1. (1) The provisions of this section shall apply if, in any calendar year, the aggregate amount of gross written premium on insurance business placed with a controlled insurer by a controlling producer is equal to or greater than five percent of the admitted assets of the controlled insurer, as reported in the controlled insurer's quarterly statement filed as of September 30 of the prior year.

2. (2) Notwithstanding paragraph (1) of this subdivision, the provisions of this section shall not apply if:

   1. (i) The controlling producer:

      1. (a) places insurance only with the controlled insurer, a member of the controlled insurer's holding company system, or the controlled insurer's parent, affiliate, or subsidiary, and receives no compensation from any such person which is based upon the amount of premiums written; and
      2. (b) accepts insurance placements only from a subproducer that is not an affiliate of the controlling producer nor a member of the same holding company system, and does not accept insurance placements directly from insureds; and

   2. (ii) The controlled insurer, except for insurance business written through a residual market facility such as the New York Automobile Insurance Plan, accepts insurance business only from a controlling producer, a producer controlled by the controlled insurer, or a producer that is a subsidiary of the controlled insurer.

      (b) Written contract.

3. (1) A controlled insurer shall not accept business from a controlling producer and a controlling producer shall not place business with a controlled insurer except pursuant to a written contract in accordance with the provisions of this subdivision.
4. (2) The contract, or any amendment to a contract, shall be submitted to the superintendent within 15 days after it has been signed; except that, for a domestic controlled insurer subject to article 15 of the Insurance Law, the contract shall not be entered into unless it is submitted to the superintendent by the insurer at least 30 days prior to entering into the contract, and the superintendent has not disapproved it within the 30 days.
5. (3) The contract shall be signed by an authorized officer of the insurer.

6. (4) The contract shall specify the responsibilities of each party and, except to the extent that any of the following provisions places the controlling producer or the controlled insurer in violation of the laws of any other state, contain, at a minimum, provisions that:

   1. (i) the controlled insurer may terminate the contract for cause, upon written notice to the controlling producer. The controlled insurer shall suspend the authority of the controlling producer to write business during the pendency of any dispute regarding the cause for the termination;
   2. (ii) the controlling producer shall render accounts to the controlled insurer detailing all material transactions, including information necessary to support all commissions, charges and other fees received by, or owing to, the controlling producer;
   3. (iii) the controlling producer shall remit all funds due under the terms of the contract to the controlled insurer on at least a monthly basis except that premiums collected from the insured shall be remitted within 90 days of the effective date of the policy or installment due date;
   4. (iv) all funds collected for the controlled insurer's account shall be held by the controlling producer in a fiduciary capacity, in one or more appropriately identified bank accounts, in accordance with the provisions of the Insurance Law, and Part 20 (Regulation No. 20) or Part 32 (Regulation No. 98) of this Title, as applicable. However, funds of a controlling producer not required to be licensed in this State shall be maintained in compliance with the requirements of the controlling producer's domiciliary jurisdiction;
   5. (v) the controlling producer shall maintain separately identifiable records of business written for the controlled insurer;
   6. (vi) the contract shall not be assigned in whole or in part by the controlling producer;
   7. (vii) the controlled insurer shall provide the controlling producer with its underwriting standards, rules and procedures, manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling producer shall adhere to the standards, rules, procedures, rates, and conditions. The standards, rules, procedures, rates, and conditions shall be the same as those applicable to comparable business placed with the controlled insurer by a producer other than the controlling producer;
   8. (viii) set forth the rates and terms of the controlling producer's commissions, charges or other fees and the purposes for those charges or fees. The rates of the commissions, charges and other fees shall be no greater than those applicable to comparable business placed with the controlled insurer by producers other than controlling producers providing the same types of services for the insurer. For purposes of this subparagraph and subparagraph (vii) of this paragraph, examples of comparable business include the same lines of insurance, same kinds of insurance, similar policy limits, similar type of risk, and similar quality of business;
   9. (ix) if the contract provides that the controlling producer, on insurance business placed with the insurer, is to be compensated contingent upon the insurer's profits on that business, then such compensation shall not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event shall the commissions be paid until the adequacy of the controlled insurer's reserves on remaining claims has been independently verified pursuant to paragraph (c)(1) of this section;
   10. (x) establish a limit on the controlling producer's writings in relation to the controlled insurer's surplus and total writings. The insurer may establish a different limit for each line or sub-line of business. The controlled insurer shall notify the controlling producer when the applicable limit is approached and shall not accept business from the controlling producer if the limit is reached. The controlling producer shall not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached; and

   11. (xi) the controlling producer may negotiate but shall not bind reinsurance on behalf of the controlled insurer on business the controlling producer places with the controlled insurer.

       (c) Reporting requirements.

       The controlled insurer shall annually, on or before April 1, provide to the superintendent:

7. (1) In addition to the loss reserve opinion required to be filed with the annual statement pursuant to section 307 of the Insurance Law, an opinion by an independent casualty actuary, who shall be a member of the American Academy of Actuaries and in active practice, or by any other independent loss reserve specialist acceptable to the superintendent. The opinion shall report on the adequacy of loss and loss adjustment expense reserves established by the controlled insurer as of the preceding December 31, for each line of insurance on the annual statement for which any business was placed by a controlling producer; and

8. (2) A report, consisting of the following:

   1. (a) the amount of premiums on insurance business placed with the controlled insurer by the controlling producer;
   2. (b) the amount of commissions, charges or other fees paid by the controlled insurer to the controlling producer during the previous calendar year; and
   3. (c) the amounts owed to the controlling producer on the business by line of insurance on the annual statement; and
   4. (ii) the percentage that the amounts specified in subparagraph (i) of this paragraph represent of the controlled insurer's net premiums written for each such line of insurance.

   (i)

(a) Applicability of section.