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10
04
2021

Insurance Sub Producer Agreement

When MGU has created a team of agent or broker sub-producers, MGU assumes both an expanded production role as an intermediary, underwriting and perhaps even the adaptive functions of an insurer. These MGUs produce their own direct book with policyholders and sit on a pyramid of sub-producers who, in turn, produce their own business book on these MGUs to the insurer. MGU, which is a network of under-production, is often referred to as a “wholesaler” and sub-producers could be referred to as “retail producers.” Agent for obtaining premium. As a general rule, state law makes both an agent and a broker “the agent of the insurer for obtaining the premium,” so that the payment to the manufacturer constituted a payment to the insurer, whether it was received or not (due to insolvency, defamation or slavery). Thus, the “intermediary`s credit risk” is held by the insurer – at least for the linked premium, expressly supported by state law. It is useful for the insurer to also retain credit risk for credit risk in the opposite direction, so that the payment of the return premium through the manufacturer is not considered to be perceived by the policyholder, unless it is actually collected. This risk of reverse direction is generally not explicitly addressed in state law, but it is useful. Especially since the related premiums and reimbursement premiums incurred by different policyholders who pass through the same manufacturer are generally compensated against each other when the manufacturer makes accounts with an insurer. This clause was created to nullify the final result of a notorious bankruptcy of a reinsurance intermediary in the early 1970s (Pritchard-Baird), which went bankrupt without paying the premiums paid to reinsurers. The court first decided which party represented the intermediary (that was the Cedent) and then decided who was able to take the intermediary`s credit risk (i.e. the intermediary`s client, i.e.

the Cedent). The industry has generally viewed the intermediary as an intermediary representing the Cedent (i.e. it “goes to the markets” with the reinsurance program agreed on behalf of the Cedent and encourages reinsurers to accept part of the risk placement). The regulators decided to reverse this legal result by contractually linking the intermediary`s credit risk with the reinsurer, which gave rise to the “intermediate clause” mentioned above, which penalizes the Cedent if it is omitted. If at any time the agent has been the insurer`s representative at all times, including the selection of limits or coverage, the insurer is responsible for any error or omission of the agent (this is not the case). These judgments and selections of the application are therefore attributable to the applicant/insurance taker and his elected independent insurance profession (even if a representative of the insurer exercises his judgment on behalf of the applicant for the most part purposes) who exercises his judgment on behalf of the applicant for this limited purpose – as if the agent were a broker working exclusively for the applicant. When a manufacturer becomes insolvent and the premiums collected are not retained as a trust fund and they have disappeared, an insurer could still seek recovery after the intermediary`s bankruptcy, since trust obligations are generally not in bankruptcy. However, the producer is likely to operate as a capital company and, therefore, the non-inevitable concealment of trust funds can only be a commitment of the bankrupt business producer and not of the manufacturer itself.

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