Minnesota Session Laws - 1998, Regular Session

                            CHAPTER 323-S.F.No. 2262 
                  An act relating to insurance; regulating reinsurance 
                  intermediary-brokers; providing for the investment of 
                  funds held or collected; amending Minnesota Statutes 
                  1996, section 60A.715. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1996, section 60A.715, is 
        amended to read: 
           60A.715 [REQUIRED CONTRACT PROVISIONS; REINSURANCE 
        INTERMEDIARY-BROKERS.] 
           Transactions between a RB and the insurer it represents in 
        this capacity shall only be entered into pursuant to a written 
        authorization, specifying the responsibilities of each party.  
        The authorization must, at a minimum, provide that: 
           (1) the insurer may terminate the RB's authority at any 
        time; 
           (2) the RB will render accounts to the insurer accurately 
        detailing all material transactions, including information 
        necessary to support all commissions, charges, and other fees 
        received by, or owing to the RB, and remit all funds due to the 
        ceding insurer or the assuming reinsurer within 30 days of the 
        month of receipt; 
           (3) all funds collected for the ceding insurer's or the 
        assuming reinsurer's account will be held by the RB in a 
        fiduciary capacity: 
           (i) in a bank that is a qualified United States financial 
        institution and may be; or 
           (ii) invested in direct obligations of, or obligations 
        guaranteed or insured by, the United States, its agencies, or 
        its instrumentalities, excluding mortgage-backed securities, or 
        in obligations described in section 60A.11, subdivision 17, 
        paragraphs (a) and (b). 
           These funds may not be invested in obligations whose 
        maturities exceed 90 days; Investments made under item (ii) must 
        be traded on a national securities exchange, and shall be 
        restricted to the following:  direct obligations of the United 
        States government or an agency of the United States government, 
        municipal bonds or corporate bonds or notes with credit ratings 
        of at least AA by Standard & Poors or equivalent ratings from a 
        comparable rating service, or commercial paper with a short-term 
        rating of at least A-1 by Standard & Poors or an equivalent 
        rating from a comparable rating service, but in no event shall 
        the obligations be rated other than in the highest category 
        established by the securities valuation office of the National 
        Association of Insurance Commissioners.  The RB shall invest 
        fiduciary funds under item (ii) only if authorized in writing by 
        the ceding insurer or assuming reinsurer in whose account the 
        funds are held, shall secure the investments with security 
        acceptable to the ceding insurer or assuming reinsurer on whose 
        account the funds are held, and shall be responsible for any 
        losses on investments made pursuant to item (ii). 
           At least 50 percent of the funds invested under clause (3), 
        based on the prior 30 days' average balance, must be invested in 
        instruments that mature in no more than 120 days.  In no case 
        shall an investment mature in greater than three years from the 
        date of purchase.  Investments made pursuant to clause (3) 
        should emphasize safety, liquidity, and diversification.  The RB 
        is required to structure those investments so that funds are 
        available to remit on a timely basis to the ceding insurer or 
        the assuming reinsurer in accordance with clause (2); 
           (4) the RB will comply with section 60A.72; 
           (5) the RB will comply with the written standards 
        established by the insurer for the cession or retrocession of 
        all risks; and 
           (6) the RB will disclose to the insurer any relationship 
        with any reinsurer to which business will be ceded or retroceded.
           Presented to the governor March 20, 1998 
           Signed by the governor March 23, 1998, 10:48 a.m.