N.J. Admin. Code § 11:17C-2.3

Current through Register Vol. 56, No. 24, December 18, 2024

Section 11:17C-2.3 - Trust account

(a) An insurance producer shall establish and maintain a trust account into which shall be deposited cash, checks and other instruments payable to the insurance producer under the following circumstances:

1. When an insurance producer holds any premiums for more than five business days before remitting the premiums to an insurer or other insurance producer, pursuant to N.J.A.C. 11:17C-2.2(a)1 through 3; or

2. When an insurance producer deposits any collected premiums into a financial institution account or other investment, or otherwise uses the premiums, even though the premiums are remitted within five business days.

(b) The account shall be designated a "Trust Account" on the bank records and those words shall be displayed on the face of the checks on that account.

(c) The trust account shall be a separate account from that required for the surplus lines guaranty fund.

(d) Non-premium monies received by the insurance producer for soliciting, negotiating, effecting, procuring, renewing, continuing or binding policies of insurance may be deposited into the trust account. Examples of non-premium monies include, but are not limited to, service fees, policy fees, late charges, inspection fees and surplus lines premium taxes.

(e) Any insurance producer who is required to maintain a trust account pursuant to (a) above shall establish and maintain a trust account in a financial institution as defined in this chapter. Any resident insurance producer required to maintain a trust account shall maintain such trust account in one or more financial institutions either:

1. Located within this State and subject to the jurisdiction of the New Jersey courts; or

2. Located outside this State, if the financial institution confirms, in a format approved by the Commissioner, that it will consent to the jurisdiction of New Jersey courts and the Department, including complying with and abiding by subpoenas and orders issued by the Department, to the same extent that New Jersey courts and the Department have jurisdictional oversight of insurance agency deposit accounts held in financial institutions located within this State, and provided that the financial institution is not transacting trust business as defined by N.J.S.A. 17:9A-316D(2) within this State without a certificate of authority in accordance with N.J.S.A. 17:9A-316.

(f) An insurance producer may place trust account funds in interest bearing or income producing assets and retain the interest or income thereon provided the nature of the account has previously been disclosed to the principal and the insurance producer has secured from the principal a written authorization for the investment of the money and the retention of any earnings thereon.

(g) The following disbursements may be lawfully withdrawn from the trust account:

1. Non-premium monies received by the insurance producer in connection with soliciting, negotiating, effecting, procuring, renewing, continuing or binding policies of insurance;

2. Net or gross premium remittances due other insurance producers or insurers;

3. Claim payments or reinsurance premiums for transfer to another trust account when authorized by an insurer;

4. Premiums due insureds;

5. Commissions due the insurance producer, net any financial institution charge or commission due another insurance producer, provided that commissions are withdrawn only on premiums deposited into the trust account;

6. Interest which the insurance producer is authorized to retain pursuant to this chapter;

7. Voluntary deposits; and

8. Funds for investment made pursuant to (f) above.

(h) Disbursements made pursuant to (g)2 and 4 above shall be made payable to the insurance producer or another insurance producer, the insurer or the insured, as the case may be.

(i) The trust account balance in the financial institution shall at all times be at least equal to the amount deposited less lawful withdrawals, except where the sole reason for the deficiency is the failure by a bank to honor checks of insureds or prospective insureds accepted in good faith as payment of premiums. If the balance in the financial institution is less than the amount deposited less lawful withdrawals, the insurance producer shall be deemed to be in violation of this chapter and shall be subject to penalties as provided by N.J.A.C. 11:17C-1.3.

N.J. Admin. Code § 11:17C-2.3

Amended by R.2004 d.127, effective 4/5/2004.
See: 35 N.J.R. 3549(a), 36 N.J.R. 1782(a).
Rewrote (e).
Amended by R.2005 d.237, effective 7/18/2005.
See: 37 N.J.R. 413(a), 37 N.J.R. 2691(c).
In (a), amended the N.J.A.C. reference.