33-3-431. Borrowed surplus. (1) A domestic stock or mutual insurer may borrow money to defray the expenses of the insurer's organization, to provide the insurer with surplus funds, or for any purpose of the insurer's business upon a written agreement that the money is required to be repaid only out of the insurer's surplus in excess of that stipulated in the agreement. The agreement may provide for interest at a rate not to exceed the greater of the rate established in 25-9-205 or a rate that is 6 percentage points per year higher than the prime rate published by the federal reserve system in its statistical release H.15 Selected Interest Rates for bank prime loans dated 3 business days prior to the execution of the agreement. The agreement must specify whether the interest constitutes a liability of the insurer. A commission or promotion expense may not be paid in connection with a loan of the type described in this section.
(2) Money borrowed, together with the interest if stipulated in the agreement, does not form a part of the insurer's legal liabilities except as to the insurer's surplus in excess of the amount stipulated in the agreement or the basis of any setoff. However, until the money or interest, or both, are repaid, financial statements filed or published by the insurer must show as a footnote the amount then unpaid together with any interest accrued but unpaid.
(3) A loan of this type to a mutual or stock insurer is subject to the commissioner's approval. The insurer shall, in advance of the loan, file with the commissioner a statement of the purpose of the loan and a copy of the proposed loan agreement. The loan and agreement are approved unless within 15 days after filing the insurer is notified of the commissioner's disapproval and reasons for the disapproval. The commissioner shall disapprove any proposed loan or agreement if the commissioner finds the loan is unnecessary or excessive for the purpose intended or that the terms of the loan agreement are not fair and equitable to the parties, and to other similar lenders, if any, to the insurer, or that the information filed by the insurer is inadequate.
(4) A loan to a mutual or stock insurer or a substantial portion of the loan must be repaid by the insurer when the loan is no longer reasonably necessary for the purpose originally intended. Repayment of either principal or interest on the loan may not be made by a mutual or stock insurer unless approved in advance by the commissioner.
(5) This section does not apply to loans obtained by the insurer in the ordinary course of business from banks and other financial institutions or to loans secured by pledge or mortgage of assets.
History: En. Sec. 455, Ch. 286, L. 1959; R.C.M. 1947, 40-4738; amd. Sec. 6, Ch. 798, L. 1991; amd. Sec. 34, Ch. 379, L. 1995; amd. Sec. 6, Ch. 469, L. 2005; amd. Sec. 3, Ch. 108, L. 2011.
Structure Montana Code Annotated
Title 33. Insurance and Insurance Companies
Chapter 3. Domestic Stock and Mutual Insurers
33-3-402. Vouchers for expenditures
33-3-403. through 33-3-410 reserved
33-3-411. Contingent liability of mutual members
33-3-412. Levy of contingent liability
33-3-413. Enforcement of contingent liability
33-3-414. Nonassessable policies of mutual insurers
33-3-415. Insufficient reserves -- nonassessable policies prohibited -- revocation of authority
33-3-416. through 33-3-420 reserved
33-3-421. Participating policies
33-3-422. Dividends to stockholders
33-3-423. Dividends to mutual policyholders
33-3-424. Illegal dividends -- administrative or civil penalty
33-3-425. through 33-3-430 reserved
33-3-432. Impairment of capital or assets
33-3-433. Assessment of stockholders or members
33-3-434. Directors' liability for losses during deficiency
33-3-435. Stock transfer during impairment of capital
33-3-436. Mutual member's share of assets on liquidation
33-3-437. through 33-3-440 reserved
33-3-441. Equity securities of domestic stock insurance company -- statement of ownership
33-3-443. Short sales of equity securities prohibited -- time for delivery after sale
33-3-445. Exemptions -- arbitrage transactions
33-3-446. Exemptions -- registered securities -- holding by less than 100 persons
33-3-447. Rules of commissioner -- classifications -- effect
33-3-448. and 33-3-449 reserved