836-074-0005
Statutory Authority; Effective Date

OAR 836-074-0005 to 836-074-0050 are adopted under the general rulemaking authority of the Director of the Department of Consumer and Business Services under ORS 731.244 for the purpose of carrying out 744.083.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.225
History:
ID 19-2006, f. & cert. ef. 9-26-06
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0010
Definitions

As used in OAR 836-074-0005 to 836-074-0050:

(1) “Insurance producer includes any person who is licensed by the Department as a resident insurance producer.

(2) "Premium Fund" and "Premium Funds" means any premium or other consideration received from or on behalf of an insured for the purpose of effecting or purchasing insurance, and includes return premiums, return premium credits, policy fees and premium taxes.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.225
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0015
Director’s Enforcement Authority

The Director may apply any sanction for violation of ORS 744.225 that the Director may apply for any other violation of the Insurance Code or rules adopted thereunder.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.225
History:
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0017
Exemptions

OAR 836-074-0005 to 836-074-0050 do not apply to:

(1) An insurance producer who is exclusively a salaried employee of an insurer.

(2) An insurance producer who sells only industrial life insurance, as that term is defined in ORS 731.166.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0020
Premium Funds Trust Account

(1) Except as otherwise provided in OAR 836-074-0025, an insurance producer shall deposit in one or more premium funds trust accounts all premium funds received by the insurance producer under the insurance producer’s license. Each trust account must be located in this state unless the Director gives written permission to the insurance producer to keep the account in another state. In applying for permission, the insurance producer must give written justification for keeping the account outside this state;

(2) An insurance producer shall maintain each trust account in one or more of the following forms:

(a) In the form of a checking account, demand account, savings account or other account in a state or national bank or savings bank, a state or federal savings association or a state or federal credit union. A trust account under this subsection must be insured by the United States Government or an agency or instrumentality thereof. However, such insurance need not exceed $100,000 for each account or the amount at any time in the account, whichever is less;

(b) In the form of an account that solely invests, either directly or through an investment fund, in any or all of the following instruments: United States government bonds and Treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest, repurchase agreements collateralized by securities issued by the United States and bankers acceptance;

(c) In the form of an account in an open-end investment company registered under the Investment Company Act of 1940 that:

(A) Limits its portfolio investments to United States-dollar denominated instruments that the board of directors determines present minimal credit risks and that are either of high quality as determined by a nationally recognized statistical rating organization or, in the case of an instrument that is not rated, of comparable quality as determined by the board of directors; and

(B) May not purchase any instrument with a remaining maturity of greater than one year or maintain a dollar-weighted average portfolio maturity that exceeds 120 days.

(3) Premium funds may be placed in an account under section (2) of this rule only if the premium funds are readily available from the account for payments when due.

(4) Each check or other instrument drawn on a trust account must clearly identify that it is drawn on an insurance premium funds trust account.

(5) An insurance producer must make each trust account of the agent accessible to the Director for purposes of examination and audit.

(6) A trust account may be interest-bearing.

(7) For the purpose of OAR 836-074-0005 to 836-074-0050, all premium funds received by an insurance producer on or under any policy of insurance are received in the fiduciary capacity of the insurance producer.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0025
Deposit and Payment of Funds

An insurance producer shall deposit and pay premium funds received as provided in this rule. When deposit is required, the insurance producer shall deposit the funds not later than the seventh day after they are received. When a payment is owed to an insured, the insurance producer shall pay the premium funds not later than the 30th day after the receipt of the funds. The following provisions also apply to the deposit and payment of premium funds:

(1) A return premium and the insurance producer’s share of any premium funds required to be refunded, including unearned commissions, shall be deposited and paid to the insured or other person entitled to the funds. When a return premium is paid in the form of a credit to the account of an insurance producer, the insurance producer shall deposit the equivalent of the credit in money into the account.

(2) When an insurance producer receives a payment of premium funds in the form of an instrument, such as a check, made payable to an insurer, another insurance producer, a surplus line licensee or a premium finance company, the insurance producer may forward the instrument directly to the payee without depositing the instrument in the trust account, if that can be done without endorsement or alteration. Such a payment need not be accounted for with respect to the trust account.

(3) Except as otherwise provided in this section, when an insurance producer receives a payment of premium funds in the form of cash or an instrument requiring endorsement by the insurance producer, the insurance producer shall deposit the premium funds in the trust account or endorse and forward the instrument to the insurer, another insurance producer, the surplus lines licensee or the premium finance company that is entitled to the premium funds received. An insurance producer:

(a) Need not deposit premium funds that are paid in cash if the insurance producer does not maintain a premium trust account because the insurance producer does not engage in transactions for which a trust account must be established, and if the insurance producer complies with all of the following requirements:

(A) Upon receiving the cash, the insurance producer must give the payor a receipt showing the amount of money received, the date on which the money was received, the policy number and the name of the policyholder;

(B) Within 72 hours after receiving the cash, the insurance producer must convert the cash into a guaranteed negotiable instrument, such as a money order, certified check or cashier's check, that is made out to the insurer and forward the money order or check to the insurer;

(C) The insurance producer must keep records of such moneys so received and forwarded.

(b) May deposit the premium funds under procedures established by the insurer entitled to the funds if the procedures meet the requirements of this section and the insurer has given those procedures to the insurance producer in writing. Such other procedures must:

(A) Recognize that the insurance producer is receiving premiums directly on behalf of the insurer;

(B) Direct the insurance producer to give adequate receipts on behalf of the insurer;

(C) Require deposit of the proceeds into the account of the insurer.

(4) An insurance producer may remove gross commissions from the trust account and pay them to the operating account of the insurance producer.

(5) An insurance producer shall not pay out premium funds from a trust account to pay premiums that have not been paid into the trust account.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0030
Advancing Return Premiums

An insurance producer may advance return premiums from funds of the insurance producer other than from a trust account of the insurance producer, in anticipation of receiving a credit for the return premium from the insurer. When the insurance producer credits the return premium to the trust account, the insurance producer may transfer the advanced credit out of the trust account.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0035
Other Permissible Funds

(1) An insurance producer may not deposit in a premium fund trust account any funds other than premium funds, except as follows:

(a) Funds reasonably sufficient to pay bank charges;

(b) Funds that the insurance producer determines to be prudent for advancing premiums or establishing reserves for the paying of return premiums;

(c) Funds for contingencies that may arise in the course of receiving and transmitting premiums.

(2) An insurance producer may deposit in a premium fund trust account any premium funds produced in another state. However, premium funds produced in another state must be deposited and paid in the same manner as premium funds under OAR 836-074-0025.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0040
Interest on Trust Funds

Unless an insurance producer and the insurer agree to the contrary, interest earned in a premium funds trust account may be retained by the insurance producer and:

(1) Used to offset bank charges; or

(2) Removed to the operating account of the insurance producer.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0045
Accounting Records; Inspection

(1) An insurance producer shall establish and maintain records and an appropriate accounting system for all premium funds received by the insurance producer as provided in this rule.

(2) Unless otherwise authorized by the Director, an insurance producer shall establish and maintain the records and accounting system in this state. An insurance producer may establish the records and system in another state if the Director gives written permission to the insurance producer to do so. In applying for permission, the insurance producer must give written justification for keeping the records and system outside this state.

(3) An insurance producer shall make the records available in this state for inspection by the Director during regular business hours upon demand.

(4) An insurance producer shall make the records available with respect to any premium funds received for a period of three years following the date of the policy expiration.

(5) An insurance producer may use any accounting system that effectively isolates each trust account from any operating accounts. A recordkeeping system, whether electronic or manual, must provide an audit trail so that details underlying the summary data, such as invoices, checks and statements, may be identified and made available on request. The system must provide the means of tracing any transaction back to its original source or forwarded to final entry such as is accomplished by a conventional double-entry bookkeeping system. When an automatic data processing system is used, the insurance producer shall make a description of the system available for review by the Director.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0047
Examinations and Audits

(1) The Director may examine or audit any trust account and any accounting records of premium funds as the Director determines necessary.

(2) The examination or audit shall be performed at the expense of the insurance producer, when the trust account or accounting records are located outside this state.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0048
Other Trust Account Requirements

OAR 836-074-0005 to 836-074-0050 do not prohibit an insurer from establishing requirements applicable to trust accounts of insurance producers of the insurer, if the requirements are more restrictive than the provisions of 836-074-0005 to 836-074-0050.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88

836-074-0050
Single Account for Affiliated Persons

(1) An insurance producer that is a firm or corporation may use one premium fund trust account for the funds received by an affiliated person operating under its license.

(2) An affiliated person of an insurance producer that is a firm or corporation may deposit the premium fund that the affiliated person received in the capacity of an affiliated person directly to the deposit account of the firm or corporation with which the person is affiliated.

Statutory/Other Authority: ORS 731
Statutes/Other Implemented: ORS 744.083
History:
ID 8-2005, f. 5-18-05, cert. ef. 8-1-05
ID 9-1987, f. 12-22-87, cert. ef. 1-1-88