Current through 2024-38, September 18, 2024
A. Except as otherwise provided in this Rule,
the Superintendent shall recognize an independent certified public accountant
as qualified as long as he or she conforms to the standards of his or her
profession, as contained in the Code of Professional Ethics of the American
Institute of Certified Public Accountants and the rules of the Maine Board of
Accountancy, or similar code; and as long as the accountant is in good standing
with the American Institute of Certified Public Accountants and in all states
in which the accountant is licensed to practice, and if applicable with the
Public Company Accounting Oversight Board, or, for a Canadian or British
company, is a chartered accountant in good standing.
B. The Superintendent shall not recognize a
person or firm as a qualified independent certified public accountant if the
person or firm:
(1) Is out of compliance with
the requirements of Subsection A of this Section; or
(2) Has either directly or indirectly entered
into any agreement of indemnity or release from liability with respect to the
audit of the insurer, including any arrangement where the intent or effect is
to shift or limit in any manner the potential liability of the person or firm
for failure to adhere to applicable auditing or professional standards.
Indemnification agreements are not permitted even if the liabilities to be
indemnified result in part from knowing or other misrepresentations made by the
insurer or its representatives. This Paragraph does not prohibit the purchase
of appropriate professional liability insurance from a carrier unaffiliated
with the insurer, nor does it prohibit the accountant from pursuing an action
for contribution or other legal recourse against the insurer.
C. An insurer may enter into an
agreement with a qualified independent certified public accountant to have
disputes relating to an audit resolved by mediation or arbitration. However, in
the event of a delinquency proceeding commenced against the insurer under 24-A
M.R.S.A. Chapter 57, the mediation or arbitration provisions shall operate at
the option of the statutory successor.
D. No accounting firm partner or other
individual serving as the lead partner or audit manager with primary
responsibility for rendering a report may act in that capacity for the same
insurer or one or more of its insurance subsidiaries or affiliates for more
than five consecutive years. Following a period of service, the individual
shall be disqualified from acting in that or a similar capacity for the same
company or its insurance subsidiaries or affiliates for a period of five years.
(1) An insurer may make application to the
Superintendent, at least thirty (30) days before the end of the calendar year,
for relief from the requirements of this Subsection on the basis of unusual
circumstances. The Superintendent may consider the following factors in
determining whether the relief should be granted:
(a) The number of partners in the firm, the
expertise of the partners, and the number of insurance clients of the
firm;
(b) The premium volume of the
insurer; and
(c) The number of
jurisdictions in which the insurer transacts business.
(2) An insurer granted relief under Paragraph
(1) shall file a copy of the Superintendent's approval with the NAIC, in an
electronic format acceptable to the NAIC, and shall make such additional
filings as may be required by any state in which the insurer is
licensed.
E. The
Superintendent shall not recognize an individual as a qualified independent
certified public accountant, nor accept an annual audited financial report
prepared in whole or in part by an individual, if he or she:
(1) Has been convicted of fraud, bribery, a
violation of the Racketeer Influenced and Corrupt Organizations Act,
18
U.S.C. §§
1961 to
1968,
or any dishonest conduct or practices under federal or state law;
(2) Has been found to have violated the
insurance laws of this state with respect to any previous reports submitted
under this Rule; or
(3) Has
demonstrated a pattern or practice of failing to detect or disclose material
information in previous reports filed under the provisions of this
Rule.
F. The
Superintendent shall not recognize an individual or firm as a qualified
independent certified public accountant, nor accept an annual audited financial
report prepared in whole or in part by an individual or firm, if the individual
or firm provides to the insurer, contemporaneously with the audit, any services
that would impair the accountant's independence from the insurer by causing the
accountant to function in the role of management, to have the authority to
audit the accountant's own work, or to serve in an advocacy role for the
insurer.
(1) The following non-audit services
violate this Subsection, unless authorized by the Superintendent pursuant to
Paragraph 2:
(a) Bookkeeping or other
services related to the accounting records or financial statements of the
insurer;
(b) Financial information
systems design and implementation;
(c) Appraisal or valuation services, fairness
opinions, or contribution-in-kind reports;
(d) Actuarially-oriented advisory services
involving the determination of amounts recorded in the financial statements.
The accountant may assist an insurer in understanding the methods, assumptions,
and inputs used in the determination of amounts recorded in the financial
statement only if it is reasonable to conclude that the services provided will
not be subject to audit procedures during an audit of the insurer's financial
statements. An accountant's actuary may also issue an actuarial opinion or
certification on an insurer's reserves if the following conditions have been
met:
(i) Neither the accountant nor the
accountant's actuary has performed any management functions or made any
management decisions;
(ii) The
insurer has competent personnel (or engages a third party actuary) to estimate
the reserves for which management takes responsibility; and
(iii) The accountant's actuary tests the
reasonableness of the reserves after the insurer's management has determined
the amount of the reserves;
(e) Internal audit outsourcing
services;
(f) Management functions
or human resources;
(g) Broker or
dealer, investment adviser, or investment banking services;
(h) Legal services or expert services
unrelated to the audit; or
(i) Any
other services that the Superintendent determines are impermissible.
(2) The Superintendent may exempt
an insurer from the prohibitions of Paragraph 1 for any calendar year in which
the insurer has direct written and assumed premiums of less than $100,000,000
and files a written request with the Superintendent, at least 30 days before
the end of the calendar year, explaining the nature of the non-audit services
to be provided and demonstrating to the satisfaction of the Superintendent that
strict compliance with the required separation of functions would impose an
unreasonable financial or organizational hardship upon the insurer, and that
the services to be provided will not compromise the integrity of the
audit.
(3) A qualified independent
certified public accountant who performs the audit may engage in non-audit
services that are not described in Paragraph 1, including tax services, only if
the insurer is a SOX-Compliant Insurer as defined in Section
16 or if the activity is approved in
advance by the Audit Committee in accordance with Subsection H. The Audit
Committee may delegate the approval authority to one or more designated members
of the Audit Committee if the decisions of any member to whom this authority is
delegated are presented to the full Audit Committee for review at each of its
scheduled meetings.
(4) The
Superintendent shall consider the analogous provisions of Securities and
Exchange Commission Final Rule No. 33-8183,
Strengthening the
Commission's Requirements Regarding Auditor Independence (adopted
January 28, 2003), when evaluating whether an accountant is performing services
that would impair the accountant's independence. The SEC Rule may be found
online at
http://www.sec.gov/rules/final/33-8183.htm.
G. If the Superintendent
determines that an accountant is not qualified, the insurer shall replace the
accountant with another whose relationship with the insurer is qualified within
the meaning of this Rule. If the insurer contests the Superintendent's
determination, the Superintendent shall hold an adjudicatory hearing pursuant
to
24-A M.R.S.A.
§229.
H. All auditing services and non-audit
services provided to an insurer by the qualified independent certified public
accountant of the insurer must be preapproved by the Audit Committee, except
for non-audit services satisfying all of the following criteria:
(1) The aggregate amount of all non-audit
services provided to the insurer constitutes not more than five percent (5%) of
the total amount of fees paid by the insurer to its qualified independent
certified public accountant during the fiscal year in which the non-audit
services are provided;
(2) The
services were not recognized by the insurer at the time of the engagement to be
non-audit services; and
(3) The
services are promptly brought to the attention of the Audit Committee and
approved prior to the completion of the audit by the Audit Committee or by one
or more members of the Audit Committee who are the members of the board of
directors to whom authority to grant such approvals has been delegated by the
Audit Committee.
I. The
Superintendent shall not recognize an independent certified public accountant
as qualified for a particular insurer if a member of the board, president,
chief executive officer, controller, chief financial officer, chief accounting
officer, or any person serving in an equivalent position for that insurer, was
employed by the independent certified public accountant and participated in the
audit of that insurer during the one-year period preceding the date that the
most current statutory opinion is due as a partner or senior manager. An
insurer may make application to the Superintendent for relief from the
requirements of this Subsection on the basis of unusual circumstances. An
insurer granted relief shall file a copy of the Superintendent's approval with
the NAIC, in an electronic format acceptable to the NAIC, and shall make such
additional filings as may be required by any state in which the insurer is
licensed.
