SBTT BY:HORLEYSUIULE INS A-2 ; 11-15-99 12:15PM J . 21S2565601-> 7177721969; H 2

Original:

Sandusky

Wilmarth

NovtmbeM5.1W8

VIA FAX 717-709-3673

Pennaytonia Insurance DepartmentOffio* of Special Pipjacit1326 Strawberry SquareHantabuig, PA 17120

R K PropoaadRulwiialdng: 31 PA Coo> Chapter 2 f

D a * Mr. SaWom:

W a r nha reporting requirement* under the Insurance Holding

Company Syatema regulations. 7Tiep»opoaednJemaKinga»te31 PACodaChapter 26 CRutomeUnfl-) aoNevot certain advancaa mine area* of danty.ahnpHoKy and the eamkiaaon of ladundandaa.

Our companlee, however, do have aorne msrvaoom and mated*UQWe**Mm*«MMbiMKWWhPbdan****;*nMMia*l**N*#*#d*M**M.

AHhough the Section 25.11

We suggest as to:

WbtnSo* a ^ b # provided lolhm p@f#on*no, Swchno**

SENT BY:HPRLEYSU1LLE INS A-2 ; 11-15-99 12:16PM : 21S256G601* 7177721960:11 3

Peter J.Sah/atoreNovember 15,1980Pag»2

would include the experts ntmt and turns <Indudingan estimation offiMt, thereby, snabWth© person flingto estimate future costs and suggest pott t fe cort savingaiemativM to ths Oapartmant

Section 25.11(b)-Th© costs bUtod by iheaxpert should beassessed against the person l ing wlWn a masonabto time of thecomptstton of the expert's engagement Purther.thei

peraon ttng to conclude met the services being bled went

Section 25,11(c)- Aa opposed to a per dam bNng approach, aneficjagemerrtsruufclbecflanrioufiyieeorag^

8ectton 26.11 (d) - There should be a corHfcatlDn or confirmationby the Department that "charges for tmvaf, lodging and foodexpenses of experts'are both ressonebls and In accordance wMhme terms of the letter of engagement

A new Section 25.11(e) ahouldbaaddad to provide: 'Ary personaeaaaaed charges for the engagement of an expert may object Inwriting to auoh eaeeaead ohergee baaed onan assertion matecharge is uwuusslwu or unreaaonefala. not directly raletml to theeveJuetion of the ffing, or outside the provWona set forth In thelatter of engagement If sudiwrttenobjecMon is received by theDepwtmortw)atothMy(30)daysofrac^from tneDepsrtmerrt or <ne expert, sDeosrtmentreprtiseria^

ODjeceofi era ranoer a oevvnvnaoon iwhich are i

The Rulemsldng's new provision defining «Son>us-c»eto.boficert»WyandmuAneedWuNtonnmy. Howevar. the surplua mmahold IbrlMng notkea,under Items 3., 4. and 5 of Form D, should not be reduced Item 35% of surplusU>25Hc#surpkiswtncaaa^jateju«rncetJon. Wears not aware of anyIndustry trends or problems that would support a c h s f ^ from the current surpfcj*threshold. tfsuAareducd^istorjeundeo^^.Kshouldbepreoeciedbyandbaaed upon a fact flnding process end thorough «xriyels,wNchtoc«actosedtothe industry, foitowad by a formal comment period.

SENT BY:HPRLEY9J1LLE INS ft-2 ; 11-15-99 12:16PM : 21SSS6S601-» 7177721969;* 4

Pater J.S«lvator«Novembw 15,1990PigaS

Although we recognize the ultty of and benedto to be derived fiwn theuttteatfon of Form E. which It ooraMwit wNh the NAIC model (bon. there to theneedfofdariflceHon«« to certain Form E tarirtnoloqy. •pedfceJy.

1. TkmeofAppic»ir-Fbrpu^oeeeofudtelnflPoanE,doetthe

In 40 P.8. |99i .1403? RegenMngihit Inquiry and the beianoe of1heFom»Econw»n^below.t¥«uldbehelpnjllf1heFomiDterminology either irtnom the §991.1403 UnrtnoJogyorprovttee

2. i4aimofOttwrl%eonlmoli^inMaigar...a-OoMthtopliiaaeImM the Applicant leaf to provkflng only the name of the iMqdmdpenmn'.le., the target company?

3. \ .namMandaddnM*of#*penwm..^#^.Jmohramantlna. - (Aim 1.) > Sbwa lha "paraomT «Mh

Investment banker., ate., thaw it a need tor daritotltonattotiaforegoing 1

4. 7«um and Pi*pote ci Prctweed Merger..." (Kern ^GWMoam^lanaadadmtoWbatWtoTn^ulrimgamdihanaWtor

O M i i l S S ^ «nd991.1403.

Thank you tor the opporturtfy to comment upon the Prc*>c*edRu»erneWngand for consWertng the concern* of the HarteyevMe mtumneaOompaniae.

Very truly youre,

Roger A. Brawn

RAB^aw

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RECEIVED9 I999KOV 18 AH 9:06

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Original: 2069

cc: Sandusky

wiimarth

Steverfe*$liott

azxsggzi mm l8 m * °t President

"^SIBteSKftSK"November 15, 1999

Peter J. SalvatoreRegulatory CoordinatorOffice of Special ProjectsPA Insurance Department1326 Strawberry SquareHarrisburg, PA 17120

£.<l RECEIVED

NOV 151999

Office of Special Projeo*

RE: Proposed Rulemaking, Insurance Company HoldingCompany Systems

Dear Sir:

I am president of the Pennsylvania Association of MutualInsurance Companies (PAMIC). On behalf of PANIC and its 74member property/casualty companies, I offer the following commentson proposed amendments to 31 Pa. Code 25, as published In thePennsylvania Bulletin. October 16, 1999.

The purpose of the rulemaking is to bring the affectedregulations into line with the relevant 1994 amendments to theInsurance Company Law of 1921. The 1994 amendments broughtHMOs within the scope of the act. PAMIC does not have HMOs in itsmembership and can offer no comments on that aspect of theamendments. The 1994 amendments also reflect changes to theprovisions relating to dividends and other material transactions withina holding company system to bring Pennsylvania into compliance withthe minimum financial regulation standards of the financial solvencyagenda of the National Association of Insurance Commissioners(NAIC). The regulatory amendments Implementing these changes arepertinent to PAMIC's membership and the following comments can beoffered.

First, PAMIC supports the NAIC's financial solvency agenda andthe NAIC financial solvency regulation standards for accreditation ofthe state insurance departments. Since these regulations are

320W Market Street • 602 Strawberry Square, Harrisburg, PA 17101 • (717) 233-1599 • FAX (717) 233-7365

Pennsylvania Association of Mutual Insurance Companies

necessary to assure continued accreditation of Pennsylvania, they areworthwhile.

Second, the effect of many of the changes is to streamline thereporting requirements and, to that extent, they can only beapplauded.

Third, the following provisions may be singled out for specificcomments.

• Section 25.12 (b) - The change regarding the need tofile only one copy of Forms B and D rather than twocopies, and the language regarding the ability to fileelectronically, are both helpful.

• Section 25.16 (a) and (c) - The addition of Form E forproviding a format for submitting information regardingthe competitive impact of a proposed merger oracquisition is good. We would comment that it issometimes difficult to show market share statistics forcertain lines of business, especially for smaller companies,and this argues for flexibility on the part of theDepartment in Implementation.

• Section 25.17 (c) - The change to eliminate the need toamend a company's Form B filing if it has already filed aForm D regarding the transaction is a good change.

• Section 25.21 (c) - Regarding the addition of languagestating that the Department may withdraw its priorapproval of a transaction if there is a material changeafter a Form D is submitted - On Its face this seems asif the Department is stating the obvious. However, weunderstand that without this language the Departmentmay not be able to enforce the withdrawal of approvalfor such a transaction.

• Form C - Summary Registration Statement - Theamendment of this form to require a description ofitems that have changed from the prior year's annualregistration statement to include the date and dollaramount of the change is somewhat cumbersome, butit probably describes the Department's view of whatwas to be included in the filing prior to the change in

Pennsylvania Association of Mutual Insurance Companies

the regulation.

Basically the regulatory changes are appropriate and have the effect ofmodernizing Pennsylvania law. Thank you for the opportunity tocomment on this rulemaking.

Very tjiily yours,

Steven C. fHlott, J.D., CPCU, CLU/President

AAmerican Insurance Association

Original!

November 15,199

•

|11|

Sandusky

WilmarthLegal

I§ O

o

By e-mail to psalvato(g)ins state.pa us

Mr. Peter J. SalvatoreRegulatory CoordinatorOffice of Special Projects o

Pennsylvania Insurance Department t S <**1326 Strawberry Square | S *Harrisburg, PA 17120

Re: Proposal to Amend Insurance Holding CompanySystems Rules [29 PaB 5392]

Dear Mr. Salvatore:

The American insurance Association (AIA) is a trade association of morethan 380 property-casualty insurers that provide insurance throughout the UnitedStates and around the world. In Pennsylvania, our members write more than28% of the property-casualty business in the state. Almost all of our membersare part of holding company systems, so they are particularly interested in theproposed amendments to Chapter 25 relating to rules and proceduralrequirements for holding company systems.

First, AIA would like to make clear that we support the purposes set forthin the proposed amendments as published in the Pennsylvania Bulletin, Wesupport the Insurance Departments efforts to meet financial regulation standardsadopted by the NAIC. In addition, we support efforts to clarify existing proceduraland reporting requirements and to eliminate other requirements deemed to beunnecessary or duplicate. Accordingly, we support the portions of the proposalthat are in compliance with those purposes. However, we cannot support andstrongly object to two provisions to amend section 25.22 relating to all dividendsand other distributions. Neither of these provisions is a financial regulationstandard adopted by the NAIC, nor is either a clarification of existing procedures.

1130Coonecfi^Avwue,NTW,Sute1000 • W r t t g m D C 2 0 0 3 6 • Phone202/82*7100 • Fax:200293-1219 • w m a M s a g

Robert V .Mende*^ RamartAvor Robert C.Gowdy B m m W L H m # ^ m # Robert EVa^eyChairman Chairman Elect Vice Chairman Vice Chairman President

Mr. Peter J.SalvatoreNovember 15,1999

SUBSECTION 25.22(f)

Subsection 25.22(f) indicates that The Department may withdraw its priorapproval of a dividend or other distribution and require the transaction to bereversed or take otter regulatory action as a result of a material change ininformation furnished under this section/ We do not understand how theDepartment can reverse a dividend that may have been disbursed to thousandsof stockholders. Even if the insurer has paid a stockholder dividend to a singleparent, that parent may have distributed a dividend to all of its stockholders, whomay well be unaffiliated with the insurer. Such as broad distribution could not bereversed.

AIA objects to this provision because of the uncertainty that it would causewhen a dividend is declared and distributed. This uncertainty is createdbecause: 1) there is no time limit for the department to require that thetransaction be reversed; and 2) an insurer is required to report changes ininformation for fifteen days after the end of a month in which a dividend is paid,which means that such changes may have to be reported up to forty-five daysafter the dividend is distributed.

This requirement is not a part of the NAIC Model and as far as we can tell,is unique to Pennsylvania. It certainly does not clarify any existing provision;rather it raises questions in our view as to whether it applies only to extraordinarydividends or whether it also applies to ordinary dividends. The confusion arisesfrom the following: 1) subsection 25.22(f) refers to information related to adividend or other distribution furnished under this section (which is found insubsection 25.22(e)); 2) subsection 25.22(e) refers to information furnishedunder subsection (c); and 3) subsection 25.22(c) refers to extraordinarydividends or other extraordinary distributions. Therefore, one might concludethat this provision relates only to extraordinary dividends or distributions, but thisis far from clear.

Even if this provision applies only to extraordinary dividends ordistributions, it is objectionable because of the uncertainty that it would cause.

SUBSECTION 25.22(a)

Subsection 25.22(a) provides that although the Commissioner may grant awaiver, according to subsection 25.22(c)(5), insurers are required to file prior toall dividends, "A balance sheet and statement of income for the periodintervening from the last annual statement filed with the Commissioner and theend of the month preceding the month in which the request for dividend or otherdistribution approval is submitted." If an insurer submits requests for dividends inJanuary, April, July or October, this would not present a hardship because

Mr. Peter J.SalvatorcNovember 15,1999

insurers normally prepare quarterly financial statements for the periods endedMarch, June, September and December, if an insurer submits requests fordividends in any of the other eight months, however, this provision will requirethat insurer to prepare financial statements for a one or two-month period that itwould not otherwise be required to prepare. And that is not a reasonablerequirement for the payment of ordinary dividends. There are additionalrequirements for the payment of extraordinary dividends, but ordinary dividendsare in the course of business and require sufficient surplus so that this additionalburden should not be necessary. In the unusual circumstances when thisrequirement is perceived as appropriate, it should be required by the Departmentand not necessitate a waiver for all other insurers.

This requirement is neither a part of the NAIC Model nor is it required inany other jurisdiction that we are aware of. It is also not a clarification of anexisting Pennsylvania requirement.

This requirement is objectionable because it puts an unnecessary burdenon all insurers when it is likely to be needed only rarely.

FOREIGN INSURERS

Finally, we note that The Holding Company Act (section 991.1404)indicates that a foreign insurer is excepted if it is M . . . subject to registrationrequirements and standards adopted by statute or regulation in the jurisdiction ofits domicile which are substantially similar to those contained in this section "Since we have not been able to find another jurisdiction with similarrequirements, we wonder whether all foreign insurers are going to be subject toPennsylvania registration requirements as a result of these proposed regulations.We certainly do not want to subject all foreign insurers to the PennsylvaniaHolding Company Act, but these provisions are not clarifications as far as theapplicability of the Act is concerned.

CONCLUSIONS

For the reasons enumerated above, we recommend that the provision toauthorize the Department to require that dividends be withdrawn (subsection25.22(f» be deleted. Further, we recommend that the provision that allinsurers,be required (subject to waiver) to file financial statements as of the previousmonth end, also be withdrawn.

Mr. Peter J.SalvatoreNovember 15,1999

Thank you for this opportunity to present these comments. We would bepleased to discuss with you any comments or questions that you might have.

Sincerely,

Phillip SchwartzVice PresidentFinancial Reporting andAssociate General Counsel

cc: Robert E. Nyce, Executive Director, Independent Regulatory ReviewCommission (Fax 717 783-2664)

Loudon L Campbell, Esq. (Fax 717 237-6019)R. Taylor Cosby (Fax 410 267-9581)

A Mizner

NOV. 16.1999 9:26AM AMERICAN IHS ASSOC •& 5733 P. 2 /5

Original: 2069

cc^n C r Sandusky, Smith, Wilmarth, Legal

MB PFrFlVEDAmerican Insurance Association K L V / U

1999HOV 16 AM 9 : 2 9

November 15,1999 O

Bv e-mail to DsaJvatoaips.gtate.Da.us

Mr. Peter J.SatvatoreRegulatory CoordinatorOffice of Special ProjectsPennsylvania Insurance Department1326 Strawberry SquareHarrlaburg, PA 17120

Re: Proposal to Amend Insurance Holding CompanySystems Rules (29 Pa.B. 53921

Dear Mr. Salvatore:

The American Insurance Association (AIA) Is a trade association of morethan 380 property-casualty insurers that provide Insurance throughout the UnitedStates and around the world. In Pennsylvania, our members write more than26% of the property-casualty business in the state. Almost all of our membersare part of holding company systems, so they are particularly interested In theproposed amendments to Chapter 25 relating to rules and proceduralrequirements for holding company systems.

First, AIA would Bk* to make dear that we support the purposes set forthIn the proposed amendments as puNshed hi the Pennsylvania Bulletin. Wesupport the Insurance Department's efforts to meet financial regulation standardsadopted by the NAIC. In addition, we support efforts to clarify existing proceduraland reporting requirements and to eliminate other requirements deemed to beunnecessary or applicative. Accordingly, we support the portions of the proposalthat are in compliance with those purposes. However, we cannot support andstrongly object to two provisions to amend section 25.22 relating to all dividendsand other distributions. Neither of these provisions is a financial regulationstandard adopted by the NAIC, nor Is either a clarification of existing procedures.

mbWV.Mmmmn RorroiAyw RobertCGo** 8m@dLHmgWm# " R m w E v ^ TChairman Chamon&ect VteeChaman VtctChakman Ptendmxt

NOV. 16.1999 9:26AM AMERICAN IMS ASSOC K0-5?33 P- 3 / 5

Mr. Peter J.Sotvwore

%%"*'"" RECEIVED

I0 I10VIS KM * 2 * ^

Subsection 2S.22(f) Weak* that "The D e p a r t m W r # K i # & l ( y p # ^ ftapproval of a dividend or other distribution and require the transaction to bs V^reversed or take other regulatory action as a result of Cjga&rjaUlKnge t i r ^information furnished under this section." We do not understand how theDepartment can reverse a dividend that may have been disbursed to thousandsof stockholders. Even if the Insurer has paid a stockholder dividend to a slngteparent, that parent may have distributed a dividend to all of its stockholders, whomay well be unaffillated with the insurer. Such as broad distribution could not be

AIA objects to this provision because of the uncertainly that it would causewhen a dividend Is declared and distributed. This uncertainty is createdbecause: 1) there is no time limit for the department to require that thetransaction be reversed; and 2) an Insurer Is required to report changes ininformation for fifteen days after the end of a month in which a dividend is paid,which means that such changes may have to be reported up to forty-five daysafter the dividend is distributed.

This requirement Is not a part of the NAIC Model and as far as we can tell,is unique to Pennsylvania. It certainly does not clarify any existing provision;rather n raises questions in our view as to whether it appfles only to extraordinarydividends or whether it also applies to ordinary dividends. The confusion arisesfrom the following: 1) subsection 25.22(0 refers to information related to adividend or other distribution furnished under this section (which is found msubsection 25.22(©)); 2) subsection 25.22(e) refers to information furnishedunder subsection (c); and 3) subsection 25.22(c) refers to extraordinarydividends or other extraordinary distributions. Therefore, one might concludethat this provision relates only to extraordinary dividends or distributions, but thisis far from clear.

Even If this provision applies only to extraordinary dividends ordistributions, it is objectionable because of the uncertainty that H would cause.

SUBSECTION 2S.22fa)

Subsection 25.22(a) provides that although the Commissioner may grant awaiver, according to subsection 26.22(c)(5), insurers are required to file prior toall dividends, "A balance sheet and statement of income for the periodintervening from the last annual statement filed with the Commissioner and theend of the month preceding the month in which the request for dividend or otherdistribution approval is submitted * If an Insurer submits requests for dividends inJanuary, April, Jury or October, this would not present a hardship because

NOV. 16. 1999 9:27AM AMERICAN IHS ASSOC N0'5733 P - 4 / 5

Mr. Peter J.Salvuor©November 15.1999

insurers normally prepare quarterly financial statements tor the periods endedMarch, June, September and December. If an insurer submits requests fordividends in any of the other eight months, however, this provision will requirethat insurer to prepare financial statements for a one or two-month period that itwould not otherwise be required to prepare. And that is not a reasonablerequirement for the payment of ordinary dividends. There are additionalrequirements for the payment of extraordinary dividends, but ordinary dividendsare in me course of business and require sufficient surplus so that this additionalburden should not be necessary. In the unusual circumstances when thisrequirement Is perceived as appropriate, it should be required by the Departmentand not necessitate a waiver for all other insurers.

This requirement Is neither a part of the NAtC Model nor is it required inany other Jurisdiction that we are aware of. It is also not a clarification of anexisting Pennsylvania requirement.

This requirement is objectionable because N puts an unnecessary burdenon all insurers when it Is likely to be needed only rarely.

FOREIGN INSURERS

Finally, we note that The Holding Company Act (section 991.1404)indicates that a foreign Insurer is exempted if tt is " . . . subject to registrationrequirements and standards adopted by statute or regulation in the jurisdiction ofits domicile which are substantially similar to those contained in this sectionSince we have not been able to find another jurisdiction with simitarrequirements, we wonder whether all foreign Insurers are going to be subject toPennsylvania registration requirements as a result of these proposed regulations.We certainly do not want to subject all foreign insurers to the PennsylvaniaHolding Company Act, but these provisions are not clarifications as far as theapplicability of the Act is concerned.

CONCLUSIONS

For the reasons enumerated above, we recommend that the provision toauthorize the Department to require that dividends be withdrawn (subsection25.22(f)) be deleted. Further, we recommend that the provision that all insurers,be required (subject to waiver) to file financial statements as of the previousmonth end, also be vwfcdtawa

Q3AI3O3H

NOV. 16 .1999 9:27AM AMERICAN IHS ASSOC R 0 - " 3 3 P. 5 /5

Mr.PMarJ.SalvatQfeNovember 15,1999

Thar* you for this opportunity to present these comments. We would bepleased to discuss with you any comments or question* thai you might have.

Sukw^c,Schwartz

Vice PresidentRnanclaJ Reporting andAssociate General Counsel

oc: Robert E. Nyce, Executive Director, Independent Regulatory ReviewCommission (Fax 717 783-2664)

Loudon L Campbell, Esq. (Fax 717 237-6019)R. Taylor Cosby (Fax 410 267-9581)

HOV. 16.1999 9:25AM A m i CAN INS ASSOC NO. 5733 P. 1/5

AAmerican Insurance Association

FAXTO;

COMPANY:

FAX#:

PHONE#:

DATE:

SecLtst

November 15,1999

FROM:

COMPANY:

FAX*

PHONE*

PAGES:

Phillip Schwartz

American Insurance Association

202-293-1219

202-828-7163

5 (including cover)

Comment*

Mr. Peter J.SftlvatoreRobert E.NyccLoudon L. Campbell, Esq.R.Taylor Cosby

717-705-3873717-783-2664717-237-6019410-267-9581

I

i1i?

io

If them are any problems with this fax traQsmusicmpIoaw call 2O2-S2S-7152.

n30Oynec*^Avmu#NW,WB7000 • Woshhaton, DC 20036 • Phon* 202/82*7100 • KK202/29^1219 • VyWWAjadCX)ig

Original: 2069

cc: Sandusky

Wilmartb

Sarah H. LawhorneChairmanRobert W. KlossVice ChairmanHenry G. EagerPresident EmeritusSamuel R. MarshallPresident &Chief Executive OfficerJohn R. DoubmanSecretary & CounselMar> beth H. Dob

Birchard T. ClothierInvestment Officer &Assistant TreasurerDanielle WitwerDirector ofGovernment Affairs

The Insurance Federation of Pennsylvania, Inc.

1600 Market StreetSuite 1520

Philadelphia, PA 19103Teli (215) 6*5-0500 Fax:(215)665-0540

RECEIVED

NOV 151999

November 12, 1999

Peter J. SalvatoreRegulatory CoordinatorPennsylvania Insurance Department1326 Strawberry SquareHarrisburg, PA 17120

Re: Chapter 25 of Title 31 - Rules and ProceduralRequirements for Insurance Holding Company

Dear Mr. Salvatore:

The Insurance Federation, on behalf of its membersand the affiliated national trade associations,offers the following comments on the InsuranceDepartment's proposed revisions to this chapter aspublished in the October 16 Pennsylvania Bulletin.

Section 25*11 - Expenses

Recent problems with the cost of outside expertsauditing insurers for Y2K compliance highlight theneed for greater certainty of the cost of expertsretained by the Department and paid by the insurer.

As such, we recommend subsections (b) and (c) berevised to refer to "reasonable" costs and"reasonable and prevailing" rates. Subsection (c)should also delete the reference to "per diem"charges, as most expert services are not calculatedor billed that way- Further, subsection (d) shouldspecify that the travel, lodging and food expensesof experts retained by the Department should belimited to the same expenses that apply toDepartment employees.

November 12, 1999Page two

Section 25.12 - Forms - general requirements

We recommend that subsection (c) be revised to provide thatbiographical statements and financial statements ofultimate controlling persons be automatically givenconfidential status unless such "person" is a publiccompany.

I am not sure why confidentiality would not be given inthose situations; absent illustrations of where theinformation would and should be public, it makes sense tomake such confidentiality a right, not a matter ofdiscretion and uncertainty.

Section 25.16 - Acquisition of control - statement filings

We recommend that subsection (e) be revised to allow forfive rather than two days to notify the Department ofchanges in officers or directors. This should not harm theDepartment's review, and it is more realistic in light ofall the other corporate activities going on at these times.

Section 25.22 - Dividends and other distributions

We recommend eliminating the filing of an interim balancesheet and statement of income as required in subsection(c)(5), at least as it applies to ordinary dividends. TheNAIC model requires this only for extraordinary dividends,and Pennsylvania should do the same.

This interim information will only supplement quarterlyinformation that will be, by definition, no more than threemonths old, and the interim information often might not beavailable in any event. Further, the Department's proposedwaiver option set forth in subsection (a) would beinadequate protection - as filing for a waiver fromsubsection (c) (5) could require essentially the sameinformation as in the (c)(5) filing itself.

November 12, 1999Page three

Form A - Statement regarding the acquisition of control ofor merger with a domestic insurer

Item 3: We recommend this be revised to allow copies ofthe biographical affidavits. Further, we recommend theaffidavits be allowed to hold absent any material changes;the current proposal requires updates every three years inany event and notification of any (not just material)changes.

Form B - Insurance holding company system annualregistration statement

Item 8: We recommend modification of the requirement thatindividuals who are ultimate controlling persons- supplyfinancial statements.

First, such information should be given confidentialtreatment. Second, the individual should be allowed tosubmit less information than contained on a financialstatement, if approved by the Department. my understandingis that most (if not all) other states do not require theseindividuals to file financial statements; presumably, thoseother states find other, less invasive means of gainingneeded financial information, and the Department shouldexplore those alternatives.

Form C - Summary of registration statement

As what I hope is a point of clarification, we recommendthe Department allow for a good faith approximation of thedollar amount of each change.

Form D - Prior notice of a transaction

Item 2; We recommend the Department delete the referenceto "immediate and long-term," instead going with supplyingthe "anticipated effect." Further, such information shouldbe kept confidential and given the safe harbor found in thePrivate Security Reform Act of 1995.

November 12, 1999Page four

Our concern here is, as we have discussed in the past, theprospect of litigation over long-term effects that do notcome to pass. The Department should match, not exceed, therequirements found in Section 27a of the 1933 SecuritiesAct with respect to forward-looking statements.

We appreciate the opportunity to comment on thisregulation, as well as the opportunity to have worked withthe Department in getting the regulation to this point. Welook forward to discussing the above recommendations and ingetting this regulation in place.

Sincerely,

Samuel R. Marshall

c: Robert E. Nyce, Executive DirectorIndependent Regulatory Review Commission

Steven Johnson, Deputy Insurance CommissionerElaine Leitzel, AnalystOffice of Regulation of CompaniesPennsylvania Insurance Department

Comments on the regulation listed below have been received from the following:

Reg U Regulation Title

11-182 Rules and Procedural Requirements for Insurance Holding Company Systems

Mr. Samuel R. Marshall President

Insurance Federation of Pennsylvania, Inc.1600 Market St.Philadelphia PA 19103- Date Recelved *1/15/1999

Phone: (215)665-0505X00000 EMaii: sammyi@ifpenn.org

Page 1 Date sent to Committee and IRRC 1/15/1999

Original:

Sandusky

Wilmarth

The Insurance Federation of Pennsylvania, Inc.

Sarah H. LawhorneChairmanRobert W. KlossVice ChairmanHenn G, HagerPresident EmeritusSamuel R. MarshallPresident &Chief Executive OfficerJohn R. DoubmanSccrciar> & CounselMarvbeth H. Dob

Birchard T. Clothierinvestment Officer &Assistant TreasurerDanielle WitwerDirector ofGovernment Affairs

1600 Market StreetSuite 1S20

Philadelphia, PA 19103Tel: (215) 665-0500 Fax: (215) 665-0540

RECEIVEDI999NOVI6 AM & 41

WDK%VcTj5S&ia,0l lY

NovMBef ifrr-*9*>"

Peter J. SalvatoreRegulatory CoordinatorPennsylvania Insurance Department1326 Strawberry SquareHarrisburg, PA 17120

Re: Chapter 25 of Title 31 - Rules and ProceduralRequirements for Insurance Holding CompanySystems

Dear Mr. Salvatore:

The Insurance Federation, on behalf of its membersand the affiliated national trade associations,offers the following comments on the InsuranceDepartment's proposed revisions to this chapter aspublished in the October 16 Pennsylvania Bulletin.

Section 25.11 - Expenses

Recent problems with the cost of outside expertsauditing insurers for Y2K compliance highlight theneed for greater certainty of the cost of expertsretained by the Department and paid by the insurer.

As such, we recommend subsections (b) and (c) berevised to refer to "reasonable11 costs and"reasonable and prevailing" rates. Subsection (c)should also delete the reference to "per diem"charges, as most expert services are not calculatedor billed that way. Further, subsection (d) shouldspecify that the travel, lodging and food expensesof experts retained by the Department should belimited to the same expenses that apply toDepartment employees.

November 12, 1999Page two

Section 25,12 - Forms - general requirements

We recommend that subsection (c) be revised to provide thatbiographical statements and financial statements ofultimate controlling persons be automatically givenconfidential status unless such "person" is a publiccompany.

I am not sure why confidentiality would not be given inthose situations; absent illustrations of where theinformation would and should be public, it makes sense tomake such confidentiality a right, not a matter ofdiscretion and uncertainty.

Section 25.16 - Acquisition of control - statement filings

We recommend that subsection (e) be revised to allow forfive rather than two days to notify the Department ofchanges in officers or directors. This should not harm theDepartment's review, and it is more realistic in light ofall the other corporate activities going on at these times.

Section 25.22 - Dividends and other distributions

We recommend eliminating the filing of an interim balancesheet and statement of income as required in subsection(c) (5) , at least as it applies to ordinary dividends. TheNAIC model requires this only for extraordinary dividends,and Pennsylvania should do the same.

This interim information will only supplement quarterlyinformation that will be, by definition, no more than threemonths old, and the interim information often might not beavailable in any event. Further, the Department's proposedwaiver option set forth in subsection (a) would beinadequate protection - as filing for a waiver fromsubsection (c) (5) could require essentially the sameinformation as in the (c)(5) filing itself.

November 12, 1999Page three

Form A - Statement regarding the acquisition of control ofor merger with a domestic insurer

Item 3: We recommend this be revised to allow copies ofthe biographical affidavits. Further, we recommend theaffidavits be allowed to hold absent any material changes;the current proposal requires updates every three years inany event and notification of any (not just material)changes.

Form B - Insurance holding company system annualregistration statement

Item 8: We recommend modification of the requirement thatindividuals who are ultimate controlling persons supplyfinancial statements.

First, such information should be given confidentialtreatment. Second, the individual should be allowed tosubmit less information than contained on a financialstatement, if approved by the Department. my understandingis that most (if not all) other states do not require theseindividuals to file financial statements; presumably, thoseother states find other, less invasive means of gainingneeded financial information, and the Department shouldexplore those alternatives.

Form C - Summary of registration statement

As what I hope is a point of clarification, we recommendthe Department allow for a good faith approximation of thedollar amount of each change.

Form D * Prior notice of a transaction

Item 2: We recommend the Department delete the referenceto "immediate and long-term," instead going with supplyingthe "anticipated effect." Further, such information shouldbe kept confidential and given the safe harbor found in thePrivate Security Reform Act of 1995.

November 12, 1999Page four

Our concern here is, as we have discussed in the past, theprospect of litigation over long-term effects that do notcome to pass. The Department should match, not exceed, therequirements found in Section 27a of the 1933 SecuritiesAct with respect to forward-looking statements.

We appreciate the opportunity to comment on thisregulation, as well as the opportunity to have worked withthe Department in getting the regulation to this point. Welook forward to discussing the above recommendations and ingetting this regulation in place.

Sincerely,

Samuel R. Marshall

c: Robert E. Nyce, Executive DirectorIndependent Regulatory Review Commission

Steven Johnson, Deputy Insurance CommissionerElaine Leitzel, AnalystOffice of Regulation of CompaniesPennsylvania Insurance Department

PHICO Insuttnce Company

One PHICO Drive

MechanicsbHtg, PA 17031-008$

Tel BoojtU.w* 7*77*6 "2*

Fax 7i7<7M>2*37

November 12,1999

Original:

Sandusky

Wilmarth

PHICO

RECEIVEDMr. Peter J.SalvatoreRegulatory Coordinator flpy • ^ \ -Office of Special Projects • - • • . - •Pennsylvania Insurance Department n . .1326 Strawbeiry Square V;-lOC Qi * ;«&) rro^vWHarrisburg, PA 17120

RE: Proposed Rulemaking31 PA Code, Chapter 25

Dear Mr. Salvatore:

PHICO Insurance Company and Pennsylvania Casualty Company (jointly referenced herein asPHICO) are Pennsylvania domestic insurers and are registered with the Department as membersof an insurance holding company system. Consequently, the proposed revisions to 31 PA CodeChapter 25 will impact upon PHICO's filing requirements.

For the most part, PHICO supports the proposed revisions to Chapter 25. In particular, PHICO ispleased to see the streamlining and coordination of the various filings through the elimination ofduplicate reporting requirements. There is, however, one section that is troublesome. Throughthe expansion of the applicability of Section 25,22 to include all dividends and otherdistributions, the proposed rulemaking extends the requirement for submission of certain data tothe notice filing related to non-extraordinary dividends.

While Section 1404(e) of the Pennsylvania insurance laws (40 PS . Section 991.1404(c)) requiresinsurers which are members of an insurance holding company system to make an informationalfiling with the Insurance Commissioner for all dividends or other distributions to shareholders,that section of the law specifies only that the insurer file a schedule of the dividends and otherdistributions made during the previous twelve months. The revision to 31 PA Code, Chapter 25,Section 25.22 proposes to establish more extensive filing requirements for such dividends.Specifically, Section 25.22(c)(S), as proposed, would requite insurers to submit a balance sheetand statement of income as part of the information submitted with respect to filings requited bySection 1404(e),

PHICO suggests that the second sentence of the revised language in Section 25.22(a) be amendedto read as follows: "The report shall include the information in section 1404<e) of the act andsubsection (cXl W*)n« The third and final sentence of Section 25.22(a) could then be deleted as

Healthcare Risk Mtnogcmmt Solutions

li 12/99 FRI 16:34 FAX 717 768 3240 PHICO SR. MGMT. @003

Mr. Peter J. SalvatoreNovember 12,1999Page 2

well. This amendment would allow for consistency between the information required by Section1404(e) of the act and that set forth in Section 25.22.

PH1CO appreciates the opportunity to comment on the proposed rulemakmg and trusts that itscomments will be of benefit to the Department as it proceeds with this rulemaldng. If you haveany questions or want to discuss these comments, please feel free to contact me at yourconvenience. I can be reached by telephone at 766-1122, extension 1400 or via the Internet atrechronisteT@phico.com.

Very truly yours,

uRonald E. ChronisterVice President, Industry & Regulatory Affairs