(1) Specific excess insurance is required of an employer or an employer group electing coverage under plan No. 1.

(2) Aggregate excess insurance is required by the department, with the concurrence of the guaranty fund, for an employer or an employer group unless substantive evidence is provided that it is not warranted. This evidence must include diversification of risk, industry type, financial resources, self-insured retention levels, policy limits of the specific excess policy, safety program, loss experience and other appropriate factors as determined relevant by the department, with the concurrence of the guaranty fund.

(3) The contract or policy of specific excess insurance and aggregate excess insurance must comply with the following:

(a) It is issued by a carrier admitted and licensed in Montana with a Best's Rating of A- or better and a financial size rating of VI or greater. Excess coverage issued by a carrier not rated by Best's will be considered for approval at the discretion of the department, with the concurrence of the guaranty fund.

(b) A self-insurer that anticipates that it may have material changes to the provisions or coverage of its excess insurance policy must notify the department of that possibility at least 30 days before the effective date of the changes.

(i) If there is a change in the provisions or coverage, the department has the authority to evaluate the changes related to the terms of the authorization to self-insure, and the department may, with the concurrence of the guaranty fund, make adjustments in the terms of that authorization accordingly.

(ii) In the event of a temporary extension of authority, the department may condition the renewal of self-insurance authority upon a suitable change in the amount of security required from the self-insurer.

(c) It may be canceled or its renewal denied only upon written notice by registered or certified mail to the other party to the policy and to the department and the guaranty fund, not less than 60 days before termination by the party desiring to cancel or not renew the policy. A carrier is liable for payment of all claims that occur from the date of inception of the policy to the cancellation date of the policy.

(d) Any contract or policy containing a commutation clause must provide that any commutation effected thereunder will not relieve the underwriter or underwriters of further liability in respect to claims and expenses unknown at the time of such commutation or in regard to any claim apparently closed at the time of initial commutation which is subsequently reopened by the department or a court. If the underwriter proposes to settle the liability as provided in the commutation clause of the policy for future compensation benefits payable for accidents or occupational diseases occurring during the term of the policy by the payment of a lump sum to the self-insurer, then not less than 60 days prior notice to such commutation must be given by the underwriter(s) or agent(s) by registered or certified mail to the department and the guaranty fund. If any commutation is effected, the department with the concurrence of the guaranty fund, shall have the right to direct such sum be placed in trust for payment of benefits of the injured employee(s) entitled to such future payments.

(e) If a self-insurer becomes insolvent and, or, fails to make benefit payments, the excess carrier, after it has been determined the retention level has been reached on the excess insurance policy, shall make payments to the entity making payments on behalf of the insolvent self-insured in the same manner as payments would have been made by the excess carrier to the self-insured.

(f) It must include an endorsement regarding late claim reporting penalty waiver.

(g) All of the following will be applied toward the retention level in the excess insurance contract:

(i) payments made by the self-insurer;

(ii) payments made on behalf of the self-insurer from the proceeds of any security deposit as ordered by the department; and

(iii) payments made on behalf of the insolvent self-insurer by the guaranty fund.

(h) Copies of the certificates and policies of the excess insurance must be filed with the department for a determination that such certificates and policies fully comply with the provisions of the Workers' Compensation Act, the Occupational Disease Act, and ARM Title 24, chapter 29, subchapter 6.