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Welcome to InsureTerms
Our partners over at Locke Lord have generously agreed to contribute to the InsurTech NY community with some educational pieces about the insurance industry and commonly used terms in it. We will be adding to this InsureTerms list periodically, so check back for more insights from Locke Lord’s team.
SAP
Insurance statutory accounting principles for insurance companies which are codified in the National Association of Insurance Commissioners’ Accounting Practices & Procedures Manual, and sometimes by a “permitted practice” of a state insurance department; the term is oftentimes used as an accounting reference for insurance company financial matters in a stock purchase agreement, managing general agreement and reinsurance agreement. SAP is an enterprise liquidation value oriented method of accounting, which is much different than U.S. Generally Accepted Accounting Principles, which an insurance holding company would normally use for preparing its financial statements. April 9, 2024 | Contribution by BCasey@lockelord.com
MGA
A Managing General Agent, which has both business and legal context meanings. In the business context, an MGA is an insurance producer that, under an agreement with an insurer, has the authority from the insurer to produce insurance business using the insurer’s policy forms and rates, or policy forms and rates developed by the MGA for use in the name of the insurer, and may also handle insurance claims for the insurance policies produced by the MGA. Oftentimes, an MGA will bring a reinsurance company partner to the transaction that will reinsure the “fronting insurer” for which the MGA acts. From a legal perspective, many state insurance departments issue a separate MGA license to a licensed insurance producer where it meets the legal definition of an MGA, which generally is an insurance producer that
- manages all or a part of an insurer’s business,
- annually produces total gross written premiums for the insurer equal to or more than 5% of the insurer’s most recent year-end total policyholders surplus and
- either (i) handles insurance claims for the insurer or (ii) negotiates ceded reinsurance for the insurer.
April 9, 2024 | Contribution by BCasey@lockelord.com