BEFORE THE COMMISSIONER OF SECURITIES AND INSURANCE
MONTANA STATE AUDITOR
In the matter of the amendment of ARM 6.6.3702, 6.6.3703, 6.6.3704, 6.6.3705, 6.6.3706, 6.6.3707, 6.6.3708, 6.6.3709, 6.6.3710, 6.6.3711, 6.6.3712, 6.6.3713, 6.6.3714, 6.6.3715, and 6.6.3716 and the adoption of New Rule I pertaining to Reporting by Holding Company Systems |
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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT AND ADOPTION |
TO: All Concerned Persons
1. On November 12, 2013, at 3:00 p.m., the Commissioner of Securities and Insurance, Montana State Auditor, will hold a public hearing in the 2nd floor conference room, at the Office of the Commissioner of Securities and Insurance, Montana State Auditor (CSI), 840 Helena Ave., Helena, Montana, to consider the proposed amendment and adoption of the above-stated rules.
2. The CSI will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing, or need an alternative accessible format of this notice. If you require an accommodation, contact the CSI no later than 5:00 p.m., November 5, 2013, to advise us of the nature of the accommodation that you need. Please contact Darla Sautter, CSI, 840 Helena Avenue, Helena, Montana, 59601; telephone (406) 444-2726; fax (406) 444-3499; TDD/Montana Relay Service (406) 444-3246; or e-mail [email protected].
3. The rules as proposed to be amended provide as follows, stricken matter interlined, new matter underlined:
6.6.3702 FORMS--GENERAL REQUIREMENTS (1) Forms A, B, C, and D are intended to be guides in the preparation of the statements required by 33-2-1104, 33-2-1111, and 33-2-1113, MCA. They are not intended to be blank forms which are to be filled in. The statements filed must contain the numbers and captions of all items, but the text of the items may be omitted, provided the answers thereto are prepared in such a manner as to indicate clearly the scope and coverage of the items. All instructions appearing in the forms, whether appearing under the items of the form or elsewhere therein, are to be must be omitted from the statements. Unless expressly provided otherwise, if any item is inapplicable, or the answer thereto to any item is in the negative, an appropriate statement to that effect shall be made.
(2) One complete copy of each statement including attached exhibits and all other papers and documents filed as a part thereof, must be filed with the commissioner by personal delivery or mail addressed to the cCommissioner of Securities and Insurance insurance, Montana State Auditor, 840 Helena Avenue, Helena, MT 59601. A copy of Form C shall be filed in each state in which an insurer is authorized to do business, if the insurance regulator of that state has notified the insurer of its request in writing, in which case the insurer has 30 days from receipt of the notice to file such form. An insurer must file a copy of Form C within 30 days of written request from a state insurance regulator in any state the insurer is authorized to do business. At least one of the copies shall must be manually signed in the manner prescribed on the form. Unsigned copies must be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of such power of attorney or other authority must also be filed with the statement.
(3) Statements should be prepared on paper 8 1/2" x 11" (or 8 1/2" x 14") paper in size and preferably bound at the top or the top left-hand corner. Exhibits and financial statements, unless specifically prepared for the filing, may be submitted in their original size. All copies of all statements, financial statements, and exhibits must be clear, easily readable and suitable for photocopying. Debits in credit categories and credits in debit categories must be so designated so as to be clearly and distinguishable as such on photocopies. Statements must be in the English language and monetary values must be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it must be accompanied by a translation into the English language and any monetary value shown in a foreign currency normally shall must be converted into United States currency.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1104, 33-2-1111, 33-2-1113, 33-2-1517, MCA
6.6.3703 FORMS--INCORPORATION BY REFERENCE, SUMMARIES, AND OMISSIONS (1) Information required by any item of Forms A, Form B, or Form D may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of Forms A, Form B, or Form D, provided such the document or paper is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the commissioner which were filed within three years need not be attached as exhibits. References to information contained in exhibits or in documents already on file must clearly identify the material and shall must specifically indicate that such material is to be incorporated by reference in answer to the item. Matter must not be incorporated by reference in any case where such incorporation would render the statement incomplete, unclear, or confusing.
(2) Where an item requires a summary or outline of the provisions of any document, only a brief statement must be made as to the pertinent provisions of the document. In addition to such statement, the summary or outline may incorporate by reference particular parts of any exhibit or document currently on file with the commissioner which was filed within three years and may be qualified in its entirety by such reference. In any case where two or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of such documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which such documents differ from the documents, a copy of which is filed.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1104, 33-2-1511, 33-2-1113, 33-2-1517, MCA
6.6.3704 FORMS--INFORMATION UNKNOWN OR UNAVAILABLE AND EXTENSION OF TIME TO FURNISH (1) Information required need be given only insofar as it is known or reasonably available to the person filing the statement. If any required information is unknown and not reasonably available to the person filing, either because the obtaining thereof would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the person filing, the information may be omitted, subject to the following conditions:
(a) The person filing shall give such information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof; and
(b) The person filing shall include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of any affiliation with the person within whose knowledge the information rests and stating the result of a request made to such person for the information.
(1)(2) If it is impractical to furnish any required information, document, or report at the time it is required to be filed, there may be filed with the commissioner a separate document: a separate document may be filed with the commissioner;
(a) remains the same.
(b) stating why the filing thereof at the time required is impractical; and
(c) requesting an extension of time to a specified date for filing the information, document, or report to a specified date.
(2)(3) The request for extension will be deemed granted unless the commissioner within 30 days after receipt thereof notifies the person that the request is denied. Unless the commissioner notifies the person that the request for extension is denied within 30 days after receipt of the request, the request will be deemed granted.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1104, 33-2-1111, 33-2-1113, 33-2-1517, MCA
6.6.3705 FORMS--ADDITIONAL INFORMATION AND EXHIBITS (1) In addition to the information expressly required to be included in Forms A, Form B, Form C, and Form D, there must be added such further material information, if any, as may be necessary to make the information contained therein not misleading. any additional material information necessary to make the information contained in the forms not misleading must be added. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. Additional exhibits not required by the statement may be filed. Such exhibits must be so marked as to indicate clearly the subject matters to which they refer. The additional exhibits must indicate the subject matters they reference. Changes to Forms A, B, C, or D must include on the top of the cover page the phrase: "Change No. (insert number) to Form (A, B, C, or D)" and must indicate the date of the change and not rather than the date of the original filing.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1104, 33-2-1111, 33-2-1113, 33-2-1517, MCA
6.6.3706 FILING OF FORM A, REGARDING ACQUISITION OR CONTROL (1) A person required to file a statement pursuant to 33-2-1104, MCA, shall furnish the required information on Form A, hereby which is made a part of these rules.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1104, 33-2-1517, MCA
6.6.3707 AMENDMENTS TO FORM A (1) The applicant shall promptly advise the commissioner of any changes in the information so furnished on Form A arising subsequent to the date upon which such the information was furnished, but prior to the commissioner's disposition of the application.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1103, 33-2-1517, MCA
6.6.3708 REPORTING ACQUISITION OF DOMESTIC INSURERS (1) If the person being acquired is deemed to be a "domestic insurer" solely because of the provisions of 33-2-1104, MCA, the name of the domestic insurer on the cover page should must be indicated as follows:
(a) "ABC Insurance Company, a subsidiary of XYZ Holding Company."
(2) remains the same.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1104, 33-2-1517, MCA
6.6.3709 FILING OF FORM B--ANNUAL REGISTRATION OF INSURERS (1) An insurer required to file an annual registration statement pursuant to 33-2-1111(2) , MCA, shall furnish the required information on Form B, hereby which is made a part of these rules.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1111, 33-2-1517, MCA
6.6.3710 AMENDMENTS TO FORM B (1) An amendment to Form B must shall be filed within 15 days after the end of any month in which there is a material change to the information provided in the annual registration statement.
(2) Amendments must be filed in the Form B format with only those items which are being amended reported. Each such amendment must include at the top of the cover page "Amendment No. (insert number) to Form B for (insert year)," and must shall indicate the date of the change and not the date of the original filings.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1111, 33-2-1517, MCA
6.6.3711 SUMMARY OF CHANGES TO REGISTRATION--STATEMENT FILING (1) An insurer required to file an annual registration statement pursuant to 33-2-1111(2) , MCA, is also required to furnish information required on Form C, hereby which is made a part of these regulations rules. An insurer shall file a copy of Form C in each state in which the insurer is authorized to do business, if requested by the commissioner of that state.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1111, 33-2-1517, MCA
6.6.3712 ALTERNATIVE AND CONSOLIDATED REGISTRATIONS (1) through (2) remain the same.
(3) With the prior approval of the commissioner, an unauthorized insurer may follow any of the procedures which could be done by an authorized insurer under paragraph (1) above.
(4) Any insurer may take advantage of the provisions of 33-2-1111(8) and (9), MCA, without obtaining the prior approval of the commissioner. The commissioner, however, may require individual filings if (s)he deems such filings necessary in the interest of clarity, and ease of administration, or for the public benefit.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1111, 33-2-1517, MCA
6.6.3713 DISCLAIMERS AND TERMINATION OF REGISTRATION (1) and (1)(a) remain the same.
(b) with respect to the person whose control is denied, and all affiliates of such person, the number and percentage of shares of the subject's voting securities which are held of record, or known to be beneficially owned, and the number of such shares concerning which there is a right to acquire, directly or indirectly;
(c) all material relationships and bases for affiliation between the subject and the person whose control is denied and all affiliates of such person; and
(d) a statement explaining why such the person should not be considered to control the subject.
(2) A request for termination of registration shall be deemed to have been granted unless the commissioner, within 30 days after (s)he receives the request, notifies the registrant otherwise.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1111, 33-2-1112, 33-2-1517, MCA
6.6.3714 FILING OF FORM D--TRANSACTIONS SUBJECT TO PRIOR NOTICE (1) An insurer required to give notice of a proposed transaction pursuant to 33-2-1113, MCA, shall furnish the required information on Form D, hereby which is made a part of these rules.
(2) Agreements for cost sharing services and management services must at a minimum, and as applicable:
(a) identify the person providing services, and the nature of such services;
(b) set forth the methods to allocate costs;
(c) require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the Accounting Practices and Procedures Manual;
(d) prohibit advancement of funds by the insurer to the affiliate except to pay for services defined in the agreement;
(e) state that the insurer will maintain oversight for functions provided to the insurer by the affiliate, and that the insurer will monitor services annually for quality assurance;
(f) define books and records of the insurer to include all books and records
developed or maintained under or related to the agreement;
(g) specify that all books and records of the insurer are and remain the property of the insurer and are subject to control of the insurer;
(h) state that all funds and invested assets of the insurer are the exclusive
property of the insurer, held for the benefit of the insurer, and are subject to
the control of the insurer;
(i) include standards for termination of the agreement with and without cause;
(j) include provisions for indemnification of the insurer in the event of gross
negligence, or willful misconduct on the part of the affiliate providing the
services;
(k) specify that, if the insurer is placed in receivership or seized by the
commissioner under the Insurers Supervision, Rehabilitation, and Liquidation Act:
(i) all of the rights of the insurer under the agreement extend to the
receiver or commissioner; and
(ii) all books and records will immediately be made available to the receiver or commissioner, and shall be turned over to the receiver or commissioner immediately upon the receiver or the commissioner's request.
(l) specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership pursuant to the Insurers Supervision, Rehabilitation, and Liquidation Act; and
(m) specify that the affiliate will continue to maintain any systems, programs, or other infrastructure notwithstanding a seizure by the commissioner under the Insurers Supervision, Rehabilitation, and Liquidation Act, and will make them available to the receiver, for so long as the affiliate continues to receive timely payment for services rendered.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1113, 33-2-1517, MCA
6.6.3715 EXTRAORDINARY DIVIDENDS AND OTHER DISTRIBUTIONS (1) through (1)(d) remain the same.
(i) the amounts, dates, and forms of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurers own securities) paid within the period of 12 consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year.;
(ii) through (f) remain the same.
(2) Subject to 33-2-1114, MCA, each registered insurer shall report to the commissioner all dividends and other distributions to shareholders within 15 business days following the declaration thereof, including the same information required by (1)(d)(i) through (v) hereof.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1116, 33-2-1114, MCA
6.6.3716 ADEQUACY OF SURPLUS (1) The factors set forth in 33-2-1113(6), MCA, are not exclusive intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer's surplus, no single factor will necessarily be controlling. The commissioner will consider the net effect of all of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the commissioner will consider the extent to which each of these factors varies from company to company, and in determining the quality and liquidity of investments in subsidiaries, the commissioner will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1113, 33-2-1517, MCA
4. The rule as proposed to be adopted provides as follows:
NEW RULE I FORMS (1) The following forms apply to this subchapter.
(a) FORM A
STATEMENT REGARDING THE
ACQUISITION OF CONTROL OF OR MERGER WITH A DOMESTIC INSURER
Name of Domestic Insurer
BY
______________________________
Name of Acquiring Person (Applicant)
Filed with the Montana Commission of Insurance
______________________________________________________________
(State of domicile of insurer being acquired)
Dated: _______________, 20____
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning this Statement Should be Addressed:
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
ITEM 1. INSURER AND METHOD OF ACQUISITION
State the name and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired.
ITEM 2. IDENTITY AND BACKGROUND OF THE APPLICANT
(a) State the name and address of the applicant seeking to acquire control over the insurer;
(b) If the applicant is not an individual, state the nature of its business operations for the past five years, or for such lesser period as such person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicant's subsidiaries; and
(c) Furnish a chart or listing clearly presenting the identities of the inter-relationships among the applicant and all affiliates of the applicant. Indicate in such chart or listing the percentage of voting securities of each such person which is owned or controlled by the applicant or by any other such person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings, and the date when commenced.
ITEM 3. IDENTITY AND BACKGROUND OF INDIVIDUALS ASSOCIATED WITH THE APPLICANT
On the biographical affidavit, include a third party background check, and state the following with respect to:
(1) The applicant if (s)he is an individual, or
(2) All persons who are directors, executive officers or owners of 10% or more of the voting securities of the applicant if the applicant is not an individual.
(a) Name and business address;
(b) Present principal business activity, occupation, or employment including position and office held and the name, principal business, and address of any corporation or other organization in which such employment is carried on;
(c) Material occupations, positions, offices, or employment during the last five years, giving the starting and ending dates of each and the name, principal business, and address of any business corporation or other organization in which each such occupation, position, office or employment was carried on; if any such occupation, position, office, or employment required licensing by or registration with any federal, state, or municipal governmental agency, indicate such fact, the current status of such licensing or registration, and an explanation of any surrender, revocation, suspension, or disciplinary proceedings in connection therewith; and
(d) Whether or not a person has ever been convicted in a criminal proceeding (excluding minor traffic violations) during the last ten years and, if so, give the date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case.
ITEM 4. NATURE, SOURCE, AND AMOUNT OF CONSIDERATION
(a) Describe the nature, source, and amount of funds or other considerations used or to be used in effecting the merger or other acquisition of control. If any part of the same is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any, between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes, and security arrangements relating thereto;
(b) Explain the criteria used in determining the nature and amount of such consideration; and
(c) If the source of the consideration is a loan made in the lender's ordinary course of business, and if the applicant wishes the identity of the lender to remain confidential, (s)he must specifically request that the identity be kept confidential.
ITEM 5. FUTURE PLANS OF INSURER
Describe any plans or proposals which the applicant may have to declare an extraordinary dividend, to liquidate the insurer, to sell its assets to or merge it with any person or persons, or to make any other material change in its business operations, or corporate structure, or management.
ITEM 6. VOTING SECURITIES TO BE ACQUIRED
State the number of shares of the insurer's voting securities which the applicant, its affiliates, and any person listed in Item 3 plan to acquire, and the terms of the offer, request, invitation, agreement, or acquisition, and a statement as to the method by which the fairness of the proposal was arrived at.
ITEM 7. OWNERSHIP OF VOTING SECURITIES
State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates, or any person listed in Item 3.
ITEM 8. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDING WITH RESPECT TO VOTING SECURITIES OF THE INSURER
Give a full description of any contracts, arrangements, or understandings with respect to any voting security of the insurer in which the applicant, its affiliates, or any person listed in Item 3 is involved including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements, or understandings have been entered into.
ITEM 9. RECENT PURCHASES OF VOTING SECURITIES
Describe any purchases of any voting securities of the insurer by the applicant, its affiliates, or any person listed in Item 3 during the 12 calendar months preceding the filing of this statement. Include in such description the dates of purchase, the names of the purchasers, and the consideration paid or agreed to be paid therefore. State whether any such shares so purchased are hypothecated.
ITEM 10. RECENT RECOMMENDATIONS TO PURCHASE
Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates, or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates, or any person listed in Item 3 during the 12 calendar months preceding the filing of this statement.
ITEM 11. AGREEMENT WITH BROKER-DEALERS
Describe the terms of any agreement, contract, or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto.
ITEM 12. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements, exhibits, and three year financial projections of the insurer(s) must be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached;
(b) The financial statements must include the annual financial statements of the persons identified in Item 2(c) for the preceding five fiscal years (or for such lesser period as the applicant and its affiliates, and any predecessors thereof shall have been in existence), and similar information covering the period from the end of such person's last fiscal year, if the information is available. Such statements may be prepared on either an individual basis, or, unless the commissioner otherwise requires, on a consolidated basis, if such consolidated statements are prepared in the usual course of business.
The annual financial statements of the applicant must be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles, or with requirements of insurance, or other accounting principles prescribed or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements need not be certified, provided they are based on the Annual Statement of such person filed with the insurance department of the person's domiciliary state and are in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of the state; and
(c) File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material relating thereto, any proposed employment, consultation, advisory, or management contracts concerning the insurer, annual reports to the stockholders of the insurer and the applicant for the last two fiscal years, and any additional documents or papers required by Form A or ARM 6.6.3702 and 6.6.3704.
ITEM 13. SIGNATURE AND CERTIFICATION
Signature and certification required as follows:
SIGNATURE
Pursuant to the requirements of 33-1-1111, MCA, ______________ has caused this application to be duly signed on its behalf in the city of _____________ and state of ______________ on the _____ day of ___________, 20__.
(SEAL) _________________________
Name of Applicant
BY _____________________________
(Name) (Title)
Attest:
__________________________
(Signature of Officer)
__________________________
(Title)
CERTIFICATION
The undersigned certifies that (s)he has duly executed the attached application dated ___________, 20___, for and on behalf of _______________________; (Name of Applicant); that (s)he is the ____________________ (Title of Officer) of such company and that (s)he is authorized to execute and file the instrument. Deponent further says that (s)he is familiar with the instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information, and belief.
(Signature) _______________________
(Type or print name beneath) _______________________
(b) FORM B
INSURANCE HOLDING COMPANY SYSTEM ANNUAL REGISTRATION STATEMENT
Filed with the Montana Commission of Insurance
By
________________________________
Name of Registrant
On Behalf of Following Insurance Companies
Name Address
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Date: ___________, 20___
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning this Statement Should be Addressed:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
ITEM 1. IDENTITY AND CONTROL OF REGISTRANT
Furnish the exact name of each insurer registering or being registered (hereinafter called "the Registrant"), the home office address and principal executive offices of each; the date on which each registrant became part of the insurance holding company system; and the method(s) by which control of each registrant was acquired and is maintained.
ITEM 2. ORGANIZATIONAL CHART
Furnish a chart or listing presenting the identities of, and interrelationships among, all affiliated persons within the insurance holding company system. The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of control. As to each person specified in such chart or listing, indicate the type of organization (e.g., corporation, trust, partnership), and the state or other jurisdiction of domicile.
ITEM 3. THE ULTIMATE CONTROLLING PERSON
As to the ultimate controlling person in the insurance holding company system furnish the following information:
(a) Name;
(b) Home office address;
(c) Principal executive office address;
(d) The organizational structure of the person, i.e., corporation, partnership, individual, trust, etc;
(e) The principal business of the person;
(f) The name and address of any person who holds or owns 10% or more of any class of voting security, the class of such security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned; and
(g) If court proceedings involving a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings, and the date when commenced.
ITEM 4. BIOGRAPHICAL INFORMATION
If the ultimate controlling person is a corporation, an organization, a limited liability company, or other legal entity, furnish the following information for the directors and executive officers of the ultimate controlling person; the individual's name and address, his or her principal occupation and all offices and positions held during the past five years, and any convictions of crimes other than minor traffic violations during the past ten years. If the ultimate controlling person is an individual, furnish the individual's name and address, the individual's principal occupation, and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years.
ITEM 5. TRANSACTIONS AND AGREEMENTS
Briefly describe the following agreements in force and transactions currently outstanding, or which have occurred during the last calendar year between the registrant and its affiliates:
(a) Loans, other investments, or purchases, sales, or exchanges of securities of the affiliates by the registrant or of the registrant by its affiliates;
(b) Purchases, sales, or exchanges of assets;
(c) Transactions not in the ordinary course of business;
(d) Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the registrant's assets to liability, other than insurance contracts entered into in the ordinary course of the registrant's business;
(e) All management agreements, service contracts, and all cost-sharing arrangements;
(f) Reinsurance agreements;
(g) Dividends and other distributions to shareholders;
(h) Consolidated tax allocation agreements; and
(i) Any pledge of the registrant's stock and/or of the stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system.
No information need be disclosed if such information is not material for purposes of 33-2-1111, 33-2-1112, and 33-2-1113, MCA.
Sales, purchases, exchanges, loans, or extensions of credit, investments or guarantees involving one-half of 1% or less of the registrant's admitted assets as of the 31st day of December of the preceding year are not deemed material.
The description must be in a manner as to permit the proper evaluation thereof by the commissioner, and must include at least the following: the nature and purpose of the transaction, the nature and amounts of any payments or transfers of assets between the parties, the identity of all parties to the transaction, and relationship of the affiliated parties to the registrant.
ITEM 6. LITIGATION OR ADMINISTRATIVE PROCEEDINGS
A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any of its directors or executive officers was a party or of which the property of any such person is or was the subject; give the names of the parties and the court or agency in which such litigation or proceeding is or was pending:
(a) Criminal prosecutions or administrative proceedings by any government agency or authority which may be relevant to the trustworthiness of any party; and
(b) Proceedings which may have a material effect upon the solvency or capital structure of the ultimate holding company including, but not necessarily limited to, bankruptcy, receivership, or other corporate reorganizations.
ITEM 7. STATEMENT REGARDING PLAN OR SERIES OF TRANSACTIONS
The insurer shall furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions, the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur.
ITEM 8. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements and exhibits must be listed under this item and attached to this statement as an appendix.
(b) If the ultimate controlling person is a corporation, an organization, a limited liability company, or other legal entity, the financial statements must include the annual financial statements of the ultimate controlling person in the insurance holding company system as of the end of the person's latest fiscal year.
If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information must be filed for any subsequent period to the extent such information is available. The financial statements may be prepared either on an individual basis, or unless the commissioner otherwise requires, on a consolidated basis if such consolidated statements are prepared in the usual course of business.
Unless the commissioner otherwise permits, the annual financial statements must be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles, or with requirements of insurance or other accounting principles prescribed or permitted under law. If the ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the insurer's annual statement filed with the insurance department of the insurer's domiciliary state, and are in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of that state.
Any ultimate controlling person who is an individual may file personal financial statements that are reviewed rather than audited by an independent public accountant. The review shall be conducted in accordance with standards for review of personal financial statements published in the Personal Financial Statements Guide by the American Institute of Certified Public Accountants. Personal financial statements shall be accompanied by the independent public accountants Standard Review Report stating that the accountant is not aware of any material modifications that should be made to the financial statements in order for the statements to be in conformity with generally accepted accounting principles.
(c) Exhibits must include copies of the latest annual reports to shareholders of the ultimate controlling person and proxy material used by the ultimate controlling person; and any additional documents or papers required by Form B or ARM 6.6.3702 and 6.6.3704.
ITEM 9. FORM C REQUIRED
A Form C, Summary of Changes to Registration Statement, must be prepared and filed with this Form B.
ITEM 10. SIGNATURE AND CERTIFICATION
Signature and certification required as follows:
SIGNATURE
Pursuant to the requirements of 33-2-1111, MCA, the registrant has caused this annual registration statement to be duly signed on its behalf in the city of _______________ and state of ___________ on the day of ___________, 20___.
(SEAL) _______________________
Name of Applicant
BY_______________________
(Name) (Title)
Attest:
________________________________
(Signature of Officer)
________________________________
(Title)
CERTIFICATION
The undersigned certifies that (s)he has duly executed the attached annual registration statement dated _______________, 20__ , for and on behalf of ____________________ (Name of Applicant); that (s)he is the _________________ (Title of Officer) of the company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information, and belief.
(Signature) ______________________
(Type or print name beneath) ______________________
(c) FORM C
SUMMARY OF CHANGES TO REGISTRATION STATEMENT
Filed with the Montana Commission of Insurance
By
_______________________________
Name of Registrant
On Behalf of Following Insurance Companies
Name Address
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Date: _____________, 20___
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Furnish a brief description of all items in the current annual registration statement which represent changes from the prior year's annual registration statement. The description must be in a manner as to permit the proper evaluation thereof by the commissioner, and must include specific references to Item numbers in the annual registration statement and to the terms contained therein.
Changes occurring under Item 2 of Form B insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where such changes are ones which result in ownership or holdings of 10% or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest.
Changes occurring under Item 4 of Form B need only be included where an individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person.
If a transaction disclosed on the prior year's annual registration statement has been changed, the nature of such change must be included. If a transaction disclosed on the prior year's annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction.
The insurer must furnish a statement that transactions entered into since the filing of the prior year's annual registration statement are not part of a plan or series of like transactions the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur.
SIGNATURE AND CERTIFICATION
Signature and certification required as follows:
Pursuant to the requirements of 33-2-1111, MCA, the registrant has caused this summary of registration statement to be duly signed on its behalf in the city of _____________ and state of ________________ on the_______ day of _____________, 20___.
(SEAL) _________________________
Name of Registrant
By _________________________
(Name) (Title)
Attest:
_______________________
(Signature of Officer)
_______________________
(Title)
CERTIFICATION
The undersigned certifies that (s)he has duly executed the attached summary of registration statement dated __________________, 20__, for and on behalf of ______________________ (Name of Applicant); that (s)he is the ______________ (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information, and belief.
(Signature) ________________________
(Type or print name beneath) ________________________
(d) FORM D
PRIOR NOTICE OF A TRANSACTION
Filed with the Montana Commission of Insurance
By
_________________________________
Name of Registrant
On Behalf of Following Insurance Companies
Name Address
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
Date: _______________, 20___
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning This Statement Should be Addressed:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
ITEM 1. IDENTITY OF PARTIES TO TRANSACTION
Furnish the following information for each of the parties to the transaction:
(a) Name;
(b) Home office address;
(c) Principal executive office address;
(d) The organizational structure; i.e., corporation, partnership, individual, trust, etc.
(e) A description of the nature of the parties' business operations;
(f) Relationship, if any, of other parties to the transaction to the insurer filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer seeking approval, or by the insurer filing the notice in the affiliated parties; and
(g) Where the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction.
ITEM 2. DESCRIPTION OF THE TRANSACTION
Furnish the following information for each transaction for which notice is being given:
(a) A statement as to whether notice is being given under 33-2-1113(2), MCA;
(b) A statement of the nature of the transaction;
(c) A statement of how the transaction meets the 'fair and reasonable' standard of Section 5A(1)(a) of the Act; and
(d) The proposed effective date of the transaction.
ITEM 3. SALES, PURCHASES, EXCHANGES, LOANS, EXTENSIONS OF CREDIT, GUARANTEES OR INVESTMENTS
Furnish a brief description of the amount and source of funds, securities, property, or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, or investment, whether any provision exists for purchase by the insurer filing notice, by any party to the transaction, or by any affiliate of the insurer filing notice, a description of the terms of any securities being received, if any, and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements, and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost and fair market value, together with an explanation of the basis for evaluation.
If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under such loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of, or deferral of interest.
If the transaction involves an investment, guarantee, or other arrangement, state the time period during which the investment, guarantee, or other arrangement will remain in effect, together with any provisions for extensions or renewals of the investments, guarantees, or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.
Notice is not required if the maximum amount which can at any time be outstanding, or for which the insurer can be legally obligated under the loan, extension of credit, or guarantee is less than, (a) in the case of non-life insurers, the lesser of 3% of the insurer's admitted assets or 25% of surplus as regards policyholders or, (b) in the case of life insurers, 3% of the insurer's admitted assets, each as of the 31st day of December of the preceding year.
ITEM 4. LOANS OR EXTENSIONS OF CREDIT TO A NON-AFFILIATE
If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit. Additionally, specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of, or make investments in any affiliate. Describe the amount and source of funds, securities, property, or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, include a description of its cost and fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction upon the insurer's surplus.
Notice is not required if the loan or extension of credit is one which equals less than, in the case of non-life insurers, the lesser of 3% of the insurer's admitted assets or 25% of surplus as regards policyholders or, with respect to life insurers, 3% of the insurer's admitted assets, each as of the 31st day of December of the preceding year.
ITEM 5. REINSURANCE
If the transaction is a reinsurance agreement or modification to a reinsurance agreement, as described by 33-2-1113(2)(a)(iii), MCA, furnish a description of the known and/or estimated amount of liability to be ceded and/or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and non-affiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer's affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer's surplus.
Notice is not required for reinsurance agreements or modifications if the reinsurance premium or a change in the insurer's liabilities in connection with the reinsurance agreement or modification is less than 5% of the insurer's surplus as regards policyholders, as of the 31st day of December of the preceding year.
ITEM 6. MANAGEMENT AGREEMENTS, SERVICE AGREEMENTS, AND COST-SHARING AGREEMENTS
For management and service agreements, furnish:
(a) A brief description of the managerial responsibilities, or services to be performed; and
(b) A brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made.
For cost-sharing arrangements, furnish:
(a) A brief description of the purpose of the agreement;
(b) A description of the period of time during which the agreement is to be in effect;
(c) A brief description of each party's expenses or costs covered by the agreement; and
(d) A brief description of the accounting basis to be used in calculating each party's costs under the agreement.
(e) A brief statement as to the effect of the transaction upon the insurer's policyholder surplus.
(f) A statement regarding the cost allocation methods that specifies whether proposed charges are based on "cost of market." If market-based, rationale for using market instead of cost, including justification for the company's determination that amounts are fair and reasonable; and
(g) A statement regarding compliance with the NAIC Accounting Practices and Procedure Manual regarding expense allocation.
ITEM 7. SIGNATURE AND CERTIFICATION
Signature and certification required as follows:
SIGNATURE
Pursuant to the requirements of 33-2-1113, MCA, _____________ has caused this notice to be duly signed on its behalf in the city of _____________ and state of ______________ on the ______ day of _____________, 20___.
(SEAL) ___________________________
Name of Applicant
By: ___________________________
(Name) (Title)
Attest:
________________________
(Signature of Officer)
________________________
(Title)
CERTIFICATION
The undersigned certifies that (s)he has duly executed the attached notice dated _____________, 20__, for and on behalf of _____________________; (Name of Applicant); that (s)he is the ____________ ____________ (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information, and belief.
(Signature) _____________________
(Type or print name beneath) _____________________
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1104, 33-2-1111, 33-2-1113, 33-2-1517, MCA
5. REASONABLE NECESSITY STATEMENT: The Commissioner of Securities and Insurance, Montana State Auditor, Monica J. Lindeen (Commissioner), is the statewide elected official responsible for administration of the Montana Insurance Department and regulating the business of insurance in the state of Montana.
The commissioner is a member, and the Vice President, of the National Association of Insurance Commissioners (NAIC). The NAIC is an organization of insurance regulators from the 50 states, the District of Columbia, and the U.S. territories. The NAIC provides a forum for the development of uniform policy and regulation when uniformity is appropriate. The source of the legislation relating to holding company systems was the Insurance Holding Company System Regulatory Act, promulgated by the NAIC. The source of the administrative rules relating to insurance company holding systems was the Insurance Holding Company System Model Regulation With Reporting Forms and Instructions (NAIC model), also promulgated by the NAIC. The rules and forms relating to insurance holding company systems need to be amended to conform more accurately to the NAIC model rules and forms and to eliminate incorrect citations, gender specific language, archaic language, redundancies, typographical or grammatical errors, and complicated sentence syntax.
ARM 6.6.3702 is being amended to eliminate archaic and redundant language, to clarify existing language, to simplify existing language, to correct mandatory language, and to properly capitalize the commissioner's official title.
ARM 6.6.3703(1) is being amended to eliminate language that was eliminated in the NAIC model. Sections (2) and (3) are proposed to be renumbered (1) and (2) to compensate for the removal of (1). New (1) and (2) are proposed to be amended to eliminate archaic language, clarify existing language, and to simplify sentence structure.
ARM 6.6.3705 is being amended to eliminate redundancies, simplify sentence structure, eliminate archaic language, and to clarify existing language.
ARM 6.6.3706 and ARM 6.6.3707 are being amended to eliminate archaic language.
ARM 6.6.3708 is being amended to correct mandatory language.
ARM 6.6.3709 is being amended to correct a spacing error and to eliminate archaic language.
ARM 6.6.3710 is being amended to correct mandatory language, eliminate archaic language, and to insert necessary commas.
ARM 6.6.3711 is being amended to conform with the updated NAIC model, to correct errors, and eliminate archaic language.
ARM 6.6.3712 is being amended to eliminate unnecessary language, remove gender specific language, and add necessary commas.
ARM 6.6.3713 is being amended to add a necessary comma, correct sentence structure, eliminate archaic language, and eliminate gender specific language.
ARM 6.6.3714 is being amended to eliminate archaic language, correct mandatory language, conform the rule to the updated NAIC model, and to correctly identify the Insurers Supervision, Rehabilitation, and Liquidation Act.
ARM 6.6.3715 is proposed to be amended to correct a spacing error, remove archaic language, and eliminate a section abbreviation.
ARM 6.6.3716 is being amended to correct a spacing error, and to conform to the updated NAIC model.
NEW RULE I is proposed to be adopted in order to properly include Forms A through D within the rules in this subchapter.
6. Concerned persons may submit their data, views, or arguments either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to: Mike Winsor, Staff Attorney, Office of the Commissioner of Securities and Insurance, Montana State Auditor, 840 Helena Ave., Helena, Montana, 59601; telephone (406) 444-2040; fax (406) 444-3499; or e-mail [email protected], and must be received no later than 5:00 p.m., November 20, 2013.
7. Michael Winsor, staff attorney, has been designated to preside over and conduct this hearing.
8. The CSI maintains a list of concerned persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Such written request may be mailed or delivered to Darla Sautter, Office of the Commissioner of Securities and Insurance, Montana State Auditor, 840 Helena Ave., Helena, Montana, 59601; telephone (406) 444-2726; fax (406) 444-3499; or e-mail [email protected] or may be made by completing a request form at any rules hearing held by the CSI.
9. An electronic copy of this proposal notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of the notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.
10. Pursuant to 2-4-302, MCA, the bill sponsor contact requirements do not apply.
11. Pursuant to 2-4-111, MCA, the small business impact analysis statement does not apply to these rules.
/s/Brett O'Neil /s/Jesse Laslovich
Brett O'Neil Jesse Laslovich
Rule Reviewer Chief Legal Counsel
Certified to the Secretary of State October 7, 2013.