                                 CODE OF VIRGINIA

DUTIES OF INSURERS UTILIZING MANAGING GENERAL AGENTS (§ 38.2-1361)

A. The insurer shall annually obtain a copy of the current financial statement,
which shall be certified by an independent public accountant and in a form
acceptable to the Commission, of each managing general agent with which it
transacts business.

B. If the 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. This is in addition to any other required loss
reserve certification.

C. The insurer shall conduct, at least semiannually, an on-site review of the
underwriting and claims processing operations of the managing general agent.

D. Binding authority for participation in insurance syndicates or reinsurance
syndicates shall rest with an officer of the insurer, who shall not be
affiliated with the managing general agent.

E. At least annually and more frequently if requested by the Commission, the
insurer shall report to the Commission, in a form acceptable to the Commission,
concerning its transactions with a managing general agent. The report shall
identify the managing general agent through which the insurer has transacted
business, and for each managing general agent shall report the nature of the
contract, the types of authority granted, the types of business written, the
amount of premium written, and any other information the Commission may request.

F. An insurer shall review its books and records each quarter to determine if
any agent as defined by &#xA7; 38.2-1800 has become a managing general agent as
defined in &#xA7; 38.2-1358. If the insurer determines that an agent has become
a managing general agent pursuant to the above, the insurer shall promptly
notify the agent and the Commission of such determination, and the insurer and
agent must fully comply with the provisions of this article within thirty
calendar days.

G. An insurer shall not appoint to its board of directors an officer, director,
employee, agent or controlling shareholder of its managing general agent. This
subsection shall not apply to relationships governed by Article 5 (&#xA7;
38.2-1322 et seq.) of this chapter or Article 2 (&#xA7; 38.2-4230 et seq.) of
Chapter 42 of this title.

H. The insurer shall not delegate to any person, other than one of its officers,
the authority to enter into or bind any reinsurance agreement by which the
insurer agrees to cede any risk to a reinsurer, except that an insurer may
delegate the specific authority to bind facultative reinsurance contracts by
placing individual risks pursuant to the provisions of subdivision 1 of &#xA7;
38.2-1353 or subdivision 10 of &#xA7; 38.2-1360. The officer shall be a regular
salaried employee of the insurer and shall not be affiliated with the managing
general agent. The insurer is not prohibited by the provisions of this
subsection from delegating to its managing general agent the authority to enter
into or bind an agreement to assume a risk provided the managing general agent
is licensed to act as a reinsurance intermediary manager under the provisions of
Article 8 (&#xA7; 38.2-1347 et seq.) of this chapter and the authority to both
cede and assume a given risk is not simultaneously vested in the same
intermediary.

HISTORY: 2001, c. 706.