Current through Register Vol. 43, No. 02, November 27, 2024
(1) Every insurer
required to file an audited financial report pursuant to this chapter that has
annual direct written and assumed premiums, excluding premiums reinsured with
the Federal Crop Insurance Corporation and Federal Flood Program, of
$500,000,000 or more shall prepare a report of the insurer's or group of
insurers' internal control over financial reporting, as these terms are defined
in rule 482-1-141-.03. The report shall
be filed with the commissioner along with the Communication of Internal Control
Related Matters Noted in an audit described under rule
482-1-141-.il. Management's Report of Internal Control
over Financial Reporting shall be as of December 31 immediately preceding.
(2) Notwithstanding the premium
threshold in paragraph (1), the commissioner may require an insurer to file
Management's Report of Internal Control over Financial Reporting if the insurer
is in any RBC level event, or meets any one or more of the standards of an
insurer deemed to be in hazardous financial condition as defined in Chapter
482-1-101.
(3) An insurer or a
group of insurers that is
(a) directly subject
to Section 404;
(b) part of a
holding company system whose parent is directly subject to Section
404;
(c) not directly subject to
Section 404 but is a SOX Compliant Entity; or
(d) a member of a holding company system
whose parent is not directly subject to Section 404 but is a SOX Compliant
Entity; may file its or its parent's Section 404 Report and an addendum in
satisfaction of this rule
482-1-141-.17 requirement
provided that those internal controls of the insurer or group of insurers'
audited statutory financial statements (those items included in paragraphs (2)
through (7) of Rule
482-1-141-.05 were included in
the scope of the Section 404 Report. The addendum shall be a positive statement
by management that there are no material process with respect to the
preparation of the insurer's or group of insurers' audited statutory financial
statements (those items included in paragraphs (2) through (7) of Rule
482-1-141-.05 excluded from the
Section 404 Report. If there are internal controls of the insurer or group of
insurers that have a material impact on the preparation of the insurer's or
group of insurer's audited statutory financial statements and those internal
controls were not included in the scope of the Section 404 Report, the insurer
or group of insurers may either file (i) a rule
482-1-141-.17 report, or (ii) the
Section 404 Report and a rule
482-1-141-.17 report for those
internal controls that have a material impact on the preparation of the
insurer's or group of insurers' audited statutory financial statements not
covered by the Section 404 Report.
(4) Management's Report of internal Control
over Financial Reporting shall include all of the following:
(a) A statement that management is
responsible for establishing and maintaining adequate internal control over
financial reporting.
(b) A
statement that management has established internal control over financial
reporting and an assertion, to the best of management's knowledge and belief,
after diligent inquiry, as to whether its internal control over financial
reporting is effective to provide reasonable assurance regarding the
reliability of financial statements in accordance with statutory accounting
principles.
(c) A statement that
briefly describes the approach or processes by which management evaluated the
effectiveness of its internal control over financial reporting.
(d) A statement that briefly describes the
scope of work that is included and whether any internal controls were
excluded.
(e) Disclosure of any
unremediated material weaknesses in the internal control over financial
reporting identified by management as of December 31 immediately preceding.
Management is not permitted to conclude that the internal control over
financial reporting is effective to provide reasonable assurance regarding the
reliability of financial statements in accordance with statutory accounting
principles if there is one or more unremediated material weaknesses in is
internal control over financial reporting.
(f) A statement regarding the inherent
limitations of internal control systems.
(g) Signatures of the chief executive officer
and the chief financial officer (or equivalent position/title).
(5) Management shall document and
make available upon financial condition examination the basis upon which its
assertions, required in paragraph (4), are made. Management may base its
assertions, in part, upon its review, monitoring and testing of internal
controls undertaken in the normal course of its activities.
(a) Management shall have discretion as to
the nature of the internal control framework used, and the nature and extent of
documentation, in order to make its assertion in a cost effective manner and,
as such, may include assembly of or reference to existing
documentation.
(b) Management's
Report on Internal Control over Financial Reporting, required by paragraph (1),
and any documentation provided in support thereof during the course of a
financial condition examination, shall be kept confidential by the state
insurance department.
Previous Rule .16 was renumbered .17 per certification filed
June 14, 2018; effective January 1,
2019.
Author: Commissioner of Insurance
Statutory Authority:
Code of Ala.
1975, §§
27-2-17,
27-3-26,
27-7-43.