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Agency # 054

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Agency # 054

    Agency # 054.00PROPOSEDRULE 23

    PROPERTY, CASUALTY, SURETY AND

    MARINE RATE AND FORM FILINGS

TABLE OF CONTENTS

1. Purpose

    2. Authority

    3. Applicability and Scope

    4. Effective Date

    5. Definitions

    6. Rate Service Organizations

    7. Procedures for Rate and Supplementary Rate Information Filings

    8. Procedures for Form Filings

    9. Severability Self Certification (“STMSCP” Program) 10. Forms11. Severability

________________________________________________________________________

    FORM UT Property & Casualty Uniform transmittal header FORM RF-1 Rate filing abstract .

    FORM A-1 Private passenger automobile abstract

    FORM H-1 Homeowners abstract

    FORM RF-2 Reference filing adoption form

    FORM RF-WC Workers' compensation reference filing adoption form

    FORM WC-1 Workers' compensation abstract FORM F-1 Form filing abstract

    FORM APCS Automobile survey

    FORM HPCS Homeowners survey

    FORM MMPCS Medical Malpractice survey

    FORM HONOT Homeowners rate notice

    FORM PPANOT Private passenger automobile rate notice FORM PROMAL Professional malpractice rate increase notice to insured FORM PRONOT Professional malpractice rate increase newspaper notice

    *Note, these forms are listed here for convenience and are not exhibits to this

    Regulation. They are the prescribed forms for use and are available at the

    Department.

    ________________________________________________________________________

Section 1. Purpose

The purpose of this Rule is to set forth rules and procedural requirements which the

    Commissioner commissioner deems necessary to carry out the provisions of Ark. Code

Ann. ??23-67-201, et seq., ?23-67-219, ?23-79-109 and ?23-79-110, as to rate and form

    filings of property, casualty, surety, and marine insurers.

Section 2. Authority

This Rule is issued pursuant to the authority vested in the ommissioner commissioner by

    Ark. Code Ann. ?23-61-108, ??25-15-202 et seq., ?23-67-218, Act 1697 of 2005, and

    Act 506 of 2005, and other applicable provisions of Arkansas law.

Section 3. Applicability and Scope

This Rule applies to insurance described in Ark. Code Ann. ?23-67-203, and ?23-67-501,

    and insurers, rate service or advisory organizations, joint underwriting associations and

    joint reinsurance organizations making filings under Ark. Code Ann. ??23-67-201, et

    seq., ?23-67-219, ??23-67-501, et seq., and ??23-79-109, et seq., subject to any

    exemptions the ommissioner commissioner may order pursuant to Ark. Code Ann. ?23-67-206.

Section 4. EFFECTIVE DATE.

Pursuant to the Commissioner's authority under Ark. Code Ann. ?23-61-108, ??25-15-

    201, et seq., and other applicable laws and rules, the effective date of this Rule is May 1,

    2006.

Section 5. Definitions

A. Form Filing.

A form filing is documentation setting forth the policy forms, endorsements or other

    forms to be used in the State of Arkansas by an insurer.

B. Insurance Holding Company Group.

    An insurance holding company group or system consists of two (2) or more affiliated companies, one or more of which is an insurer as defined in Ark. Code Ann. ?23-63-

    503(3) and Arkansas Insurance Department (“Department”) Rule 15.

C. Expenses.

Expenses mean those parts of a rate attributable to acquisition, commissions, selling,

    inspection, audit, field supervision, collection, general expenses, taxes, licenses and fees.

D. Rate.

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Rate means the cost of insurance per exposure unit, whether expressed as a single

    number or as prospective loss cost and an adjustment to account for the treatment of

    expenses, profit and variations in loss experience, prior to any application of individual

    risk variations based on loss or expense considerations, and does not include minimum

    premiums.

E. Supplementary Rate Information

Supplementary rate information means any manual, minimum premium, rating

    schedule or plan of policy writing rules, rating rules, classification system, territory codes

    and descriptions, rating plans and any other similar information needed to determine,

    clarify or support the applicable premium for an insured. Supplementary rate information includes factors and relativities, such as increased limits factors, classification relativities,

    deductible relativities or similar factors.

F. Supporting Information.

    Supporting information means information, including supporting actuarial data, which includes (i) the experience and judgment of the insurer and the experience or data of

    other insurers or advisory organizations relied upon by the insurer, (ii) the interpretation

    of any statistical data relied upon by the insurer, (iii) descriptions of methods used in

    making the rates, and (iv) actuarial, technical or other services made available by an

    advisory organization, or other similar information required to be filed by the

    ommissioner commissioner to explain, clarify or justify a filing.

G. Prospective Loss Costs.

    Prospective loss costs means that portion of a rate that does not include provisions for expenses (other than loss adjustment expenses) or profit, and are based on historical

    aggregate losses and loss adjustment expenses adjusted through development to their

    ultimate value and projected through trending to a future point in time.

H. Participating Insurer.

    Participating insurer means any member, subscriber or service purchaser of an advisory organization.

Section 6. Rate Service Organizations

A. Advisory Organizations - Permitted Activity.

Every advisory organization shall file with the Department every advisory document

    thirty (30) days prior to the effective date. The Department may extend the review period

    an additional thirty (30) days by written notice to the filer before the thirty (30) day

    period expires. Any advisory organization, in addition to other activities permitted, is

    authorized to:

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     1. Prepare and distribute rates, supplementary rate information and

    supporting information in accordance with Ark. Code Ann. ?23-67-216 and ?23-67-219;

    however, such filings are for advisory purposes only and shall not be made on behalf of

    any insurer.

     2. Prepare and file on behalf of members and subscribers, policy forms and

    endorsements and consult with members, subscribers and others relative to their use and

    application. Every company that is a member or subscriber shall use these forms as filed

    on its behalf unless it advises the commissioner of either its intention not to adopt, to

    delay one or more of the forms filed, or to file its own forms. If its intention is to adopt,

    not adopt, or delay implementation, then a letter stating its intention is sufficient.

     3. An advisory organization may develop and make reference filings

    containing advisory prospective loss costs in accordance with Ark. Code Ann.

    ?23-67-216. Such filings shall contain the statistical data and supporting information for

    any calculations or assumptions underlying those prospective loss costs.

     4. The commissioner may require members and subscribers to provide

    information regarding their use of specific advisory organization forms.

     45. Final rates for residual markets may be prepared and filed by Plan

    Administrator Administrators as directed by the Department.

B. Advisory Organizations - Prohibited Activity.

     1. An advisory organization cannot file any plan of rates or supplementary

    rate information on behalf of an insurer.

     2. An advisory organization cannot file, distribute or compile

    recommendations relating to rates that include expenses (other than loss adjustment

    expenses) or profit except in the lines of insurance as may be designated by the

    ommissioner commissioner. An advisory organization may, however, provide insurers

    with an annual study of aggregate average expense data and investment income.

Section 7. Procedures for Rate and Supplementary Rate Information Filings

A. For All Lines Other Than Workers' Compensation and Employers' Liability.

1. Filing Cover.Property and Casualty Transmittal Documents.

     a. If a copy of the filing, bearing the appropriate stamp of the Department, is

    to be returned to the filer, two (2) copies of the filing cover Property and Casualty Transmittal Document or letter of submission and filing are required together with a postage-paid envelope large enough to accommodate the return filing and addressed to

    the filing insurer, insurance holding company or group, or advisory organization.

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Insurance holding company groups submitting rate filings simultaneously for affiliated

    companies must file a cover letter Property and Casualty Transmittal Document for each

    affiliated company. A copy of the Property and Casualty Transmittal Document shall be

    included for each company. Only one (1) complete copy of the rate documents and

    supporting information need be filed for Departmental records if the documents are

    applicable to all affiliated companies. However, if there are any deviations between or

    among affiliated companies, supporting information must be submitted for each company

    along with separate cover letters outlining the deviations. Each company must submit in

    the cover letter Property and Casualty Transmittal Document or attached explanatory memorandum a synopsis of each exhibit, the location of the supporting information

    within the filing, and the conclusion of the data. In addition, the entire filing packet,

    consisting of all filings, supporting information and exhibits, shall be sequentially

    numbered or contain a table of contents, and the total number of pages comprising the

    filing packet shall be referenced in the filing cover.

     b. Except for those lines covered by Ark. Code Ann. ??23-67-501, et seq.

    after May 1, 2006, In in a competitive market, as defined under Ark. Code Ann.

    ?23-67-202(2), insurers shall submit to the Department filings with a proposed effective

    date. Such proposed effective date shall not be less than twenty (20) days after the filing

    and all information required by Section 7(A)(2) below in this Rule, has been received by the Department,or sooner if approved by the commissioner. If the information required by Ark. Code Ann. ??23-67-201, et seq. and this Rule is not included with the filing, the filing shall be disapproved.

     c. In a competitive market, if the Department determines after a hearing or

    by agreement that an insurer's rates require closer supervision because of the insurer's

    financial condition or its rating practices, the insurer shall file with the Department at

    least sixty (60) days prior to the effective date all such rates and such supplementary rate

    information and supporting information as prescribed by the Department. Upon

    application by the filer, the Department may authorize an earlier effective date. A filing

    shall be deemed to meet the requirements of Ark. Code Ann. ??23-67-201, et seq., and to

    be effective upon the expiration of the waiting period.

     d. In a noncompetitive market, insurers shall file with the Department rates,

    supplementary rate information, and supporting information required by the Department

    at least sixty (60) days prior to the effective date. Written applications for the

    Department's approval of an earlier effective date, stating clearly the insurer's reasons for

    the request, must accompany the filing. A filing shall be deemed to meet the

    requirements of Ark. Code Ann. ??23-67-201, et seq. and to be effective upon the expiration of the waiting period.

     e. Effective May 1, 2006, for those lines of insurance covered by Ark. Code

    Ann. ??23-67-501, et seq., comprising the professional malpractice lines, except for

    officers and directors liability and fiduciary insurance, all rates must be either approved

    and disapproved within sixty (60) days from filing. No rate may be used until it is

    approved by the commissioner, pursuant to Act 1697 of 2005.

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2. Supporting Information Required to Supplement a Filing.

     a. Each rate and rule filing submitted shall the Rate Filing Abstract (Form

    RF-1) include the rate and rule transmittal documents. If you are making a loss cost

    reference filing, see Section 7(A)(3) of this Rule. Rate and rule filings for Homeowners

    Insurance and Private Passenger Automobile Insurance must also include the Private

    Passenger Automobile Abstract (Form A-1), Survey Form APCS or Homeowners

    Abstract (Form H-1) and Survey Form HPCS. If the filing does not affect the APCS or

    HPCS previously filed, then a statement in a cover letter or on the transmittal document

    to that effect is acceptable. Rate and form filings must be made separately. (See Section

    8, Procedures for Form Filings, below in this Rule). The following required

    documentation should be identified as an exhibit in the filing, and the exhibits should be

    numbered to correspond directly with the listing of documentation. If an item required is

    not available or is inapplicable, a statement should be included that specifies the

    inapplicability or unavailability of the particular item.

     b. Explain the type of loss information utilized in this rate filing. Specify

    whether the data reflects a calendar period, accident period, or policy period.

     (1) If calendar period information is used, explain any adjustments that

    have been made to reflect changes in those estimated loss liabilities based on actual

    claims, and changes in incurred but not reported estimated loss liabilities. If a provision

    for incurred but not reported estimated loss liabilities is included, specify the calculation

    changes over the experience period, and the distribution among coverages and states.

    Loss development factors should be shown by coverage both for Arkansas and

    countrywide for the past five (5) years.

     (2) If policy or accident period data is used, explain any tests or

    adjustments that were made to loss development factors so as to make them appropriate

    for use in this filing. Loss development factors should be shown by coverage both for

    Arkansas and countrywide for the past five (5) years.

     c. If the methods used in this filing differ from those used in the insurer's last

    rate filing for this coverage in Arkansas, or if the Arkansas methods differ from those

    used countrywide, attach an explanation of the differences.

     d. Explain any adjustments for large or catastrophic losses that were made in

    the statistical information on losses.

     e. Display the calculation of the estimate of investment income on net

    unearned premiums and loss reserves.

     f. Display the calculation of any loading or contingency factor which is used

    in this filing.

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     g. Display underwriting expenses. State procedures used in the filing to

    recognize the distinction between expenses which vary directly with losses, and expenses

    such as general expenses, which do not vary.

     h. State steps taken to control losses for the coverages included in this filing.

     i. Explain any adjustments made by the trending components of the filing.

    If significant trends within this State are utilized, a narrative describing the basis of the

    trend must be included.

     j. The determination of the weighting of credibility assigned to Arkansas

    must be fully explained.

     k. If common classes are grouped together for ratemaking purposes because

    the data for one particular class is not credible either for Arkansas or countrywide, all

    class codes utilized in developing credibility must be stated with Arkansas experience for

    each class affected shown separately.

     l. Any additional information the Department may require pursuant to Ark.

    Code Ann. ??23-67-202(11) (12) and ??23-67-401 through 415 must be included.

3. Reference Filings.

     a. If an insurer is a participating insurer in an advisory organization and

    decides to use the prospective loss costs in a reference filing in support of its own filing,

    the insurer shall make a filing using the Reference Filing Adoption Form (Form RF-2), in

    addition to the Rate Filing Abstract (Form RF-1) applicable rate and rule transmittal

    document. The insurer's rates are the combination of the prospective loss costs and the

    loss cost adjustments contained in Form RF-2. Reference filings for Homeowners must

    also include the Homeowners Abstract (Form H-1) and Survey Form HPCS. Private

    Passenger Automobile reference filings shall include the Private Passenger Automobile

    Abstract (Form A-1) and Survey Form APCS.

     b. Any participating insurer in an advisory organization may satisfy its

    obligation to file rates, the prospective loss costs portion of its rates, supplementary rate

    information or supporting information, by filing a reference to a filing made by the

    advisory organization. Such reference filings must include, othe advisory organization's

    reference document number.

4. Deviations

An insurer may file a deviation from the reference document as filed by the advisory

    organization. Such filings shall specify the basis for and adequately justify the request for

    the deviation and shall be accompanied by the information required in Section 7(A)(2) of

    this Rule.

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5. Loss Cost Filings.

     a. An insurer wishing to adopt an advisory organization's current loss cost

    filing must:

     (1) Provide the documentation required in Section 7(A)(2) of this Rule,

    indicating whether or not the loss cost multiplier is to be applicable to future filings.

     (2) Provide documentations to support the development of the

    company's loss cost adjustments.

     (3) Pay the appropriate fees.

     (4) Indicate the insurer's proposed effective date.

     b. Upon subsequent revision by an advisory organization of a loss cost filing,

    an insurer having requested to have its loss cost adjustment applicable to subsequent

    filings must:

     (1) Give notice of its intent to adopt by submitting a cover letter so

    stating and provide the advisory organization's reference document number.

     (2) Pay the appropriate fees.

     (3) Provide a copy of the previously filed Form RF-2 indicating that

    the loss cost modifier will be applicable to future filings.

     c. If an insurer who has filed to have its loss cost adjustments remain on file

    with the Department intends to delay, modify, or not adopt a particular advisory

    organization's loss cost reference filing, the insurer must notify the Department in writing.

    The insurer's on-file loss cost adjustments will shall remain in effect until disapproved by the Department, withdrawn by the insurer, or until the insurer files and receives approval of a requested change submitted on a revised Form RF-2.

     d. To the extent that an insurer's final rates are determined solely by applying

    its loss cost adjustments to the prospective loss costs contained in an advisory

    organization's reference filing, the insurer need not develop or file its final rate pages

    with the Department. If an insurer chooses to print and distribute final rate pages for its

    own use, based solely upon the application of its filed loss cost adjustments to an

    advisory organization's prospective loss costs, the insurer must file those pages with the

    Department. If the advisory organization does not print the loss costs in its rating manual,

    the insurer must submit its rates to the Department.

     e. Nothing in these procedures shall be construed to require advisory

    organizations or their participating insurers to immediately re-file rates previously

    implemented. Any participating insurer of an advisory organization is authorized to

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continue to use all rates and deviations filed for its use until disapproved, or the insurer

    makes its own filing, or files Form RF-2 adopting the advisory organization's prospective

    loss costs or a modification thereof.

    6. Property & Casualty Transmittal Documents

All filings made under subsections 1, 3, 4 and 5 of Section 7(A) of this Rule, unless

    otherwise stated, must include the Property & Casualty Transmittal Document.

B. Procedures for Rate and Supplementary Rate Information Filings. For

    Workers' Compensation and Employers' Liability Insurance.

,All Classification manuals, rules and rates, rating plans, and every modification of any of

    the foregoing which an insurer proposes to use for workers' compensation and employers'

    liability insurance must shall be approved, or deemed approved, by this Department

    before such manual manuals, rules, and rates or rating plan can be used. Insurers may file independently or by reference to the loss costs, supporting information or

    supplementary rate information filed by an advisory organization. Insurers may file

    deviations to the loss costs filed by an advisory organization.

1. Filing Cover.

If a copy of the filing, bearing the appropriate stamp of the Department, is to be returned

    to the filer, two (2) copies of the filing cover Property and Casualty Transmittal

    Document or letter of submission are required, together with a postage-paid envelope

    large enough to accommodate the return filing and addressed to the filing insurer, insurance holding company or group, or advisory organization. Insurance holding

    company groups submitting rate filings simultaneously for affiliated companies must file

    a cover letter Property and Casualty Transmittal Document for each affiliated company. A copy of the Property and Casualty Transmittal Document shall be included for each

    company. Only one (1) complete copy of the rate documents and supporting information

    need be filed for Departmental records, if the documents are applicable to all affiliated companies. However, if there are any deviations between or among affiliated companies,

    supporting information must be submitted for each company along with separate cover

    letters Property and Casualty Transmittal Documents outlining the deviations. Each company must submit in the cover letter or attached explanatory memorandum a synopsis

    of each exhibit, the location of the supporting information within the filing, and the

    conclusion of the data. In addition, the entire filing packet, consisting of all filings,

    supporting information and exhibits, shall be sequentially numbered or contain a table of

    contents, and the total number of pages comprising the filing packet shall be referenced

    in the filing cover.

2. Supporting Information Required to Supplement the Filing.

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     a. Each rate and rule filing submitted shall be accompanied by the Rate

    Filing Abstract (Form RF-1). If you are making a loss cost reference filing, see Section 7(B)(5) of this Rule. Rate and form filings must be made separately. The following

    required documentation should be identified as an exhibit to the filing, and the exhibits should be numbered to correspond directly with the listing of documentation. If an item required is not available or is inapplicable, a statement should be included that specifies the inapplicability or unavailability of the particular item.

     b. Explain the type of loss information utilized in this rate filing. Specify

    whether the data reflects a calender calendar period, accident period, or policy period.

     (1) If calendar period information is used, explain any adjustments that

    have been made to reflect changes in those estimated loss liabilities based on actual

    claims, and changes in incurred but not reported estimated loss liabilities. If a provision for incurred but not reported estimated loss liabilities is included, specify the calculation changes over the experience period, and the distribution among coverages and states.

    Loss development factors should be shown by coverage both for Arkansas and

    countrywide for the past five (5) years.

     (2) If policy or accident period data is used, explain any tests or

    adjustments that were made to loss development factors, so as to make them appropriate

    for use in this filing. Loss development factors should be shown by coverage both for

    Arkansas and company-wide for the past five (5) years.

     c. If the methods used in this filing differ from those used in the insurer's last

    rate filing for this coverage in Arkansas, or if the Arkansas methods differ from those used countrywide, attach an explanation of the differences.

     d. Explain any adjustments for large or catastrophic losses that were made in

    the statistical information on losses.

     e. Display the calculation of the estimate of investment income on net

    unearned premiums and loss reserves.

     f. Display the calculation of any loading or contingency factor used in this

    filing.

     g. Display underwriting expenses. State procedures used in the filing to

    recognize the distinction between expenses which vary directly with losses, and expenses such as general expenses, which do not vary.

     h. State steps taken to control losses for the coverages included in this filing.

     i. Explain any adjustments made by the trending components of the filing.

    If significant trends within this State are utilized, a narrative describing the basis of the trend must be included.

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