215 ILCS 5/141a
2021 Illinois Compiled Statutes|Chapter 215 - INSURANCE|215 ILCS 5/ - Illinois Insurance Code.|Article IX - Provisions Applicable To All Companies

 (from Ch. 73, par. 753a)Sec. 141a.         Managing general agents and retrospective compensation  agreements.(a) As used in this Section, the following terms have the following  meanings:"Actuary" means a person who is a member in good standing of the American  Academy of Actuaries."Gross direct written premium" means direct premium including policy and  membership fees, net of returns and cancellations, and prior to any cessions."Insurer" means any person duly licensed in this State as an insurance  company pursuant to Articles II, III, III 1/2, IV, V, VI, and  XVII of this Code."Managing general agent" means any person, firm, association, or  corporation, either separately or together with affiliates, that:(1) manages all or part of the insurance business of     an insurer (including the management of a separate division, department, or underwriting office), and(2) acts as an agent for the insurer whether known as     a managing general agent, manager, or other similar term, and(3) with or without the authority produces, directly     or indirectly, and underwrites:(A) within any one calendar quarter, an amount of         gross direct written premium equal to or more than 5% of the policyholders' surplus as reported in the insurer's last annual statement, or(B) within any one calendar year, an amount of         gross direct written premium equal to or more than 8% of the policyholders' surplus as reported in the insurer's last annual statement, and either(4) has the authority to bind the company in     settlement of individual claims in amounts in excess of $500, or(5) has the authority to negotiate reinsurance on     behalf of the insurer.Notwithstanding the provisions of items (1) through (5), the following  persons shall not be considered to be managing general agents for the  purposes of this Code:(1) An employee of the insurer;(2) A U.S. manager of the United States branch of an     alien insurer;(3) An underwriting manager who, pursuant to a     contract meeting the standards of Section 141.1 manages all or part of the insurance operations of the insurer, is affiliated with the insurer, subject to Article VIII 1/2, and whose compensation is not based on the volume of premiums written;(4) The attorney or the attorney in fact authorized     and acting for or on behalf of the subscriber policyholders of a reciprocal or inter-insurance exchange, under the terms of the subscription agreement, power of attorney, or policy of insurance or the attorney in fact for any Lloyds organization licensed in this State."Retrospective compensation  agreement" means any arrangement, agreement, or contract having as its  purpose the actual or constructive retention by the insurer of a fixed  proportion of the gross premiums, with the balance of the premiums,  retained actually or constructively by the agent or the producer of the  business, who assumes to pay therefrom all losses, all subordinate  commission, loss adjustment expenses, and his profit, if any, with other  provisions of the arrangement, agreement, or contract being auxiliary or  incidental to that purpose."Underwrite" means to accept or reject risk on behalf of the insurer.(b) Licensure of managing general agents.(1) No person, firm, association, or corporation     shall act in the capacity of a managing general agent with respect to risks located in this State for an insurer licensed in this State unless the person is a licensed producer or a registered firm in this State under Article XXXI of this Code or a licensed third party administrator in this State under Article XXXI 1/4 of this Code.(2) No person, firm, association, or corporation     shall act in the capacity of a managing general agent with respect to risks located outside this State for an insurer domiciled in this State unless the person is a licensed producer or a registered firm in this State under Article XXXI of this Code or a licensed third party administrator in this State under Article XXXI 1/4 of this Code.(3) The managing general agent must provide a surety     bond for the benefit of the insurer in an amount equal to the greater of $100,000 or 5% of the gross direct written premium underwritten by the managing general agent on behalf of the insurer.  The bond shall provide for a discovery period and prior notification of cancellation in accordance with the rules of the Department unless otherwise approved in writing by the Director.(4) The managing general agent must maintain an     errors and omissions policy for the benefit of the insurer with coverage in an amount equal to the greater of $1,000,000 or 5% of the gross direct written premium underwritten by the managing general agent on behalf of the insurer.(5) Evidence of the existence of the bond and the     errors and omissions policy must be made available to the Director upon his request.(c) No person, firm, association, or corporation acting in the capacity  of a managing general agent shall place business with an insurer unless  there is in force a written contract between the parties that sets forth  the responsibilities of each party, that, if both parties share  responsibility for a particular function, specifies the division of  responsibility, and that contains the following minimum provisions:(1) The insurer may terminate the contract for cause     upon written notice to the managing general agent.  The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination.(2) The managing general agent shall render accounts     to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis.(3) All funds collected for the account of an insurer     shall be held by the managing general agent in a fiduciary capacity in a bank that is a federally or State chartered bank and that is a member of the Federal Deposit Insurance Corporation.  This account shall be used for all payments on behalf of the insurer; however, the managing general agent shall not have authority to draw on any other accounts of the insurer.  The managing general agent may retain no more than 3 months estimated claims payments and allocated loss adjustment expenses.(4) Separate records of business written by the     managing general agent will be maintained.  The insurer shall have access to and the right to copy all accounts and records related to its business in a form usable by the insurer, and the Director shall have access to all books, bank accounts, and records of the managing general agent in a form usable to the Director.(5) The contract may not be assigned in whole or part     by the managing general agent.(6) The managing general agent shall provide to the     company audited financial statements required under paragraph (1) of subsection (d).(7) That appropriate underwriting guidelines be     followed, which guidelines shall stipulate the following:(A) the maximum annual premium volume;(B) the basis of the rates to be charged;(C) the types of risks that may be written;(D) maximum limits of liability;(E) applicable exclusions;(F) territorial limitations;(G) policy cancellation provisions; and(H) the maximum policy period.(8) The insurer shall have the right to: (i) cancel     or nonrenew any policy of insurance subject to applicable laws and regulations concerning those actions; and (ii) require cancellation of any subproducer's contract after appropriate notice.(9) If the contract permits the managing general     agent to settle claims on behalf of the insurer:(A) all claims must be reported to the company in         a timely manner.(B) a copy of the claim file must be sent to the         insurer at its request or as soon as it becomes known that the claim:(i) has the potential to exceed an amount             determined by the company;(ii) involves a coverage dispute;(iii) may exceed the managing general agent's             claims settlement authority;(iv) is open for more than 6 months; or(v) is closed by payment of an amount set by             the company.(C) all claim files will be the joint property of         the insurer and the managing general agent.  However, upon an order of liquidation of the insurer, the files shall become the sole property of the insurer or its estate; the managing general agent shall have reasonable access to and the right to copy the files on a timely basis.(D) any settlement authority granted to the         managing general agent may be terminated for cause upon the insurer's written notice to the managing general agent or upon the termination of the contract.  The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.(10) Where electronic claims files are in existence,     the contract must address the timely transmission of the data.(11) If the contract provides for a sharing of     interim profits by the managing general agent and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves, controlling claim payments, or by any other manner, interim profits will not be paid to the managing general agent until one year after they are earned for property insurance business and until 5 years after they are earned on casualty business and in either case, not until the profits have been verified.(12) The managing general agent shall not:(A) Bind reinsurance or retrocessions on behalf         of the insurer, except that the managing general agent may bind facultative reinsurance contracts under obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules.(B) Appoint any producer without assuring that         the producer is lawfully licensed to transact the type of insurance for which he is appointed.(C) Without prior approval of the insurer, pay or         commit the insurer to pay a claim over a specified amount, net of reinsurance, that shall not exceed 1% of the insurer's policyholders' surplus as of December 31 of the last completed calendar year.(D) Collect any payment from a reinsurer or         commit the insurer to any claim settlement with a reinsurer without prior approval of the insurer.  If prior approval is given, a report must be promptly forwarded to the insurer.(E) Permit its subproducer to serve on its board         of directors.(F) Employ an individual who is also employed by         the insurer.(13) The contract may not be written for a term of     greater than 5 years.(d) Insurers shall have the following duties:(1) The insurer shall have on file the managing     general agent's audited financial statements as of the end of the most recent fiscal year prepared in accordance with Generally Accepted Accounting Principles.  The insurer shall notify the Director if the auditor's opinion on those statements is other than an unqualified opinion.  That notice shall be given to the Director within 10 days of receiving the audited financial statements or becoming aware that such opinion has been given.(2) If a managing general agent establishes loss     reserves, the insurer shall 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 managing general agent, in addition to any other required loss reserve certification.(3) The insurer shall periodically (at least     semiannually) conduct an on-site review of the underwriting and claims processing operations of the managing general agent.(4) Binding authority for all reinsurance contracts     or participation in insurance or reinsurance syndicates shall rest with an officer of the insurer, who shall not be affiliated with the managing general agent.(5) Within 30 days of entering into or terminating a     contract with a managing general agent, the insurer shall provide written notification of the appointment or termination to the Director.  Notices of appointment of a managing general agent shall include a statement of duties that the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is to be authorized to act, and any other information the Director may request.(6) An insurer shall review its books and records     each quarter to determine if any producer has become a managing general agent.  If the insurer determines that a producer has become a managing general agent, the insurer shall promptly notify the producer and the Director of that determination, and the insurer and producer must fully comply with the provisions of this Section within 30 days of the notification.(7) The insurer shall file any managing general agent     contract for the Director's approval within 45 days after the contract becomes subject to this Section.  Failure of the Director to disapprove the contract within 45 days shall constitute approval thereof.  Upon expiration of the contract, the insurer shall submit the replacement contract for approval.  Contracts filed under this Section shall be exempt from filing under Sections 141, 141.1 and 131.20a.(8) An insurer shall not appoint to its board of     directors an officer, director, employee, or controlling shareholder of its managing general agents.  This provision shall not apply to relationships governed by Article VIII 1/2 of this Code.(e) The acts of a managing general agent are considered to be the acts  of the insurer on whose behalf it is acting.  A managing general agent may  be examined in the same manner as an insurer.(f) Retrospective compensation agreements for business written under  Section 4 of this Code in Illinois and outside of Illinois by an insurer  domiciled in this State must be filed for approval.   The standards for approval shall be as set forth under Section 141  of this Code.(g) Unless specifically required by the Director, the provisions of this  Section shall not apply to arrangements between a managing general agent not  underwriting any risks located in Illinois and a foreign insurer domiciled in  an NAIC accredited state that has adopted legislation substantially similar to  the NAIC Managing General Agents Model Act.  "NAIC accredited state" means a  state or territory of the United States having an insurance regulatory agency  that maintains an accredited status granted by the National Association of  Insurance Commissioners.(h) If the Director determines that a managing general agent  has not materially complied with this Section or any regulation or  order promulgated hereunder, after notice and opportunity to be heard, the  Director may order a penalty in an amount not exceeding $100,000 for each  separate violation and may order the revocation or suspension of the producer's  license.  If it is found that because of the material noncompliance the  insurer  has suffered any loss or damage, the Director may maintain a civil action  brought by or on behalf of the insurer and its policyholders and creditors for  recovery of compensatory damages for the benefit of the insurer and its  policyholders  and creditors or other appropriate relief.  This subsection (h) shall not be  construed to prevent any other person from taking civil action against a  managing general agent.(i) If an Order of Rehabilitation or Liquidation is entered  under Article XIII and  the receiver appointed under that Order determines that the managing general  agent or any other person has not materially complied with this Section or any  regulation or Order promulgated hereunder and the insurer 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.Any decision, determination, or order of the Director under this  subsection shall be subject to judicial review under the Administrative  Review Law.Nothing contained in this subsection shall affect the right of the  Director to impose any other penalties provided for in this Code.Nothing contained in this subsection is intended to or shall in any  manner limit or restrict the rights of policyholders, claimants, and auditors.(j) A domestic company shall not during any calendar year write,  through  a managing general agent or managing general agents, premiums in an  amount equal to or greater than its capital and surplus as of the preceding  December 31st unless the domestic company requests in writing the Director's  permission to do so and the Director has either approved the request or has  not disapproved the request within 45 days after the Director received the  request.No domestic company with less than $5,000,000 of capital and surplus may  write any business through a managing general agent unless the domestic company  requests in writing the Director's permission to do so and the Director has  either approved the request or has not disapproved the request within 45 days  after the Director received the request.    (Source: P.A. 93-32, eff. 7-1-03.)