In this subtitle the following words have the meanings indicated. “License” means a license issued by the Commissioner to act as a reinsurance intermediary. “Qualified financial institution” means an institution that: is organized or, in the case of a United States office of a foreign banking organization, licensed under the laws of the United States or a state; is regulated, supervised, and examined by the United States or any state by authorities with regulatory authority over banks and trust companies; and has been determined by the Commissioner or the securities valuation office of the National Association of Insurance Commissioners to meet the standards of financial condition and standing considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the Commissioner. “Reinsurance broker” means a person that solicits, negotiates, or places reinsurance cessions or retrocessions for a ceding insurer without the authority to bind reinsurance for the ceding insurer. “Reinsurance broker” does not include an officer or employee of the ceding insurer. “Reinsurance intermediary” means a reinsurance broker or a reinsurance manager. “Reinsurance manager” means a person that: acts as an insurance producer for a reinsurer; and has authority to bind the reinsurer; or manages all or part of the assumed reinsurance business of the reinsurer, including the management of a separate division, department, or underwriting office. “Reinsurance manager” does not include: an employee of the reinsurer; a United States manager of the United States branch of an alien reinsurer; an underwriting manager that, by contract: manages all or part of the reinsurance operations of the reinsurer; is under common control with the reinsurer; and is not compensated based on the volume of premiums written; or the manager of a group, association, pool, or organization of insurers that: engages in joint underwriting or joint reinsurance; and is subject to examination by the insurance regulatory authority of the state where the manager’s principal business office is located. “Reinsurer” means a person that engages in the business of reinsurance as: an authorized insurer; or an accepted reinsurer approved by the Commissioner.

The Commissioner may adopt regulations to carry out this subtitle.

This section does not apply to a lawyer admitted to the bar of the State while acting within the scope of the profession of the lawyer. Except as otherwise provided in paragraph (2) of this subsection, before a person acts as a reinsurance manager or reinsurance broker in the State, the person: in the case of a person that maintains an office in the State: must obtain a license under this subtitle; or must qualify as an insurance producer under Title 10, Subtitle 1 of this article; or in the case of a person that maintains an office in another state: must obtain a license under this subtitle or under a law of another state that is substantially similar to this subtitle; or must qualify as an insurance producer under Title 10, Subtitle 1 of this article or under a law of another state that is substantially similar to Title 10, Subtitle 1 of this article. Before a person acts as a reinsurance manager for a reinsurer domiciled in the State, the person must: obtain a license under this subtitle; or qualify as an insurance producer under Title 10, Subtitle 1 of this article. This subsection applies to a person that maintains an office in the State either directly or as a member or employee of a firm or association or as an officer, director, or employee of a corporation that maintains an office in the State.

The Commissioner may require a reinsurance manager to: file a bond from an insurer in an amount acceptable to the Commissioner for the protection of each reinsurer that the reinsurance manager represents; and maintain an errors and omissions policy in an amount acceptable to the Commissioner. The bond required under subsection (a)(1) of this section must be written by an insurer that is authorized to write surety insurance in the State and is acceptable to the Commissioner. Subject to the approval of the Commissioner, a reinsurance manager may provide security other than a bond, including an irrevocable letter of credit, to satisfy the requirements of subsection (a)(1) of this section.

On the form that the Commissioner provides, each nonresident applicant for a license must appoint the Commissioner as attorney for service of process issued against the applicant in the State. The appointment: is irrevocable; binds the applicant and any successor in interest; and remains in effect as long as there is in force in the State a contract made by the applicant or an obligation arising from a contract made by the applicant. Each nonresident applicant for a license shall provide the Commissioner with the name and address of a resident of the State on whom notice and orders of the Commissioner and process issued against the applicant may be served. A nonresident licensee promptly shall notify the Commissioner of a change in its designated agent for service. A change is not effective until acknowledged by the Commissioner.

An applicant for a license shall: file with the Commissioner an application on the form that the Commissioner provides; and pay to the Commissioner an application fee of $25. The application form shall require: for a firm or association, the name of each member of the firm or association and of each employee of the firm or association who will act as a reinsurance intermediary under the license; and for a corporation, the name of each officer of the corporation and of each employee and director of the corporation who will act as a reinsurance intermediary under the license.

The Commissioner shall issue a license to each applicant that: meets the requirements of this subtitle; and pays the applicable fee for a license for an insurance producer under § 2-112 of this article. In this subsection, “controlling person” means a person that directly or indirectly has the power to direct, or cause to be directed, the management, control, or activities of a reinsurance intermediary. The Commissioner may refuse to issue a license if the Commissioner finds that the applicant, an individual named on the application, a member, principal, officer, or director of the applicant, or a controlling person of the applicant: is not trustworthy to act as a reinsurance intermediary; has given cause for revocation or suspension of a license; or has failed to comply with a requirement for issuance of a license. On written request, the Commissioner shall provide a summary of the basis for the refusal to issue a license. The summary of the basis for refusal is privileged and is not a public document under Title 10, Subtitle 6 of the State Government Article.

A license issued to an individual authorizes the individual to act as a reinsurance intermediary. A license issued to a firm or association authorizes each member of the firm or association, and each employee of the firm or association who is listed on the license, to act as a reinsurance intermediary. A license issued to a corporation authorizes each officer of the corporation, and each employee or director of the corporation who is listed on the license, to act as a reinsurance intermediary.

A license expires on the first July 1 after its effective date and in an odd-numbered year, unless it is renewed for a 2-year term as provided in this section. At least 1 month before a license expires, the Commissioner shall mail to the licensee, at the last known address of the licensee, or send by electronic means in accordance with § 2–116 of this article: a renewal application form; and a notice that states: the date by which the Commissioner must receive the renewal application for the renewal to be issued and mailed before the license expires; and the amount of the renewal fee. Before a license expires, the licensee may renew it for an additional 2-year term, if the licensee: otherwise is entitled to be licensed; files with the Commissioner a renewal application on the form that the Commissioner provides; and pays to the Commissioner the applicable renewal fee for an insurance producer under § 2-112 of this article. The Commissioner shall renew the license of each licensee who meets the requirements of this section.

To add a name to or delete a name from a license, the licensee shall: submit to the Commissioner the change in the form that the Commissioner requires; and pay to the Commissioner a fee of $10.

Subject to the hearing provisions of §§ 2-210 through 2-214 of this article, the Commissioner may deny, refuse to renew, suspend, or revoke a reinsurance intermediary’s license, or a reinsurance intermediary’s insurance producer license, if the reinsurance intermediary has violated this subtitle or § 10-126 of this article. Instead of or in addition to the penalties provided in subsection (a) of this section, the Commissioner: may impose a penalty not exceeding $5,000 for each violation of this subtitle; may bring a civil action for the benefit of an insurer or reinsurer and its policyholders and creditors to recover compensatory damages or may seek other appropriate relief; and may impose any other penalty authorized by this article. An order of the Commissioner issued under this section is subject to judicial review in accordance with § 2-215 of this article. A receiver appointed under Title 9, Subtitle 2 of this article may bring a civil action to recover damages or for other appropriate sanctions for the benefit of an insurer if the receiver determines that: a reinsurance intermediary or other person has failed to comply materially with this subtitle; and the failure has caused an insurer under an order of rehabilitation or liquidation to suffer a loss or damage. This section is not intended to limit the rights of policyholders or claimants of an insurer or reinsurer.

A reinsurance intermediary may be examined under §§ 2-205 through 2-209 of this article.

A person may not act as a reinsurance broker for an authorized insurer without a written authorization agreement between the reinsurance broker and the authorized insurer that states the responsibilities of the parties. The authorization agreement required by this section shall provide that: on written notice, the authorized insurer may terminate at any time the authority of the reinsurance broker to act for it; and the reinsurance broker shall: render accounts to the authorized insurer detailing all material transactions, including information necessary to support the commissions, charges, and other fees received by or owed to the reinsurance broker; remit all funds due to the authorized insurer within 30 days after receipt; hold in a fiduciary capacity in a qualified financial institution all funds collected for the account of the authorized insurer; keep all books, records, and accounts in accordance with § 8-514 of this subtitle; comply with all written standards established by the authorized insurer for the cession or retrocession of all risks; and disclose to the authorized insurer any relationship of the reinsurance broker with a reinsurer to which business is ceded or retroceded.

A reinsurance broker shall keep a record of each transaction that relates to a contract of reinsurance transacted by the reinsurance broker for at least 10 years after the contract expires. For each contract of reinsurance, the record required by this section shall include: the type of contract, limits, underwriting restrictions, classes or risks, and territory; the period of coverage, including effective and expiration dates, cancellation provisions, and required notice of cancellation; the requirements for reporting and settling balances; the rate used to compute the reinsurance premium; the names and addresses of assuming reinsurers; the rates of all reinsurance commissions, including commissions on any retrocessions handled by the reinsurance broker; proof of placement; details of retrocessions handled by the reinsurance broker, including the identity of retrocessionaires and the percentage of each contract assumed or ceded; financial records, including premium and loss accounts; and any related correspondence and memoranda. In addition to the records required by this section, a reinsurance broker shall keep written evidence that the assuming reinsurer: has agreed to accept the risk, if the reinsurance broker, while acting for a ceding authorized insurer, procured a reinsurance contract directly from an assuming reinsurer; and has delegated binding authority to its representative, if the reinsurance broker, while acting for a ceding authorized insurer, procures a reinsurance contract from a representative, other than an employee, of an assuming reinsurer. An authorized insurer shall have reasonable access to and the right to copy and audit all accounts and records maintained by the reinsurance broker that relate to business transactions with the authorized insurer. The reinsurance broker shall maintain accounts and records in a form usable by the authorized insurer.

A person may not act as a reinsurance manager for a reinsurer without a written contract that: states the responsibilities of the reinsurance manager and the reinsurer; and is approved by the board of directors of the reinsurer. A reinsurance manager may not assign the contract required under this section. At least 30 days before a reinsurer assumes or cedes business through a reinsurance manager, a copy of the contract required under this section shall be filed with the Commissioner for approval. The contract required by this section: shall state the rates, terms, and purposes of commissions, charges, and other fees that the reinsurance manager may impose against the reinsurer; and shall provide that: the reinsurer shall have reasonable access to and the right to copy all accounts and records maintained by the reinsurance manager that relate to business transactions with the reinsurer; the reinsurance manager shall maintain accounts and records in a form usable by the reinsurer; the reinsurance manager may not retain for more than 3 months estimated claims payments and allocated loss adjustment expenses; the reinsurer may: terminate the contract for cause on written notice to the reinsurance manager; and suspend immediately the authority of the reinsurance manager to assume or cede business during the pendency of a dispute about the termination of the contract; and the reinsurance manager shall: render accounts to the reinsurer detailing all material transactions, including information necessary to support the commissions, charges, and other fees received by or owed to the reinsurance manager; remit to the reinsurer at least monthly all funds due under the contract; hold in a fiduciary capacity in a qualified financial institution all funds collected for the account of the reinsurer; keep a separate bank account for each reinsurer that the reinsurance manager represents; comply with the written underwriting and rating standards established by the authorized insurer for the acceptance, rejection, or cession of all risks; provide annually to the reinsurer a statement of the reinsurance manager’s financial condition prepared by an independent certified accountant; and disclose to the reinsurer any relationship of the reinsurance manager with an authorized insurer before ceding or assuming business with the authorized insurer in accordance with the reinsurance contract. If the contract required by this section allows the reinsurance manager to settle claims for the reinsurer: all claims shall be reported to the reinsurer in a timely manner; the reinsurance manager shall provide the reinsurer with a copy of each claim file that: is requested by the reinsurer; involves a coverage dispute; may exceed the reinsurance manager’s settlement authority; remains open for more than 6 months after the date the reinsurance manager receives the claim; has the potential to exceed the lesser of an amount determined by the Commissioner or a limit set by the reinsurer; or is closed by payment of the lesser of the amount determined by the Commissioner or the limit set by the reinsurer; the settlement authority granted to a reinsurance manager under the contract may be terminated for cause on 30 days’ notice from the reinsurer to the reinsurance manager or on termination of the contract; and the reinsurer may suspend the settlement authority of the reinsurance manager during the pendency of a dispute about the cause for termination; except as provided in paragraph (2) of this subsection, all claim files are joint property of the reinsurer and reinsurance manager; and the reinsurer shall have reasonable access to and the right to copy the claim files on a timely basis. If the Commissioner obtains an order of liquidation, rehabilitation, reorganization, or conservation against a reinsurer, the files become the sole property of the liquidator, rehabilitator, conservator, or receiver. If the contract required by this section allows a sharing of interim profits by the reinsurance manager, the interim profits may not be paid until: 1 year after the end of each underwriting period for property insurance business; 5 years after the end of each underwriting period for casualty insurance business; or a longer period that the Commissioner sets for a specific line of insurance; and the adequacy of reserves on remaining claims is verified as provided in § 8-520(a)(3) of this subtitle.

A reinsurance manager shall keep a record of each transaction that relates to a contract of reinsurance transacted by the reinsurance manager for at least 10 years after the contract expires. For each contract of reinsurance, the record required by this section shall include: the type of contract, limits, underwriting restrictions, classes or risks, and territory; the period of coverage, including effective and expiration dates, cancellation provisions, required notice of cancellation, and disposition of outstanding reserves on covered risks; the requirements for reporting and settling balances; the rate used to compute the reinsurance premium; the names and addresses of assuming reinsurers; the rates of all reinsurance commissions, including commissions on any retrocessions handled by the reinsurance manager; proof of placement; details of retrocessions handled by the reinsurance manager, including the identity of retrocessionaires and the percentage of each contract assumed or ceded; financial records, including premium and loss accounts; and any related correspondence and memoranda. In addition to the records required by this section, a reinsurance manager shall keep written evidence that the assuming reinsurer: has agreed to accept the risk, if the reinsurance manager, while acting for a ceding authorized insurer, procured a reinsurance contract directly from an assuming reinsurer; and has delegated binding authority to its representative, if the reinsurance manager, while acting for a ceding authorized insurer, procures a reinsurance contract from a representative, other than an employee, of an assuming reinsurer.

The acts of a reinsurance manager are considered to be the acts of the reinsurer on whose behalf the reinsurance manager is acting.

A reinsurance manager: except as provided in subsection (b) of this section, may not cede retrocessions for a reinsurer; may not commit a reinsurer to participate in reinsurance syndicates; may not appoint or hire an insurance producer to solicit, procure, or negotiate reinsurance contracts for a reinsurer without ensuring that the insurance producer is qualified under Title 10, Subtitle 1 of this article; may not take an action that would constitute a violation of § 27-503 of this article if taken directly by a reinsurer; without the reinsurer’s prior written approval, may not pay or commit a reinsurer to pay a claim, net of reinsurance, that exceeds the lesser of 1% of the reinsurer’s policyholder surplus as of the preceding calendar year and an amount specified by the reinsurer; subject to subsection (b) of this section and without the reinsurer’s prior written approval: may not collect a payment from a retrocessionaire; or may not commit a reinsurer to a claim settlement with a retrocessionaire; may not appoint a subreinsurance manager; or may not employ an individual who is also employed by a reinsurer that transacts business with the reinsurance manager, unless the reinsurance manager is under common control with the reinsurer and is subject to Title 7 of this article. A reinsurance manager may cede facultative reinsurance contracts under obligatory facultative agreements if the contract between the reinsurance manager and reinsurer contains reinsurance underwriting guidelines for the retrocessions, including: a list of reinsurers with which any automatic agreements are in effect; the coverages and amounts or percentages that may be reinsured; and commission schedules.

An authorized insurer shall obtain annually a copy of statements of the financial condition of each reinsurance broker that transacts business with the authorized insurer. An authorized insurer may not: engage the services of a person to act as a reinsurance broker on its behalf unless the person has complied with this subtitle; or employ an individual who also is employed by a reinsurance broker that transacts business with the authorized insurer, unless the reinsurance broker is under common control with the authorized insurer and is subject to Title 7 of this article. An authorized insurer that violates any provision of this subtitle is subject to the disciplinary and penalty provisions of §§ 4-113 and 4-114 of this article.

In this subsection, “actuary” means an individual who is a member in good standing of the American Academy of Actuaries. A reinsurer shall obtain annually a copy of statements by an independent certified accountant in a form acceptable to the Commissioner of the financial condition of each reinsurance manager that transacts business with the reinsurer. If a reinsurance manager is allowed by contract to maintain loss reserves, a reinsurer shall obtain annually the opinion of an independent actuary attesting to the adequacy of the loss reserves established for losses incurred and outstanding on business produced by the reinsurance manager. A reinsurer shall conduct at least semiannually an on-site review of the underwriting and claims processing operations of the reinsurance manager. A reinsurer shall notify the Commissioner, in writing, within 30 days after terminating a contract with a reinsurance manager. A reinsurer may not engage the services of a person to act as a reinsurance manager on its behalf unless the person has complied with this subtitle. Unless the relationship between the reinsurer and the reinsurance manager is controlled by and disclosed under § 8-106 of this title or Title 7, Subtitles 6 and 7 of this article, a reinsurer may not have on its board of directors an officer, director, employee, agent, or controlling shareholder of its reinsurance manager. The binding authority for all retrocessional contracts or participation in reinsurance syndicates shall rest with an officer of the reinsurer who is not affiliated with the reinsurance manager. Subject to the hearing provisions of Title 2 of this article, if a reinsurer violates any provision of this subtitle, the reinsurer may be: refused approval as an accepted reinsurer; or disapproved as an accepted reinsurer under Title 5, Subtitle 9 of this article. In addition to removal as an accepted reinsurer under Title 5, Subtitle 9 of this article, a reinsurer is subject to a civil penalty not exceeding $5,000 for each violation of this subtitle.