Current through September 17, 2024
017.01 Every
Insurer required to file an Audited financial report pursuant to this Rule 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 Section 003. The report shall be filed with the Director along with the
Communication of Internal Control Related Matters Noted in an Audit described
under Section 011. Management's Report of Internal Control over Financial
Reporting shall be as of December 31 immediately preceding.
017.02 Not with standing the premium
threshold in Section 017.01, the Director 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 (include
reference to Corrective Action statute).
017.03 An Insurer or a Group of insurers that
is
017.03(a) directly subject to Section
404;
017.03(b) part of a holding
company system whose parent is directly subject to Section 404;
017.03(c) not directly subject to Section 404
but is a SOX Compliant Entity; or
017.03(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 Section 017 requirement provided that those
internal controls of the Insurer or Group of insurers having a material impact
on the preparation of the Insurer's or Group of insurers' audited statutory
financial statements (those items included in Section 005.02 through 005.07 of
this Rule) were included in the scope of the Section 404 Report. The addendum
shall be a positive statement by management that there are no material
processes with respect to the preparation of the Insurer's or Group of
insurers' audited statutory financial statements (those items included in
Section 005.02 through 005.07 of this Rule) 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
insurers' 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 Section 017 report, or (ii) the Section 404
Report and a Section 017 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.
017.04
Management's Report of Internal Control over Financial Reporting shall include:
017.04(a) A statement that management is
responsible for establishing and maintaining adequate Internal control over
financial reporting;
017.04(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;
017.04(c) A statement
that briefly describes the approach or processes by which management evaluated
the effectiveness of its Internal control over financial reporting;
and
017.04(d) A statement that
briefly describes the scope of work that is included and whether any Internal
controls were excluded;
017.04(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 its
Internal control over financial reporting;
017.04(f) A statement regarding the inherent
limitations of Internal control systems; and
017.04(g) Signatures of the chief executive
officer and the chief financial officer (or equivalent
position/title).
017.05
Management shall document and make available upon financial condition
examination the basis upon which its assertions, required in Section 017.04
above, 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.
017.05(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.
017.05(b)
Management's Report on Internal Control over Financial Reporting, required by
Section 017.01 above, and any documentation provided in support thereof during
the course of a financial condition examination, shall be kept confidential by
the Department.
017.06
The requirements of Section 014 are to be in effect January 1, 2010. An Insurer
or Group of insurers that is not required to have independent Audit committee
members or only a majority of independent Audit committee members (as opposed
to a supermajority) because the total written and assumed premium is below the
threshold and subsequently becomes subject to one of the independence
requirements due to changes in premium shall have one (1) year following the
year the threshold is exceeded (but not earlier than January 1, 2010) to comply
with the independence requirements. Likewise, an Insurer that becomes subject
to one of the independence requirements as a result of a business combination
shall have one (1) calendar year following the date of acquisition or
combination to comply with the independence requirements.
017.07 The requirements of Section 016 and
other modified sections, except for Section 014 covered above, are effective
beginning with the reporting period ending December 31, 2010 and each year
thereafter. An Insurer or Group of insurers that is not required to file a
report because the total written premium is below the threshold and
subsequently becomes subject to the reporting requirements shall have two (2)
years following the year the threshold is exceeded (but not earlier than
December 31, 2010) to file a report. Likewise, an Insurer acquired in a
business combination shall have two (2) calendar years following the date of
acquisition or combination to comply with the reporting requirements.
