Mont. Code Ann. §33-2-1113 — what it says, and how the exam tests it

33-2-1113. Transactions with affiliates -- standards. (1) Material transactions by registered insurers with their affiliates are subject to the following standards: (a) The terms must be fair and reasonable. (b) Charges or fees for services performed must be reasonable. (c) Expenses incurred and payments received must be allocated to the insurer in conformity with customary insurance accounting practices consistently applied. (d) The books, accounts, and records of each party must clearly and accurately disclose the precise nature and details of the transactions, including any accounting information necessary to support the reasonableness of the charges or fees to the respective parties. (e) The insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates must be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs. (2) (a) The following transactions involving a domestic insurer and a person in its holding company system, including amendments or modifications to affiliate agreements previously filed under this section, may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into a transaction within at least 30 days prior to the transaction, or a shorter period as the commissioner may permit, and the commissioner does not disapprove the transaction: (i) sales, purchases, exchanges, loans or extensions of credit, guaranties, or investments if, as of the prior December 31, the transactions are equal to or exceed: (A) with respect to insurers other than life insurers, the lesser of 3% of the insurer's admitted assets or 25% of its surplus as regards policyholders; and (B) with respect to life insurers, 3% of the insurer's admitted assets; (ii) loans or extensions of credit to a person who is not an affiliate if the insurer makes the loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in an affiliate of the insurer making the loans or extensions of credit if the transactions, as of the prior December 31, are equal to or exceed: (A) with respect to insurers other than life insurers, the lesser of 3% of the insurer's admitted…