[Federal Register Volume 61, Number 184 (Friday, September 20, 1996)]
[Notices]
[Pages 49506-49507]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24081]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26574]


Filings Under the Public Utility Holding Company Act of 1935, As 
Amended (``Act'')

September 13, 1996.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated thereunder. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendments thereto is/are available for public 
inspection through the Commission's Office of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by October 7, 1996, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 20549, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in case of an attorney at law, by 
certificate) should be filed with the request. Any request for hearing 
shall identify specifically the issues of fact or law that are 
disputed. A person who so requests will be notified of any hearing, if 
ordered, and will receive a copy of any notice or order issued in the 
matter. After said date, the application(s) and/or declaration(s), as 
filed or as amended, may be granted and/or permitted to become 
effective.

The Columbia Gas System, Inc. (70-8905)

    The Columbia Gas System, Inc. (``Columbia''), 12355 Sunrise Valley 
Drive, Suite 300, Reston, Virginia 20191-3420, a registered holding 
company, has filed an application-declaration under sections 9(a), 10, 
and 12(b) of the Act and rule 45 thereunder.
    Columbia proposes to form a wholly owned direct subsidiary company 
(``Captive'') to engage in the business of reinsuring certain 
commercial insurance bought by Columbia, its subsidiaries and 
affiliates, from certain commercial insurance companies, such as 
Travelers Insurance Companies.\1\ Columbia seeks authorization to fund 
the Captive up to an aggregate principal amount of $3 million by 
providing up to: (1) $1 million in capital contributions and/or cash in 
exchange for Captive common stock, $25 par value; and (2) $2 million in 
letters of credit under Columbia's credit facility (``Letters of 
Credit'') previously authorized by the Commission. If payment is 
required under any Letter of Credit, Columbia would reimburse the 
issuing bank, and the amount paid would be treated as a capital 
contribution to Captive.
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    \1\ Affiliates would include project companies in which 
subsidiaries of Columbia have an equity interest.
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    Currently, the risk management department of Columbia purchases a 
broad array of insurance coverages for automobile, general liability 
and ``all risk'' property losses. Columbia maintains an underlying 
deductible of $200,000 per event for automobile and general liability 
coverage, and $50,000 per event for ``all-risk'' property coverage. In 
excess of these deductibles, Columbia purchases commercial insurance. 
Subsidiaries of Columbia, regardless of size and business needs, have 
no choice as to deductibles. Commercial premiums are then allocated to 
subsidiaries based on such factors as number of automobiles, total 
property values, revenues and product throughput. A subsidiary's 
individual loss experience is not considered for purposes of allocating 
premium expenses.
    Under the new program, the Captive would assume the risk of the 
more ``predictable'' loss layer from the commercial insurers, for 
losses between up to $2 million for automobile and general liability 
losses per event and up to $750,000 for ``all-risk'' property losses 
per event.\2\ Each subsidiary would be given a choice of deductible, 
and premiums would be based on that choice and on the subsidiary's 
prior loss experience. With this exception, premium allocations would 
continue to be made on the basis of the factors described above. 
Commercial insurance would continue to be purchased for 
``unpredictable'' losses above $2 million and $750,000, respectively, 
just as is done under the current program. Premiums for the first year 
which were actuarially determined to equal the aggregate predictable 
loss plus administrative expenses are estimated at $4.2 million, which, 
when aggregated with $3 million of funding, give the Captive a total of 
$7.2 million plus interest to respond to claims during the first year. 
In the event of losses exceeding this amount, commercial insurance will 
respond to any claims in excess of the aggregate and retention.
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    \2\ Columbia will use its own ten-year loss experience to 
identify actuarially its ``predictable'' losses for automobile, 
general liability and ``all-risk'' property losses and underwriting 
such losses through the Captive. Captive may, in the future, expand 
its coverage into such areas as workers' compensation, director and 
officer liability, legal malpractice, performance bonds and warranty 
programs offered to consumers.
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    Captive would not be an admitted commercial insurer in the United 
States, but instead would operate as an insurance company in Bermuda 
and work through admitted commercial insurers.\3\ A Bermuda management 
company will be retained to provide administrative services. Columbia 
employees will be directors of the Captive, and employees of Columbia's 
service corporation will be principal officers. Time and expenses will 
be billed to the Captive and recovered in premiums.
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    \3\ Although the Columbia system public-utility companies would 
not deal with an associate company directly, Columbia intends to 
review the proposed arrangements concerning the Captive with the 
interested state commissions.
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    To assure the financial strength and integrity of the Captive, 
which must comply with strict Bermuda capital to

[[Page 49507]]

premium requirements of $1 of capital for every $5 of net premium, 
aggregate ``stop loss'' protection will be arranged from a commercial 
insurer.
    To the extent that premiums and interest earned exceed current 
claims and expenses, an appropriate reserve would be accumulated to 
respond in years when claims and expenses exceed premiums. To the 
extent that losses over the long term are lower than projected, 
premiums would be appropriately reduced. Excess cash would be invested 
in accordance with Columbia's investment guidelines.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 96-24081 Filed 9-19-96; 8:45 am]
BILLING CODE 8010-01-M