Current through 2024-13, March 27, 2024
1. The
filing entity shall be as descriptive as possible in completing the CGAD, with
inclusion of attachments or example documents that are used in the governance
process, since these may provide a means to demonstrate the strengths of their
governance framework and practices. For purposes of this section, governance of
the filing entity includes governance at any higher level within the holding
company system that exercises direct or indirect operational control over the
filing entity.
2. The CGAD shall
describe the filing entity's corporate governance framework and structure,
including consideration of the following:
A.
The Board and the committees that are ultimately responsible for overseeing the
domestic insurance carrier and the level(s) at which that oversight occurs
(e.g., ultimate control level, intermediate holding company,
legal entity). The filing entity shall describe and discuss the rationale for
the current Board size and structure;
B. The duties of the Board and each of its
significant committees and how they are governed (e.g.,
bylaws, charters, informal mandates), and how the Board's leadership is
structured, including a discussion of the roles of Chief Executive Officer
(CEO) and Chair of the Board within the organization; and
C. If the filing entity is not the domestic
insurance carrier, the relationship between the filing entity's Board and
senior management and the domestic insurance carrier's board and senior
management.
3. The
filing entity shall describe the policies and practices of the most senior
governing entity and significant committees thereof, including a discussion of
the following factors:
A. How the
qualifications, expertise, and experience of each Board member meet the needs
of the filing entity.
B. How an
appropriate degree of independence is maintained on the Board and its
significant committees.
C. The
number of meetings held by the Board and its significant committees over the
past year, and a record of director attendance.
D. How the filing entity identifies,
nominates, and elects members to the Board and its committees. The discussion
should include, for example:
(1) Whether a
nominating committee is in place to identify and select candidates;
(2) Whether term limits are placed on
directors;
(3) How the election and
re-election processes function; and
(4) Whether there is a Board diversity
policy, and if so, how it functions.
E. The processes for the Board to evaluate
its performance and the performance of its committees, and any recent measures
taken to improve performance (including any Board or committee training
programs that have been put in place).
4. The filing entity shall describe the
policies and practices for directing senior management, including a description
of the following factors:
A. Any suitability
standards and other processes or practices to determine whether officers and
key persons in control functions have the appropriate background, experience,
and integrity to fulfill their prospective roles, including:
(1) The specific positions for which
suitability standards have been developed and a description of the standards
employed; and
(2) How the filing
entity monitors and evaluates changes in an officer's or key person's
suitability, and any such changes that the filing entity has
identified.
B. The
filing entity's code of business conduct and ethics, including standards for:
(1) Compliance with laws, rules, and
regulations; and
(2) Proactive
reporting of any illegal or unethical behavior.
C. The filing entity's processes for
performance evaluation, compensation, and corrective action to ensure effective
senior management throughout the organization, including a description of the
general objectives of significant compensation programs and what the programs
are designed to reward. The description shall include sufficient detail to
allow the Superintendent to understand how the organization ensures that
compensation programs do not encourage or reward excessive risk taking.
Elements to be discussed may include, for example:
(1) The Board's role in overseeing management
compensation programs and practices;
(2) The various elements of compensation
awarded in the compensation programs and how the amount of each element of
compensation paid is determined and calculated;
(3) How compensation programs are related to
both company and individual performance over time;
(4) Whether compensation programs include
risk adjustments and how those adjustments are incorporated into the programs
for employees at different levels;
(5) Any clawback provisions built into the
programs to recover awards or payments if the performance measures upon which
they are based are restated or otherwise adjusted;
(6) Any other factors relevant in
understanding how the filing entity monitors its compensation policies to
determine whether its employee incentives are meeting its risk management
objectives.
D. The
filing entity's plans for CEO and senior management succession.
5. The filing entity shall
describe the processes by which the Board, its committees, and senior
management ensure an appropriate amount of oversight to the critical risk areas
impacting the insurance carrier's business activities, including a discussion
of:
A. How oversight and management
responsibilities are delegated between the Board, its committees and senior
management;
B. How the Board is
kept informed of the insurance carrier's strategic plans, the associated risks,
and steps that senior management is taking to monitor and manage those
risks;
C. How reporting
responsibilities are organized for each critical risk area. The description
should allow the Superintendent to understand the frequency at which
information on each critical risk area is reported to and reviewed by senior
management and the Board. This description may include, for example, the
following critical risk areas of the insurance carrier:
(1) Risk management processes. If the filing
entity conducts an Own Risk and Solvency Assessment (ORSA), it may incorporate
by reference the ORSA Summary Report filed under
24-A
M.R.S. §§
222(8)
(B-3) or 423-F, or the substantially similar law of another state;
(2) Actuarial function;
(3) Investment decision-making
processes;
(4) Reinsurance
decision-making processes;
(5)
Business strategy/finance decision-making processes;
(6) Compliance function;
(7) Financial reporting/internal auditing;
and
(8) Market conduct
decision-making processes.