Certain officers, directors, and other executives from insurance companies that have gone insolvent will now be barred from acting as managing general agents (MGAs) in Louisiana, under new regulations that took effect on Aug. 1.
These regulations, enacted under House Bill 672, apply to individuals holding executive positions within two years prior to the company’s insolvency. However, the insurance commissioner has the authority to overrule this restriction if the executive can demonstrate that their personal actions or omissions did not significantly contribute to the company’s insolvency.
Additionally, the commissioner can make an exception if at least five years have passed since the insolvency, as per a report from AM Best.
The new law also imposes reporting requirements on MGAs, one of which requires them to send reports to their carrier partners detailing written, earned, and unearned premiums; losses and loss expenses paid and outstanding; losses incurred but not reported; management fees; and an outline of expenses. These reports must be delivered at least once per calendar year.
MGAs must also notify the Louisiana Department of Insurance if balances due to an insurer for more than 90 days exceed $1 million or 10% of the insurer’s policyholder surplus.
Additionally, MGAs are required to send notice if their authority to settle claims is withdrawn, the contract is canceled or terminated, or if the money held from insurers for losses exceeds what is necessary to cover claims and loss adjustment expenses within the next 60 days by $100,000 or more.
The law further updates requirements for audited financial reports from MGAs. These reports must now include the opinion of an independent certified public accountant and must report the MGA’s financial position as of the most recent year-end, as well as the results of its operations and cash flows. Carriers are required to submit these reports to the commissioner upon request.
Moreover, the new law grants the insurance commissioner the discretion to examine an MGA’s financial condition at the company’s expense.
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