Amwest Surety Insurance Company, in Liquidation

AGENT RELATIONS – Frequently Asked Questions

Question: What type of documentation must be sent to the Liquidator to demonstrate compliance with the notification requirement?

The agent must give Notice by 1st class mail to the policyholder/principal at the last known address contained in agent's records within 15 days of agent's receipt of Notification.

The notification must contain the following information:

Name & address of the insurer (Amwest)

Name & address of the agent

Identification of the policy/bond impaired

Nature of the impairment including termination of coverage with the following language:

All policies including bonds and other noncancellable business in effect at the time or issuance of the order of liquidation shall continue in force until the earliest of:

(1) Thirty-days from the date of entry of liquidation order (i.e., July 6, 2001 at 12:00 p.m. CDT);

(2) the expiration of the policy or bond coverage;

(3) the date when the insured has replaced the insurance coverage with equivalent insurance with another insurer or otherwise terminated the policy; or

(4) the Liquidator has affected a transfer of the policy obligation pursuant to subdivision (1)(j) of section 44-4821 (Reissue 1998).

Confirmation of compliance on the agent's part can be a letter to the Liquidator indicating that the above requirements have been met and copies of the individual letters sent to the agent's policyholders or a list of the policyholder’s names addresses & bond numbers with a sample letter.

Question: Will all bonds cancelled July, 6, 2001 have their premiums prorated to that date so that the agent’s statement will reflect the correct amount due and any credits can be claimed through the "proof of claim"?

Answer: Amwest will prorate earned premium on all open bonds as of July 6, 2001. Premium for contract bonds is fully earned when written. Premium for commercial bonds (non-contract) will be earned consistent with Amwest’s rate filings, which typically provide for prorating of earned premium for renewal years, subject to an earned premium. First year premium is always earned. The credit for unearned premium or the debit for earned premium will be reflected on the agent’s statement.  

Question: What should an agent do with premiums that have been collected but not paid against the statement?

Answer: Payment of earned premiums must be remitted net (to date of cancellation, no later than midnight July 6, 2001) by the agent. Premiums for certain bonds are fully earned but any policies or bonds qualifying for a pro-rata unearned premium, shall be promptly returned by the agent to the insured or other person from whom it was received.

Question: Will the state rate filings take precedent as to how earned premiums are computed?

Answer: Yes.

Question:  Who will determine the pro-rated amount of premium subject to the Proof of Claim (POC) process?

Answer: The Liquidation staff.

Question: Will the return premiums, if any, be credited to the agent’s statement upon receipt and process of proof of claim, or will the funds be returned directly to the principal? 

Answer: Generally return premium will be claimed via a POC by the policyholder, principal or person that paid the premium and any distribution would be paid directly to the claimant, which is consistent with the Nebraska Scheme of Priorities set forth at §44-4822 of the Nebraska Revised Statutes. Unearned premium claims are a class 4 claim against Amwest. The unearned commission is due the Liquidator from the agent, broker, premium finance company or any other person, other than the insured, responsible for payment of premium.

Question: What about refunds of commissions to agents?

Answer: Any claims for contingent commissions by agents will be subject to the proof of

claim process and will be deemed general creditor claims, a class 4 claim.

Question: Who will determine the amount of unearned commission due and how will it be paid?

Answer: The Liquidation staff and most likely collection will be through present agent billing method.

Question: If a bond is replaced within the first few months of the 1st term, are we prorating the earned premium?

Answer: The first term is fully earned and is not subject to prorating. Premium for second and subsequent terms is prorated subject to an earned minimum of $100 for commercial bonds and $300 for contract bonds. This is consistent with Amwest's rate filings and SAA rate manuals. Agents that refuse to comply with this practice are in violation of the Liquidation Order and subject themselves to contempt proceedings. Keep in mind that we are not returning any UEP, as this is subject to the POC process.

Question: When will the cancellation process start?

Answer: The cancellation process is over and the bonds were cancelled effective July 6, 2001. For unremitted, earned premium, the funds must be forwarded to Amwest Surety Insurance Company immediately. Unremitted, unearned premium must be returned to the principal. Remitted, unearned premium will be retained by Amwest Surety Insurance Company as set forth above and will follow the POC process. Remitted, earned premium does not warrant explanation. Of course, all premium is fully earned with the limited exception per the above.