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1. On May 21, 2015, at 10:00 a.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 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., May 14, 2015, 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; TDD (406) 444-3246; fax (406) 444-3499; or e-mail dsautter@mt.gov.
3. The new rules as proposed to be adopted provide as follows:
NEW RULE I  DEFINITIONS The following definitions apply to this subchapter:
(1) "Fire premium" means the portion of property insurance premium an insurer reasonably attributes to insurance against fire, in relation to all other risks covered by the property insurance policy at issue.
(2) "Presumptively reasonable allocation" means the minimum percentage of fire premium the CSI determines to be reasonable pursuant to 33-2-705(3), MCA, without further justification from the insurer.
NEW RULE II  FIRE PREMIUM ALLOCATION PROCEDURE (1) Insurers paying fire premium tax required by 50-3-109(1), MCA, shall provide to the CSI the calculation of fire premium separately for each line of business identified in 50-3-109(2), MCA.
(2) For each line of business identified in 50-3-109(2), MCA, the following requirements apply to an insurer's reporting obligation under (1):
(a)  If the percentage of fire premium reported is at or above the presumptively reasonable allocation, the insurer need not provide any other documentation to justify that fire premium;
(b)  If the percentage of fire premium reported is below the presumptively reasonable allocation, the insurer shall provide the basis for the calculation of fire premium along with any supporting documentation to the CSI. If the CSI accepts the insurer's calculation of fire premium, and in subsequent years the percentage of fire premium remains the same, the insurer is not required to provide such justification to the CSI; and
(c)  If the fire premium reported is zero, the insurer shall provide the policy terms which show that risk of fire is excluded from the policy. If the CSI accepts the insurer's calculation of fire premium, and in subsequent years the calculation and policy terms remain the same, the insurer is not required to provide such policy terms to the CSI.
(3)  If a rider, schedule, or addition to a policy:
(a)  exclusively includes risk of fire, then all premium collected under such rider, schedule, or addition must be included in the fire line of business at 100% fire premium; or
(b)  includes risk of fire as well as other risks, then all premium collected under such rider, schedule, or addition must be included in the line of business of the policy.
NEW RULE III  PRESUMPTIVELY REASONABLE ALLOCATIONS (1) The presumptively reasonable allocation for each line of business identified in 50-3-109(2), MCA, is as follows:
(a) for fire, 100%;
(b) for allied lines, 30%;
(c) for farmowners multi-peril, 40%;
(d) for homeowners multi-peril, 40%;
(e) for commercial multi-peril (nonliability), 50%;
(f) for commercial multi-peril (liability), 35%;
(g) for surplus lines, 60%;
(h) for ocean marine, 12%;
(i) for inland marine, 15%;
(j) for other private passenger auto liability, 9%;
(k) for other commercial auto liability, 9%;
(l) for private passenger auto physical damage, 9%;
(m) for commercial auto physical damage, 9%;
(n) for aircraft, 15%;
(o) for burglary and theft, 20%; and
(p) for boiler and machinery, 15%.
4. STATEMENT OF REASONABLE NECESSITY
The Commissioner of Securities and Insurance, Montana State Auditor, Monica J. Lindeen (commissioner), is the statewide elected official responsible for administering the Montana Insurance Code and regulating the business of insurance.
The commissioner is a member and 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.
In 1959, the legislature enacted 33-2-705, MCA, which granted the commissioner authority to review, authorize, and approve "reasonable" allocation of fire premium. Also in 1959, the legislature granted the commissioner the authority to make reasonable rules for the effective administration of any provision of the Insurance Code. The commissioner has determined that new rules should be proposed to increase the efficiency and effectiveness of review of fire tax premium.
NEW RULE I is necessary in order to define terms for these rules.
NEW RULE II is necessary in order to establish a procedure for the efficient determination of fire premium tax, to reduce costs for both the CSI and insurers involved in determining what "reasonable" allocations are. Currently, insurers have no standard to apply to their calculations of fire premium, and CSI employees do not have a uniform standard for reviewing those calculations. Review of the reasonableness of reported fire premium has taken a disproportionate amount of time for CSI employees.
NEW RULE III is necessary in order to establish a base minimum fire premium tax allocation which will streamline review of such allocations. Currently, insurers have no standard to apply to their calculations of fire premium, and CSI employees do not have a uniform standard for reviewing those calculations. Review of the reasonableness of reported fire premium has taken a disproportionate amount of time for CSI employees.
5. Concerned persons may submit their data, views, or arguments concerning the proposed actions either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to Michael Kakuk, Attorney, Office of the Commissioner of Securities and Insurance, Montana State Auditor, 840 Helena Ave., Helena, Montana, 59601; telephone (406) 444-2040; fax (406) 444-5223; or e-mail mkakuk@mt.gov, and must be received no later than 5:00 p.m., May 29, 2015.
6. Michael Kakuk, staff attorney, has been designated to preside over and conduct this hearing.
7. 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. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to Darla Sautter using the contact information in 2 above, or may be made by completing a request form at any rules hearing held by the CSI.
8. 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.
9. The bill sponsor contact requirements of 2-4-302, MCA, do not apply to these proposed rules.
10. The requirements of 2-4-111, MCA apply to these proposed rules. The CSI has determined there will be little economic impact in the aggregate because the presumptively reasonable allocations are substantially equivalent to the average the industry paid in 2013 and 2012, and because the proposed rates are presumptions that insurers do not have to follow. The proposed rules likely will save the CSI and insurers time and money by making the determination and payment of the fire premium tax easier. The cost savings from the streamlined procedure should be proportionately larger for small businesses.
/s/ Nick Mazanec                         /s/ Jesse Laslovich
Nick Mazanec                             Jesse Laslovich
Rule Reviewer                             Chief Legal Counsel
Certified to the Secretary of State April 20, 2015.
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