                                 CODE OF VIRGINIA

REQUIRED CONTRACT PROVISIONS (§ 38.2-1360)

No insurer shall retain or act through a managing general agent unless there is
in force a written contract between said insurer and its managing general agent
that sets forth the responsibilities of each party and where both parties share
responsibility for a particular function, specifies the division of such
responsibilities, 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 will 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 will be held by the
managing general agent in a fiduciary capacity in a bank that is a qualified
United States financial institution. This account shall be used for all payments
on behalf of the insurer. The managing general agent may retain no more than
three months&#8217; estimated claims payments and allocated loss adjustment
expenses. The managing general agent shall maintain a separate bank account for
each insurer it represents.

4. Separate records of business written by the managing general agent will be
maintained. The insurer shall have reasonable access to and the right to copy
all accounts and records related to its business in a form usable by the
insurer, and the Commission shall have access to all books, bank accounts and
records of the managing general agent in a form usable by the Commission. Such
records shall be retained in order to accomplish the purpose of subdivision 9 of
this section but in no case for a period of less than five years.

5. The contract may not be assigned in whole or part by the managing general
agent.

6. Appropriate underwriting guidelines including:
			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.
			The insurer shall have the right to cancel or nonrenew any policy of
insurance subject to the applicable laws and regulations.

7. If the contract permits the managing general agent to settle claims on behalf
of the insurer:
			a. All claims must be reported to the insurer in a timely manner.
			b. A copy of the claim file will be sent to the insurer at its request or as
soon as it becomes known that the claim:

   1. Has the potential to exceed one percent of the insurer&#8217;s surplus to
   policyholders as of December 31 of the last completed calendar year, an amount
   set by the company, or any other amount deemed appropriate by the Commission,
   whichever is less;

   2. Involves a coverage dispute;

   3. May exceed the managing general agent&#8217;s claims settlement authority;

   4. Is open for more than six months; or

   5. Is closed by payment of an amount exceeding one percent of the
   insurer&#8217;s surplus to policyholders as of December 31 of the last
   completed calendar year, an amount set by the company, or any other amount
   deemed appropriate by the Commission, whichever is less.
   				c. All claim files will be the joint property of the insurer and the
   managing general agent. However, upon entry of an order of liquidation or the
   appointment of a receiver for the liquidation of an insurer, such 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&#8217;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.

8. Where electronic claims files are in existence, the contract must address the
timely transmission of the data.

9. 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 or controlling claim
payments, or in any other manner, interim profits will not be paid to the
managing general agent until the profits have been verified pursuant to
subsection B of &#xA7; 38.2-1361 (i) one year after they are earned for property
insurance business and health insurance business and (ii) five years after they
are earned on casualty insurance business.

10. The managing general agent shall not:
			a. Bind reinsurance contracts or similar risk sharing arrangements, except
that a managing general agent who acts on behalf of a ceding insurer may bind
facultative reinsurance contracts by placing individual risks pursuant to
obligatory facultative agreements provided that the contract between the insurer
and the managing general agent contains reinsurance underwriting guidelines
including, for both reinsurance assumed and ceded, a list of reinsurers with
which such automatic agreements are in effect, the coverages and amounts or
percentages that may be reinsured and commission schedules;
			b. Commit the insurer to participate in insurance or reinsurance syndicates;
			c. Appoint any agent unless (i) the agent is lawfully licensed to transact
the type of insurance for which he is appointed and (ii) the insurer has
notified the Commission of the managing general agent&#8217;s authorization to
appoint agents on its behalf;
			d. Without prior approval of the insurer, pay or commit the insurer to pay a
claim over a specified amount, net of reinsurance, which amount shall not exceed
one percent of the insurer&#8217;s surplus to policyholders as of December 31 of
the last completed calendar year;
			e. 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;
			f. Permit any agent appointed by the managing general agent to serve on the
insurer&#8217;s board of directors;
			g. Jointly employ an individual who is employed with the insurer; or
			h. Utilize or engage a submanaging general agent.

HISTORY: 2001, c. 706.