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In the matter of the adoption of New Rule I, and the amendment of ARM 6.6.3702, 6.6.3703, 6.6.3705, and 6.6.3717 pertaining to Reporting by Holding Company Systems
NOTICE OF PROPOSED ADOPTION AND AMENDMENT
1. On March 28, 2016, the Commissioner of Securities and Insurance, Montana State Auditor (CSI), proposes to adopt and amend the above-stated rules.
2. The CSI will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact the CSI no later than 5:00 p.m., March 14, 2016, 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 rule as proposed to be adopted provides as follows:
NEW RULE I ENTERPRISE RISK REPORT (1) The ultimate controlling person of an insurer required to file an enterprise risk report pursuant to 33-2-1111(7), MCA, shall furnish the required information on Form F, found in ARM 6.6.3717.
4. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:
6.6.3702 FORMS--GENERAL REQUIREMENTS (1) Forms A, B, C, and D, and F 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 are prepared to indicate the scope of the items. All instructions appearing in the forms must be omitted from the statements. Unless expressly provided otherwise, if any item is inapplicable, or the answer to any item is in the negative, an appropriate statement to that effect shall be made.
(2) and (3) remain the same.
6.6.3703 FORMS--INCORPORATION BY REFERENCE, SUMMARIES, AND OMISSIONS (1) Information required by any item of Forms A, B, or D, or F 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, B, or D, or F, provided 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 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.
6.6.3705 FORMS--ADDITIONAL INFORMATION AND EXHIBITS (1) In addition to the information required to be included in Forms A, B, C, and D, and F, any additional material information necessary to make the information contained in the forms not misleading must be added. Additional exhibits not required by the statement may be filed. The additional exhibits must indicate the subject matters they reference. Changes to Forms A, B, C, or D, or F must include on the top of the cover page the phrase: "Change No. (insert number) to Form (A, B, C, or D, or F)" and must indicate the date of the change 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
6.6.3717 FORMS (1) The following forms apply to this subchapter.
ACQUISITION OF CONTROL OF OR MERGER WITH A DOMESTIC INSURER
Name of Domestic Insurer
Name of Acquiring Person (Applicant)
Filed with the Montana Commission of Insurance Office of the Montana State Auditor, Commissioner of Securities and Insurance
(State of domicile of insurer being acquired)
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning this Statement Should be Addressed:
Items 1 through 13 remain the same.
INSURANCE HOLDING COMPANY SYSTEM ANNUAL REGISTRATION STATEMENT
Filed with the Montana Commission of Insurance Office of the Montana State Auditor, Commissioner of Securities and Insurance
On Behalf of Following Insurance Companies
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning this Statement Should be Addressed:
Items 1 through 10 remain the same.
SUMMARY OF CHANGES TO REGISTRATION STATEMENT
Filed with the Montana Commission of Insurance Office of the Montana State Auditor, Commissioner of Securities and Insurance
On Behalf of Following Insurance Companies
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 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___.
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.
(Type or print name beneath) ________________________
PRIOR NOTICE OF A TRANSACTION
Filed with the Montana Commission of Insurance Office of the Montana State Auditor, Commissioner of Securities and Insurance
On Behalf of Following Insurance Companies
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning This Statement Should be Addressed:
Items 1 through 7 remain the same.
Filed with the Office of the Montana State Auditor, Commissioner of Securities and Insurance
On Behalf of/Related to Following Insurance Companies
Name, Title, Address, and Telephone Number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed:
ITEM 1.                      ENTERPRISE RISK
The Registrant/Applicant, to the best of its knowledge and belief, shall provide information regarding the following areas that could produce enterprise risk as defined in 33-2-1101(3), MCA, provided such information is not disclosed in the Insurance Holding Company System Annual Registration Statement filed on behalf of itself or another insurer for which it is the ultimate controlling person:
Any material developments regarding strategy, internal audit findings, compliance or risk management affecting the insurance holding company system;
Acquisition or disposal of insurance entities and reallocating of existing financial or insurance entities within the insurance holding company system;
Any changes of shareholders of the insurance holding company system exceeding ten percent (10%) or more of voting securities;
Developments in various investigations, regulatory activities or litigation that may have a significant bearing or impact on the insurance holding company system;
Business plan of the insurance holding company system and summarized strategies for next 12 months;
Identification of material concerns of the insurance holding company system raised by supervisory college, if any, in last year;
Identification of insurance holding company system capital resources and material distribution patterns;
Identification of any negative movement, or discussions with rating agencies which may have caused, or may cause, potential negative movement in the credit ratings and individual insurer financial strength ratings assessment of the insurance holding company system (including both the rating score and outlook);
Information on corporate or parental guarantees throughout the holding company and the expected source of liquidity should such guarantees be called upon; and
Identification of any material activity or development of the insurance holding company system that, in the opinion of senior management, could adversely affect the insurance holding company system.
The Registrant/Applicant may attach the appropriate form most recently filed with the U.S. Securities and Exchange Commission, provided the Registrant/Applicant includes specific references to those areas listed in Item 1 for which the form provides responsive information.  If the Registrant/Applicant is not domiciled in the U.S., it may attach its most recent public audited financial statement filed in its country of domicile, provided the Registrant/Applicant includes specific references to those areas listed in Item 1 for which the financial statement provides responsive information.
ITEM 2:       OBLIGATION TO REPORT.
If the Registrant/Applicant has not disclosed any information pursuant to Item 1, the Registrant/Applicant shall include a statement affirming that to the best of its knowledge and belief, it has not identified enterprise risk subject to disclosure pursuant to Item 1.
AUTH: 33-1-313, 33-2-1517, MCA
IMP: 33-2-1104, 33-2-1111, 33-2-1113, 33-2-1517, MCA
5. 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 former 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.
House Bill 119 was passed during the 2015 legislative session in order to ensure compliance with the NAIC accreditation standards. These rule amendments and adoption are necessary to bring the holding company rules into compliance with recently passed legislation.
6. Concerned persons may submit their data, views, or arguments concerning the proposed actions in writing to Jennifer Hudson, 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 jhudson@mt.gov, and must be received no later than 5:00 p.m., March 21, 2016.
7. If persons who are directly affected by the proposed actions wish to express their data, views, or arguments orally or in writing at a public hearing, they must make written request for a hearing and submit this request along with any written comments to jhudson@mt.gov at the above address no later than 5:00 p.m., March 21, 2016.
8. If the agency receives requests for a public hearing on the proposed action from either 10 percent or 25, whichever is less, of the persons directly affected by the proposed action; from the appropriate administrative rule review committee of the Legislature; from a governmental subdivision or agency; or from an association having not less than 25 members who will be directly affected, a hearing will be held at a later date. Notice of the hearing will be published in the Montana Administrative Register. Ten percent of those directly affected has been determined to be 40 persons based on 400 people on the Interested Parties List.
9. Jennifer Hudson, Attorney, has been designated to preside over and conduct this hearing.
10. The CSI maintains a list of interested 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 dsautter@mt.gov, or may be made by completing a request form at any rules hearing held by the CSI.
11. 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.
12. Pursuant to 2-4-302, MCA, the bill sponsor contact requirement does apply. Representative Tom Berry, bill sponsor, was notified via telephone and e-mail on January 25, 2016, regarding the rule.
13. The proposed rule actions do not significantly and directly impact small businesses; therefore, the requirements of 2-4-111, MCA, do not apply.
/s/ Nick Mazanec                         /s/ Jesse Laslovich
Nick Mazanec                             Jesse Laslovich
Rule Reviewer                             Chief Legal Counsel
Certified to the Secretary of State February 8, 2016.
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