BEFORE THE COMMISSIONER OF SECURITIES AND INSURANCE
MONTANA STATE AUDITOR
In the matter of the adoption of New Rule I pertaining to the adoption of the NAIC Valuation Manual
NOTICE OF PROPOSED ADOPTION
NO PUBLIC HEARING CONTEMPLATED
TO: All Concerned Persons
1. On October 3, 2016, the Commissioner of Securities and Insurance, Montana State Auditor (CSI), proposes to adopt the above-stated rule.
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. on September 26, 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; fax (406) 444-3439; TDD/Montana Relay Service (406) 444-3246; or e-mail firstname.lastname@example.org.
3. The rule as proposed to be adopted provides as follows:
NEW RULE I INCORPORATION BY REFERENCE OF THE NAIC VALUATION MANUAL (1) The Commissioner of Securities and Insurance, Office of the State Auditor, adopts and incorporates by reference the Valuation Manual adopted by the National Association of Insurance Commissioners (NAIC) on December 2, 2012, which sets forth and specifies a principle-based method for the valuation of insurance policies and contracts and the establishment of reserves. A copy of the Valuation Manual may be obtained from the NAIC web site at the following link: http://www.naic.org/documents/committees_a_latf_related_valuation_manual_apf_adopted_by_a_cmte.pdf.
AUTH: 33-1-313, 33-2-418, MCA
IMP: 33-2-402, 33-2-403, MCA
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, a former Vice President, 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.
In 2015, the legislature granted the commissioner rulemaking authority to adopt the NAIC's uniform valuation manual (valuation manual) pursuant to 33-2-418, MCA. The commissioner has determined that the new rule be proposed in accord with that section.
New Rule I is proposed in order to adopt the valuation manual. Adoption of the valuation manual is reasonably necessary because the valuation manual is an integral component to, and guide for, the implementation of the Standard Valuation Act (Act), 33-2-401, MCA, et seq.
An important component of the Act was to promote uniformity of regulation and reserving methods throughout the insurance industry and to enable establishment of reserves by using a principle-based valuation of insurance policies and contracts as specified in the valuation manual.
Principle-based valuation is a reserve valuation that uses one or more methods, or one or more assumptions determined by the insurer, which meets the conditions for policies or contracts as specified in the valuation manual; and which complies with the provisions of 33-2-404, MCA.
Uniformity in reserving methods used by insurance companies and other states is essential for the commissioner to work effectively as part of the national system of state-based regulation.
5. Concerned persons may submit their data, views, or arguments concerning the proposed action in writing to: Mike Winsor, Attorney, Office of the Commissioner of Securities and Insurance, Montana State Auditor, 840 Helena Avenue, Helena, Montana, 59601; telephone (406) 444-2040; fax (406) 444-3499; or e-mail email@example.com, and must be received no later than 5:00 p.m., September 30, 2016.
6. If persons who are directly affected by the proposed action 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 Mike Winsor at the above address no later than 5:00 p.m., September 30, 2016.
7. 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 35 persons based on 350 people on the CSI list of interested persons.
8. 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, e-mail, 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 the contact person in 2 above or may be made by completing a request form at any rules hearing held by the department.
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 this 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. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor Tom Berry, House District #40, was contacted by mail through the U.S. Postal Service on August 18, 2016.
11. With regard to the requirements of 2-4-111, MCA, the CSI has complied with and determined that there are no insurers currently writing life insurance policies based in Montana, and the CSI is not aware of any life insurance companies with fewer than 50 employees. Even if a small business was impacted by the adoption of the NAIC valuation manual, the valuation model allows for greater flexibility in reserving funds for policies written, which would help small business insurers. In addition, currently 46 states have adopted the revised model laws, and uniformity of regulation would be a substantial benefit to any small business insurer.
/s/ Michael A. Kakuk_______ /s/ Jesse Laslovich
Michael A. Kakuk Jesse Laslovich
Rule Reviewer Chief Counsel
Certified to the Secretary of State August 22, 2016.