and obligations of the reinsurance manager. For instance, the reinsurer must have the right to terminate the contract for cause upon written notice to the reinsurance manager. Recall that, with the reinsurance broker, the authorization could be terminated by the cedent without cause, i.e., for convenience.[47] Here, the reinsurer may immediately suspend the authority of the reinsurance manager to assume or cede business during the pendency of any dispute regarding the cause for termination.[48]

Because of the relationship among the reinsurance manager and the reinsurer, the NAIC Model Act requires that the reinsurance manager 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 manager, and remit all funds due under the contract to the reinsurer at least monthly.[49] All funds collected for the reinsurer’s account must be held by the reinsurance manager in a fiduciary capacity in a bank that is a qualified U.S. financial institution. The reinsurance manager may retain no more than three months estimated claims payments and allocated loss adjustment expenses. And, the reinsurance manager must maintain a separate bank account for each reinsurer that it represents.[50] New York further clarified the requirement of this contract provision by providing that “[e]very reinsurance intermediary acting as such in this state shall be responsible, in a fiduciary capacity for all funds received or collected in such capacity, and shall not, without the express consent of his or its principal or principals, mingle any such funds with his or its own funds or with funds held by him or it in any other capacity.”[51]

The reinsurance manager must keep a complete record of each reinsurance transaction for at least ten years after the expiration of the reinsurance contract. The NAIC Model Act sets forth in detail the types of information to be maintained.[52] The reinsurer must have access and the right to copy all accounts and records maintained by the reinsurance manager related to its business.[53]

The reinsurance manager must comply with the written underwriting and rating standards established by the reinsurer for the acceptance, rejection or cession of all risks.[54] The contract must set forth the rates, terms and purposes of commissions, charges and other fees which the reinsurance manager may levy against the reinsurer.[55]

A contract may permit the reinsurance manager to settle claims on behalf of the reinsurer. In that event, all claims must be reported to the reinsurer in a timely manner. All claim files are the joint property of the reinsurer and the reinsurance manager. However, upon an order of liquidation of the reinsurer the files will become the sole property of the reinsurer or its estate. In such an event, the reinsurance manager will have reasonable access to and the right to copy the files. Any settlement authority granted to the reinsurance manager may be terminated for cause upon the reinsurer’s written notice to the reinsurance manager or upon the termination of the contract. The reinsurer may suspend the settlement authority during the pendency of any dispute regarding the cause of termination.[56]

The reinsurer must verify the adequacy of loss reserves by annually obtaining the opinion of an actuary attesting to the adequacy of the reserves established for losses incurred and outstanding on business produced by a reinsurance manager. This is an actuarial opinion distinct from any other required loss reserve certification.[57]

The NAIC Model Act also requires that the reinsurance manager annually provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant.[58] In turn, the reinsurer is to conduct a periodic on-site review of the underwriting and claims processing operations of the reinsurance manager.[59] The reinsurance manager must disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with such insurer pursuant to the reinsurer-manager contract.[60]

E. Prohibited Acts

The NAIC Model Act prohibits the reinsurance manager from engaging in certain activity. For instance, the reinsurance manager may not generally cede retrocessions on behalf of the reinsurer.[61] Also, the manager may not commit the reinsurer to participate in reinsurance syndicates.[62]

The reinsurance manager, without prior approval of the reinsurer, may not pay or commit the reinsurer to pay a claim that exceeds the lesser of an amount specified by the reinsurer or one percent of the reinsurer’s policyholder’s surplus as of December 31 of the last complete calendar year.[63] Further, the NAIC Model Act prohibits the reinsurance manager from collecting any payment from a retrocessionaire or committing the reinsurer to any claim settlement with a retrocessionaire, without prior approval of the reinsurer.[64]

Consistent with the duties of reinsurers in these arrangements, as described below, the reinsurance manager may not appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which he or she is appointed.[65] Further, the reinsurance manager is prohibited from jointly employing an individual who is employed by the reinsurer unless the reinsurance manager is an affiliate of the reinsurer. The reinsurance manager also cannot appoint a sub-manager.[66] Furthermore, pursuant the NAIC Model Act the contract between the reinsurance manager and reinsurer cannot be assigned in whole or in part to another party.[67]

Reinsurance intermediaries have also faced allegations of improper conduct prohibited under the common law. For instance, in Anglo-Iberia Underwriting Management Company v. Lodderhose, a reinsurance underwriter and a reinsurance intermediary sued a reinsurance broker and the reinsurance broker’s owners and employee, alleging fraud, negligent misrepresentation, conversion, and breach of contract regarding a reinsurance agreement. The plaintiffs moved for summary judgment on these theories. The court granted the plaintiffs’ motion for summary judgment on the fraud claims against the reinsurance broker and one of the reinsurance broker’s owners, because the plaintiffs proved that the representations were recklessly made with an intent to induce the plaintiffs to act upon them.[68] Conversely, the court in Lodderhose denied the plaintiffs’ motion as to the fraud claims against the other owner and the employee due to factual issues. In addition, the court determined that summary judgment was inappropriate as to the negligent misrepresentation, conversion, and breach of contract claims. Regarding the negligent representation claim, an issue of fact existed as to whether a special relationship existed between the plaintiffs and the defendants establishing a duty on the part of the intermediary to give correct information. Regarding the conversion claim, an issue of fact existed as to whether the premium payments were properly forwarded, and the premium sums no longer belonged to the plaintiffs at the time of the alleged failure to perform. Regarding the breach of contract claim, a factual question existed as to whether any contractual obligations existed between the plaintiffs and the defendants.

F. Relationship With Other Laws

It is often unclear as to whether the statutory provisions governing insurance producers generally apply to reinsurance intermediaries. In BCS Insurance Company v. Guy Carpenter & Company, the Seventh Circuit went to great lengths to distinguish a reinsurance agreement from a “policy of insurance” under the Illinois Insurance Producers Limitations Act (“IPLA”). The court concluded that the IPLA did not apply to reinsurance intermediaries and therefore did not govern the disputed agreements among the parties.[69] Accordingly, the dispute was not subject to the two-year statute of limitations set forth in the IPLA.

This brings us to the question of whether reinsurance intermediaries are subject to the substantive provisions of insurance regulatory law, such as the prohibition against insurance producers sharing commissions set forth in the NAIC’s Producer Licensing Model Act and repeated in virtually every state’s insurance code.[70] Section 18 of the Producer Licensing Model Act, concerning compensation disclosure, indicates that that section does not apply to reinsurance intermediaries. No other section of the Producer Licensing Model Act provides a similar exemption. By express exemption in Section 18, without a corresponding exemption in Section 13, one could argue that the prohibition against sharing commissions with unlicensed personnel applies to reinsurance intermediaries.[71] The NAIC Model Act is silent on the issue of commission sharing.

G. Duties of Insurers and Reinsurers 

Ceding insurers bear certain regulatory obligations when engaging the services of a reinsurance broker. For instance, a ceding insurer can only engage the services of a person to act as a reinsurance broker on its behalf if the person is properly licensed.[72] Further, the ceding insurer may not employ an individual who is already employed by a reinsurance broker with which it transacts business, unless the reinsurance broker is an affiliate of the insurer. Separately, the ceding insurer must annually obtain a copy of statements of the financial condition of each reinsurance broker with which it transacts business.[73]

The NAIC Act also imposes duties on reinsurers when engaging a person to act as a reinsurance manager on its behalf. For example, a reinsurer can only engage a reinsurance manager who is properly licensed.[74] Further, the reinsurer must annually obtain a copy of statements of the financial condition of each reinsurance manager which the reinsurer has engaged that is prepared by an independent certified accountant in a form acceptable to the commissioner.[75] If a reinsurance manager establishes loss reserves, the reinsurer must annually 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 manager. As noted above, ahis opinion will be in addition to any other required loss reserve certification.

An officer of the reinsurer, not the reinsurance manager, will have binding authority for all retrocessional contracts or participation in reinsurance syndicates and the officer cannot be affiliated with the reinsurance manager. The reinsurer must notify the commissioner within thirty days of termination of a contract with a reinsurance intermediary. A reinsurer cannot appoint to its board of directors, any officer, director, employee, controlling shareholder or subproducer of its reinsurance intermediary.[77]

H. Examination Authority 

The insurance commissioner may examine a reinsurance intermediary. To facilitate this examination, the NAIC Model Act provides the commissioner with the authority to access to all books, bank accounts and records of the reinsurance intermediary. Further, a reinsurance manager may be examined as if it were the reinsurer.[78]

New York extends its examination authority to out-of-state transactions. New York’s regulation provides as follows:

Where a ceding insurer obtains reinsurance through a reinsurance intermediary, as defined in section 2101(f) of the Insurance Law, from an assuming insurer which is neither licensed in this State nor has placed funds with the ceding insurer pursuant to section 1301(a)(9) of the Insurance Law, the ceding insurer shall not be allowed credit unless: … in the case of a reinsurance intermediary acting outside this State, the ceding insurer obtains a written agreement from the reinsurance intermediary that the intermediary will comply with all of the provisions of Part 32 of this Title (Regulation No. 98) and the intermediary agrees to be subject to examination by the superintendent as often as the superintendent may deem it expedient.[79]

I. Penalties and Liabilities 

The insurance commissioner may enforce the state’s insurance code to discipline not only the reinsurance intermediary but also “any other person [who] has not materially complied with this [NAIC Model] Act.”[80] Some states have enacted laws more narrowly tailored as to who will be subject to penalty. For instance, some statutes only apply penalties to licensees (i.e. the intermediary, ceding insurer or reinsurer), as opposed to “any other person.”.[81] Penalties can range from fines up to $5,000 for each separate violation, to revocation or suspension of the reinsurance intermediary’s license.[82] If it is found that, because of material non-compliance, the ceding insurer or reinsurer has suffered any loss or damage, the commissioner may maintain a civil action brought by or on behalf of the reinsurer or ceding insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the reinsurer or ceding insurer and its policyholders and creditors or seek other relief. If the ceding insurer is in receivership, the receiver may maintain a civil action for the recovery of damages for the benefit of the ceding insurer.[83]

Whether a person has not “materially complied” with the NAIC Model Act necessarily involves a factual inquiry. Some states have chosen not to include this qualification.[84]

4. Conclusion 

Reinsurance intermediaries play a vital role in the reinsurance marketplace. The intermediary is distinctly positioned to access this market for needed coverage. With sophisticated parties on either side of the reinsurance contract, the reinsurance intermediary must comply with distinct obligations not ascribed to other types of insurance representatives.

The common law has imposed agency and commensurate duties on the reinsurance intermediary and the principal for whom they act, and tested the scope of rights purported by third parties relying on this relationship. Every state has enacted statutes or adopted rules which align with the NAIC Model Act, providing uniform standards to measure and restrict the conduct of reinsurance intermediaries.

The NAIC Model Act and state insurance laws have helped clarify the duties of an insurance intermediary that arise under the common law by establishing certain minimum requirements for inclusion in contracts between the reinsurance intermediary and its principal. The NAIC Model Act has played a significant role in clarifying the role and obligations of the intermediary in today’s evolving reinsurance marketplace.

Licensure of reinsurance intermediaries serves as the jurisdictional platform upon which insurance commissioners may examine intermediary conduct for possible infraction of the conditions upon which that license may be maintained, and upon which regulatory liability and penalties may be levied. The common law continues to provide theories of redress not available as private rights of action under a state’s regulatory scheme. Both legal avenues facilitate disclosure, to ensure proper and adequate coverage in a ceding insurer’s ever-changing risk portfolio.

References

NOTES

[1] Donaldson v. United Community Ins. Co., 741 So. 2d 676, 679 (La. Ct. App. 3 Cir. 1999) (citing inter alia 19 Couch on Insurance § 80.2 (2d ed. LCP 1987)); Calvert Fire Ins. Co. v. Unigard Mut. Ins. Co., 526 F. Supp. 623, 626 n.1 (D. Neb. 1980); Lee. R. Russ & Thomas F. Segalla, 1 Couch on Insurance §§ 9:2 & 9.3 (3d ed. LCP 1996).

[2] Donaldson, 741 So. 2d at 679.

[3] Mutual Benefit Life Ins. Co. v. Zimmerman, 783 F. Supp. 853, 857 (D.N.J. 1992).

[4] Compagnie De Reassurance D’Ile De Fr. v. New Eng. Reinsurance Corp, 57 F.3d 56, 66-67 (1st Cir. 1995) (quoting 19 Couch on Insurance § 80:77 (2d ed. LCP 1987)).

[5] Id. at 72.

[6] Id. at 73.

[7] Id. The law often imposes requirements that ceding insurers maintain a diverse reinsurance program. See, e.g., Nev. Rev. Stat. Ann. § 681A.235(2) (“A ceding insurer shall take steps to diversify its reinsurance program.”).

[8] “A reinsurance intermediary acts between the two principals to the reinsurance transaction, negotiating and drafting the reinsurance treaty and handling all communications relating thereto. The intermediary may also transmit accounts, collect balances due, settle cash losses and handle other matters of detail in the working of the reinsurance transaction.” Calvert Fire Ins. Co., 526 F. Supp. at 626 n.2 (citation omitted).

[9] N.Y. Ins. Law § 122-a (as added by L 1976, ch. 620, § 1, as amended by L 1981, ch. 154, § 3), now codified at N.Y. Ins. Law §§ 2101(f), 2102(a)(2), 2102(c), 2106, 2110, 2120(b) & 2120(c).

[10] N.Y. Comp. Codes R. & Regs. tit. 11, §§ 32.0 to 32.4 (“Regulation 98”).

[11] Reinsurance Intermediary Model Act, MO-790 (NAIC 2007).

[12] For a discussion of the history of the NAIC Model Act, and how it compares to the regulation of reinsurance intermediaries in the United Kingdom, see Debra J. Hall, The Emerging Regulation of Reinsurance Intermediaries, 42 Drake L. Rev. 859 (1993); see also Stephen W. Schwab, Peter G. Gallanis, David E. Mendelsohn & Bradley V. Ritter, Caught Between Rocks and Hard Places: The Plight of Reinsurance Intermediaries Under U.S. and English Law, 16 Mich. J. Int’l L. 485 (1995).

[13] See Ala. Code §§ 27-5A-1 to 27-5A-13; Ala. Admin. Code r. 482-1-107.01 to r. 482-1-107-.07; Alaska Stat. §§ 21.27.670 to 21.27.770 (portions of Model Act); Ariz. Rev. Stat. Ann. §§ 20-486 to 20-486.11; Ark. Code Ann. §§ 23-62-401 to 23-62-413; Cal. Ins. Code §§ 1781.1 to 1781.14; Colo. Rev. Stat. §§ 10-2-901 to 10-2-912; 3 Colo. Code Regs. § 702-1 (Amended Regulation I-2-6); Conn. Gen. Stat. §§ 38a-760 to 38a-760j; Del. Code Ann. tit. 18, §§ 1601 to 1613; D.C. Code §§ 31-1801 to 31-1810; Fla. Stat. § 626.7492; Ga. Code Ann. §§ 33-49-1 to 33-49-11; Haw. Rev. Stat. §§ 431:9B-101 to 431:9B-111; Idaho Code §§ 41-5101 to 41-5111; 215 Ill. Comp. Stat. 100/1 to 100/60; Ind. Code §§ 27-6-9-1 to 27-6-9-26; 760 Ind. Admin. Code 1-51-1 to 1-51-7; Iowa Code §§ 521C.1 to 521C.13; Kan. Stat. Ann. §§ 40-4501 to 40-4513; Ky. Rev. Stat. Ann. §§ 304.9-700 to 304.9-759; La. Stat. Ann. §§ 22:1721 to 22:1732; Me. Stat. tit. 24-A, §§ 741 to 754; Md. Code Ann. Ins. §§ 8-501 to 8-520; Mass. Gen. Laws ch. 175, §§ 177M to 177W; Mich. Comp. Laws §§ 500.1151 to 500.1171; Minn. Stat. §§ 60A.70 to 60A.756; Miss. Code Ann. §§ 83-19-201 to 83-19-221; Mo. Rev. Stat. §§ 375.1110 to 375.1140; Mo. Code Regs. Ann. tit. 20, § 700-7.100; Mont. Code Ann. §§ 33-2-1701 to 33-2-1709; Neb. Rev. Stat. §§ 44-5601 to 44-5613; Nev. Rev. Stat. §§ 681A.260 to 681A.580; Nev. Admin. Code §§ 681A.050 to 681A.110; N.H. Rev. Stat. Ann. §§ 402-F:1 to 402-F:12; N.J. Rev. Stat. §§ 17:22E-1 to 17:22E-23; N.J. Admin. Code §§ 11:17-7.1 to 11:17-7.7; N.M. Stat. Ann. §§ 59A-12D-1 to 59A-12D-12; N.Y. Ins. Law §§ 2101 to 2138 (reinsurance intermediary provisions in agents licensing law); N.Y. Comp. Codes R. & Regs. tit. 11, §§ 32.0 to 32.4 (Regulation 98); N.C. Gen. Stat. §§ 58-9-2 to 58-9-26; N.D. Cent. Code §§ 26.1-31.1-01 to 26.1-31.1-12; Ohio Rev. Code Ann. § 3905.81; Ohio Admin. Code 3901-3-09; Okla. Stat. tit. 36, §§ 5101 to 5113; Or. Rev. Stat. §§ 744.800 to 744.820; 40 Pa. Cons. Stat. §§ 321.1 to 321.10; 27 R.I. Gen. Laws §§ 27-52-1 to 27-52-12; S.C. Code Ann. §§ 38-46-10 to 38-46-120; S.D. Codified Laws §§ 58-14-24 to 58-14-44; Tenn. Code Ann. §§ 56-6-801 to 56-6-812; Tex. Ins. Code Ann. §§ 4152.001 to 4152.302; Utah Code Ann. §§ 31A-23a-801 to 31A-23a-809; Vt. Stat. Ann. tit. 8, §§ 4815 to 4824; Vt. Stat. Ann. tit. 8, § 6072 (licensure of reinsurance intermediaries for risk retention groups); 21-035 Vt. Code R. 21-020-035-X (Regulation 94-2); Va. Code Ann. §§ 38.2-1347 to 38.2-1357; Va. Bureau of Ins., Admin. Letter 2002-10 (Aug. 27, 2002); Wash. Rev. Code §§ 48.94.005 to 48.94.901; Wash. Admin. Code §§ 284-13-700 to 284-13-863; W. Va. Code §§ 33-38-1 to 33-38-14; Wis. Admin. Code Ins §§ 47.01 to 47.10; Wis. Admin. Code Ins §§ 6.58 to 6.61; Wyo. Stat. Ann. §§ 26-47-101 to 26-47-113.

[14] See id. The NAIC Model Act exempts licensed attorneys at law from the state’s reinsurance intermediary licensing requirements when acting in their professional capacity in the state in which they are licensed. NAIC Model Act § 3(F). Some states have expanded the class of persons who may intermediate reinsurance without a license. See, e.g., Tex. Ins. Code § 4152.251(b) (“An insurer, or an employee, attorney, or actuary of an insurer, may negotiate and obtain reinsurance  for that insurer without holding a broker or manager license or without using the services of a broker or manager if that insurer, employee, attorney, or actuary does not otherwise hold the person out as a broker or manager or perform the duties or provide the services of a broker or manager.”); N.Y. Ins. Law § 2101(f) (“reinsurance intermediary” does not include licensed attorneys, “regular salaried officers, employees or attorneys in fact of an authorized insurer or of an underwriting office of such insurer while acting in their capacity as such in discharging the duties of their employment or appointment,” licensed insurance agents, and licensed insurance brokers).

[15] NAIC Model Act § 2(F). The term “solicit” is routinely defined as “attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.” Producer Licensing Model Act, MO-218, § 2(N) (NAIC 2005). Correspondingly, the term “sell” is routinely defined as meaning “to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company.” Id. at § 2(M). The term “negotiate” is typically defined as “the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers.” Id. at § 2(K).

[16] NAIC Model Act § 2(G). The NAIC Model Act exempts from this definition the following persons: (a) An employee of the reinsurer; (b) a United States manager of the United States branch of an alien reinsurer; (c) an underwriting manager that, pursuant to contract, manages all or part of the reinsurance operations of the reinsurer, is under common control with the reinsurer, subject to the Holding Company Act, and that is not compensated based on the volume of premiums written; (d) the manager of a group, association, pool or organization of insurer which engage in joint underwriting or joint reinsurance provided that the group association, pool or organization of insurers is subject to examination by the insurance commissioner of the state in which the manager’s principal business office is located. Id.

[17] E.g., id. at § 3(A); Ala. Code § 27-5A-3(a).

[18] NAIC Model Act § 3(D).

[19] Id. at § 3(B).

[20] Id. at § 3(D).

[21] Boomerang Recoveries, LLC v. Guy Carpenter & Co., LLC, 182 F. Supp. 3d 212, 218 (E.D. Pa. 2016).

[22] Trenwick Am. Reinsurance Corp. v. IRC, Inc., 764 F. Supp. 2d 274, 303 (D. Mass. 2011) (citation omitted).

[23] Cherokee Ins. Co. ex rel. Weed v. E.W. Blanch Co., 66 F.3d 117 (6th Cir. 1995).

[24] Id. at 122; Francis v. United Jersey Bank, 392 A.2d 1233, 1236 (N.J. Super. Ct. Law Div. 1978).

[25] Cherokee Ins. Co., 392 A.2d at 1236 (citing Higginbotham & Assocs. v. Greer, 738 S.W.2d 45, 46 (Tex. Ct. App. 1987)).

[26] Id. The alleged negligence of the broker should be considered in light of his or her knowledge at the time the treaty was issued, and not at the time of the loss and failure to pay the claim. Id. at 123 (quoting Master Plumbers Ltd. Mut. Liab. Co. v. Cormany & Bird, Inc., 255 N.W.2d 533, 535 (Wis. 1977)).

[27] Id. at 124.

[28] N.Y. Comp. Codes R. & Regs. tit. 11, § 32.1(d) (Regulation 98). See also N.Y. Comp. Codes R. & Regs. tit. 11, § 125.6(a)(1) (“Where a ceding insurer obtains reinsurance through a reinsurance intermediary, as defined in section 2101(f) of the Insurance Law, from an assuming insurer which is neither licensed in this State nor has placed funds with the ceding insurer pursuant to section 1301(a)(9) of the Insurance Law, the ceding insurer shall not be allowed credit unless:… the reinsurance agreement includes a provision whereby the assuming insurer assumes all credit risks of the intermediary related to payments to the intermediary”).

[29] NAIC Model Act § 7(N).

[30] Mutual Benefit Life Ins. Co., 783 F. Supp. at 865-66.

[31] Id.

[32] Id. at 675 (citations omitted).

[33] Francis v. United Jersey Bank, 392 A.2d 1233, 1236 (N.J. Super. Ct. Law Div. 1978).

[34] Car Sense, Inc. v. Am. Special Risk, LLC, 56 F. Supp. 3d 686, 693-94 (E.D. Pa. 2014) (citations omitted).

[35] In re Pritchard & Baird, Inc., No. E-75-3202, slip op. 14, 17-18 (D.N.J. Mar. 1, 1979) (internal citation omitted). See also Calvert Fire Insurance Company, 526 F. Supp. at 639 (holding that “at all times material to this case and in all transactions with the plaintiffs relating to the Unigard reinsurance program, Guy Carpenter and Company was acting as an agent of Unigard”, having formally appointed Guy Carpenter as its reinsurance intermediary, to negotiate reinsurance agreements for Unigard).

[36] Brokers & Reinsurance Markets Ass’n, BRMA 23A Intermediary (Spring 2005), https://www.brma.org/docs/Intermediary_BRMA_23A-B.doc.

[37] Generally, to place reinsurance for a particular insurance company, a broker must be a “broker of record” for the underlying insurer. Homeowners Choice, Inc. v. Aon Benfield, Inc., 550 Fed. Appx. 311, 312 (7th Cir. 2013), aff’g 895 F. Supp. 2d 889 (N.D. Ill. 2012).

[38] It has been held that, where the parties’ sole express agreement speaks only in general terms, the extent of the obligations thereunder may be proved by the parties’ course of dealings. Northwestern Nat’l Ins. Co. v. Marsh & McLennan, Inc., 817 F. Supp. 1424, 1431 (E.D. Wis. 1993).  See also N.Y. Comp. Codes R. & Regs. tit. 11, § 32.1(d) (Regulation 98) (“Where a reinsurance intermediary acts for a licensed assuming insurer in accepting a reinsurance contract, the reinsurance intermediary shall act only within the authority granted by such insurer and shall promptly notify the insurer in writing of any commitment made on its behalf.”).

[39] Vantage Commodities Fin. Servs. I, LLC v. Assured Risk Transfer PCC, LLC, 31 F.4th 800, 804 (D.C. Cir. 2022) (holding that the binders’ disclosures of a reinsurance policy and description of that policy did not create a direct contractual relationship between the original insured and the reinsurers). See also Anglo-Iberia Underwriting Mgmt. Co., 224 F. Supp. 2d at 687 (the “special relationship” component of a negligence claim requires a closeness approximating privity); Holborn Corp. v. Sawgrass Mut. Ins. Co., 304 F. Supp. 3d 392, 405 (S.D.N.Y. 2018) (finding no “special relationship” between the intermediary and the cedant for the intermediary’s failure to secure Top and Drop reinsurance when the parties only discussed “the most advantageous policy” without specifically mentioning Top and Drop reinsurance).

[40] NAIC Model Act § 4(A). See also Homeowners Choice, Inc. v. Aon Benfield, Inc., 895 F. Supp. 2d 889, 896 (N.D. Ill. 2012), aff’d, 550 Fed. Appx. 311 (7th Cir. 2013) (citing to the Illinois Reinsurance Intermediary Act for the requirements that “[t]he contract shall, at a minimum [provide] that: (1) The insurer may terminate the intermediary broker’s authority at any time.”). In Homeowners Choice, the contract was with the holding company of which the ceding insurer was a subsidiary. The court found that the Act did not apply because the contract was between the intermediary and the holding company, which was not an insurer. Id.

[41] NAIC Model Act § 4(B).

[42] Id. at § 4(C). The NAIC Model Act defines a “qualified U.S. financial institution” as an institution that: (a) Is organized or licensed, under the law of the United States or any state; (b) is regulated, supervised, and examined by U.S. federal or state authorities having regulatory authority over banks and trust companies; and (c) has been determined by either the insurance commissioner, or the NAIC’s Securities Valuation Office, 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. NAIC Model Act § 2(J). See generally N.Y. Comp. Codes R. & Regs. tit. 11, § 32.3 (Regulation 98) (specifying the rules by which such fiduciary funds are to be remitted); Francis v. United Jersey Bank, 392 A.2d 1233, 1242 (N.J. Super. Ct. Law Div. 1978) (“the universal custom in the reinsurance business is that brokers segregate funds coming from and owing to ceding companies and reinsurers and keep them separate from the broker’s own funds.”).

[43] NAIC Model Act § 4(D). For example, NAIC Model Act § 5 requires that the reinsurance broker maintain certain books and records for a period of ten years after the expiration of each reinsurance contract transacted by the reinsurance broker.

[44] Id. at § 4(E).

[45] Id. at § 4(F).

[46] Id. at § 7.

[47] See supra text accompanying note 40.

[48] NAIC Model Act § 7(A).

[49] Id. at § 7(B).

[50] Id. at § 7(C). See supra note 42 for the qualifications of an acceptable U.S. financial institution.

[51] N.Y. Ins. Law § 2120(b).

[52] See NAIC Model Act §§ 7(D)(1) to (10).

[53] Id. at § 7(E).

[54] Id. at § 7(G).

[55] Id. at § 7(H).

[56] Id. at § 7(I).

[57] Id. at § 9(C).

[58] Id. at § 7(K).

[59] Id. at § 7(L).

[60] Id. at § 7(M).

[61] Id. at § 8(A).

[62] Id. at § 8(B).

[63] Id. at § 8(D).

[64] Id. at § 8(E).

[65] Id. at § 8(C).

[66] Id. at § 8(G).

[67] Id. at § 7(F).

[68] Anglo-Iberia Underwriting Mgmt. Co. v. Lodderhose, 224 F. Supp. 2d 679, 683 (S.D.N.Y. 2002) (internal quote and citation omitted).

[69] BCS Ins. Co. v. Guy Carpenter & Co., 490 F.3d 597, 602 (7th Cir. 2007).

[70] Section 13 of the Producer Licensing Model Act provides as follows:

  1. An insurance company or insurance producer shall not pay a commission, service fee, brokerage or other valuable consideration to a person for selling, soliciting or negotiating insurance in this state if that person is required to be licensed under this Act and is not so licensed.
  2. A person shall not accept a commission, service fee, brokerage or other valuable consideration for selling, soliciting or negotiating insurance in this state if that person is required to be licensed under this Act and is not so licensed.
  3. Renewal or other deferred commissions may be paid to a person for selling, soliciting or negotiating insurance in this state if the person was required to be licensed under this Act at the time of the sale, solicitation or negotiation and was so licensed at that time.
  4. An insurer or insurance producer may pay or assign commissions, service fees, brokerages or other valuable consideration to an insurance agency or to persons who do not sell, solicit or negotiate insurance in this state, unless the payment would violate [insert appropriate reference to state law, i.e. citation to anti-rebating statute, if applicable].

[71] Compare Marker & Assocs. v. J. Allan Hall & Assocs., 314 F. Supp. 2d 555, 560 (E.D.N.C. 2004) (finding North Carolina insurance code precluded an unlicensed reinsurance intermediary from recovering sales commissions), with H & H Reinsurance Brokers v. Hermitage Ins. Co., 678 N.Y.S.2d 651, 652 (N.Y. Ct. App. 1998) (finding no provision in the New York Insurance Law precluding an unlicensed intermediary from receiving a fee). But see N.Y. Ins. Dep’t Gen. Counsel, Op. No. 05-10-18 (Oct. 27, 2005) (indicating that, although statute did not explicitly refer to reinsurance intermediaries, intermediary acting on behalf of ceding insurer should be treated as insurance broker and as such should be held equally subject to statute).

[72] See, e.g., N.J. Admin. Code § 11:17-7.5(a) (“No insurer or reinsurer shall appoint or continue to use the services of a reinsurance intermediary unless the reinsurance intermediary is qualified to act as a reinsurance intermediary in this State pursuant to N.J.A.C. 11:17-7.3 [requiring inter alia licensure] and 7.4 [same].”); Tex. Ins. Code § 4152.251(a) (“an insurer may not engage the services of a person to act as a broker or manager on the insurer’s behalf unless the person holds a license”).

[73] NAIC Model Act § 6.

[74] Id. at § 9(A). See supra text accompanying note 19 for a discussion of reinsurance manager licensing requirements.

[75] Id. at § 9(B).

[76] Id. at § 9(C).

[77] Id. at § 9(F).

[78] Id. at § 10.

[79] N.Y. Comp. Codes R. & Regs. tit. 11, § 125.6(a)(2).

[80] NAIC Model Act § 12(A).

[81] See, e.g., Utah Code Ann. § 31A-23a-809; Wash. Rev. Code § 48.94.050; W. Va. Code § 33-38-11; Wyo. Stat. § 26-47-112.

[82] But see S.C. Code Ann. § 38-46-110 (capping monetary penalty at $15,000 and $30,000 if the violation is willful, for each separate violation); Vt. Stat. Ann. tit. 8, § 4822(1) (capping monetary penalty at $25,000 for each separate violation).

[83] NAIC Model Act § 12. See, e.g., Nev. Rev. Stat. § 681A.570 (describing actions that may be taken against intermediary who fails to comply with laws).

[84] See, e.g., Okla. Stat. tit. 36, § 5111; S.D. Codified Laws § 58-14-38; Tenn. Code Ann. § 56-6-811; Wash. Rev. Code. § 48.94.050; W. Va. Code § 33-38-11; Wyo. Stat. § 26-47-112.