BEFORE THE COMMISSIONER OF SECURITIES AND INSURANCE

MONTANA STATE AUDITOR

 

In the matter of the amendment of ARM 6.6.6802, 6.6.6804, 6.6.6805, 6.6.6806, 6.6.6811, 6.6.6815, 6.6.6820, 6.6.6821, and the repeal of 6.6.6810, pertaining to Formation and Regulation of Captive Insurance Companies

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NOTICE OF AMENDMENT AND REPEAL

 

TO:  All Concerned Persons

 

            1.  On October 13, 2011, the Office of the Commissioner of Securities and Insurance, Montana State Auditor published MAR Notice No. 6-196 regarding the public hearing on the proposed amendment and repeal of the above-stated rules at page 2118 of the 2011 Montana Administrative Register, issue number 19.

 

2.  On November 2, 2011, the Office of the Commissioner of Securities and Insurance, Montana State Auditor held a public hearing to consider the proposed amendment and repeal of the above-stated rules.

 

3.  The commissioner has amended ARM 6.6.6804, 6.6.6805, 6.6.6806, 6.6.6815, 6.6.6820, and 6.6.6821 exactly as proposed.

 

            4.  The commissioner has amended 6.6.6802 and 6.6.6811 as proposed, but with the following changes, stricken matter interlined, new matter underlined:

 

6.6.6802  DEFINITIONS  For purposes of these rules:

(1) remains as proposed.

(2)  "Commissioner" means the State Auditor and Commissioner of Insurance Commissioner of Securities and Insurance, Montana State Auditor.

 

            6.6.6811  ANNUAL AUDIT  (1) through (4)(d) remain as proposed.

            (5)  A risk retention group licensed as a captive insurer shall utilize the Model Audit Rule as defined in ARM 6.6.3501 - 6.6.3521.  A risk retention group licensed as a captive insurer shall only be exempt from the Model Audit Rule for such year if:

            (a)  the nationwide total of direct written plus assumed premiums is less than $1,000,000 in any calendar year;

            (b)  there are less than 1,000 policyholders or certificateholders of directly written policies nationwide at the end of such calendar year; and

            (c)  the commissioner has not made a specific finding that the insurer's compliance with the Model Audit Rule is necessary for the commissioner to carry out statutory responsibilities.

 

            5.  The commissioner has repealed ARM 6.6.6810 exactly as proposed.

 

            6.  The commissioner has thoroughly considered the comments received.  A summary of the comments and the commissioner's responses are as follows:

 

COMMENT 1:  The commenter supported the proposed amendments.  The commenter noted that the definition of commissioner should reflect the actual title of the commissioner.   

 

RESPONSE 1:  The Office of the Commissioner of Securities and Insurance, Montana State Auditor (CSI) agrees.  The amended language of 6.6.6802(2) has been changed to reflect the commissioner's full title.

 

COMMENT 2:  The commenter supported the proposed amendments.  However, the commenter noted that ARM 6.6.6811 refers to the Model Audit Rule.  The Model Audit Rule has an exemption for companies which write less than $1,000,000 total premium in Montana.  However, most risk retention groups licensed as captive insurers would fall under the exemption to the Model Audit Rule because they are registered in Montana but writing little to no premium in Montana.  The commenter suggested the language be broadened to restate the exemption to include only companies writing less than $1,000,000 nationwide.

 

RESPONSE 2:  The CSI agrees.  The CSI has changed the rule by restating the exemption language from the Model Audit Rule with the commenter's proposed change to clarify when a risk retention group licensed as a captive insurer qualifies for an exemption from the Model Audit Rule.

 

 

            /s/ Brett O'Neil                       /s/  Jesse Laslovich

            Brett O'Neill                            Jesse Laslovich

            Rule Reviewer                       Chief Legal Counsel

 

Certified to the Secretary of State November 14, 2011.