KANSAS INSURANCE
DEPARTMENT
K.A.R. 40-3-48. Insurance companies; managing general
agents; definitions; requirements; penalties. (a) The terms “managing general agent” and “MGA,” as
defined in K.S.A. 40-2,130(d) and amendments thereto, shall include any person
who, in addition to the criteria set forth in that statute, adjusts or pays any
claim in excess of $10,000 per claim or negotiates reinsurance on behalf of the
insurer.
(b) The term
“total annual written premium” shall include all direct premiums written by a
managing general agent regardless of where the risks are
located.
(c)(1) Each managing general agent shall acquire and
maintain a fidelity bond for the protection of the insurer contracting with the
managing general agent. The bond
shall be in the amount of at least $100,000 or 10 percent of the managing
general agent’s total annual written premium nationwide that was produced by the
MGA for the insurer in the prior calendar year. The bond shall not exceed $500,000. The bond amount shall be adjusted
accordingly on or before April 1 of each year.
(2) Coverage shall
not be written by the insurer or an affiliate of the insurer contracting with
the managing general agent. The bond shall be executed by a fidelity insurer
admitted to do business in
(3) A copy of the
executed bond shall be filed with the department.
(d)(1) Each managing general agent shall acquire and
maintain an errors and omissions insurance policy. The policy coverage limits
shall be at a minimum of $100,000
or 10 percent of the
managing general agent’s total annual written premium nationwide that was
produced by the MGA for the insurer in the prior calendar year. The policy coverage
limits shall
not exceed $500,000. The policy
coverage limits shall be adjusted accordingly on or before April 1 of each
year.
(2) The errors
and omissions policy shall be issued by an insurer admitted to do business in
(3) Proof of
insurance shall be filed with the department.
(e)(d)
Each contract entered into between a managing general agent and a
domestic insurer shall be retained by the insurer.
(f)(e)
Each managing general agent shall keep the usual and customary records
pertaining to transactions taking place under the managing general agent
agreements at the managing general agent's place of business. All books, bank
accounts, and records shall be kept available and open to the inspection
of the commissioner or the commissioner's representatives at any time during
business hours. These records shall be retained by the managing general agent
until the insurer and the business to which the records pertain has been the
subject of an examination pursuant to the provisions of K.S.A. 40-222 and
amendments thereto.
(g)(f)
If the contract between an insurer and a managing general agent is
terminated for any reason, the managing general agent shall, upon request of the
insurer, deliver all records to the insurer within 90 days of the
request.
(h)(g)
Each managing general agent shall send the insurer a claim file when the
managing general agent first knows that the claim might exceed a limit set by
the insurer, or one-quarter of one percent of the policyholder surplus as
reported in the last annual statement of the insurer, whichever is less.
(i)(h) Each managing general agent
shall send the insurer a claim file when the managing general agent first knows
that the claim file is closed by payment of an amount set by the insurer, or an
amount in excess of one-quarter of one percent of the policyholder
surplus as reported in the last annual statement of the insurer, whichever is
less.
(j)(i) Each insurer licensed
to write business in the state of
(k)(j) An independent audit by a
certified public accountant shall be conducted annually upon managing general
agents currently under contract, and shall be contracted for by the
insurer. The independent audit shall include the following:
(1) A report of an independent certified public accountant;
(2) a balance
sheet;
(3) a statement
of income;
(4) a statement
of cash flows;
(5) a statement
of income and retained earnings;
(6) the
notes to financial statements required by generally accepted accounting
principles; and
(7) a listing
of all exceptions and internal control weaknesses noted in the course of the
audit.
(l)(k) Each insurer shall retain a
current independent audit report by a certified public accountant of each
managing general agent with which the insurer has done
business.
(m)(l)
The authority to examine a managing general agent shall be retained by
the commissioner, notwithstanding termination of the managing general agent's
contractual authority. The insurer employing the managing general agent shall
reimburse the department for the expense of the examination according to the
provisions of K.S.A. 40-223 and amendments thereto. (Authorized by K.S.A. 40-103 and K.S.A.
40-2,136; implementing K.S.A. 40-2,130(d)(1), K.S.A. 2004 Supp. 40-2,131,
K.S.A. 40-2,132, and K.S.A. 40-2,133, and 40-2,134;
effective Dec. 16, 1991; amended Dec. 5, 2003; amended
P-______________.)