Current through Register Vol. 46, No. 39, September 25, 2024
(a)
(1) The audit committee shall be directly
responsible for the appointment, compensation and oversight of the work of any
CPA (including resolution of disagreements between management and the CPA
regarding financial reporting) for the purpose of preparing or issuing the
audited financial report or related work pursuant to this Part. Every CPA shall
report directly to the audit committee.
(2) The audit committee shall be responsible
for overseeing the company's internal audit function and granting the person or
persons performing the function suitable authority and resources to fulfill
their responsibilities if required by section
89.16 of this
Part.
(b) Every member of
the audit committee shall be a member of the board of directors, a member of
the board of directors of a member of the holding company system described in
section 89.1(j) of this
Part or, for a United States branch of an alien company, a member of the audit
committee of the person that controls the branch.
(c) In order to be considered independent for
purposes of this section, a member of the audit committee may not, other than
in the member's capacity as a member of the audit committee, the board of
directors, or any other board committee, accept any consulting, advisory or
other compensatory fee from the company or be an affiliated person of the
company or any subsidiary thereof, except to the extent that any law may
require board participation by otherwise non-independent members, and, in such
case, the member may participate in the audit committee and be designated as
independent for audit committee purposes, unless the member is an officer or
employee of the company or one of its affiliates.
(d) If a member of the audit committee ceases
to be independent for reasons outside the member's reasonable control, that
person may remain an audit committee member of the responsible company until
the earlier of the next annual meeting of the responsible company or one year
from the occurrence of the event that caused the member to be no longer
independent, provided that the company promptly notifies the
superintendent.
(e) The company
shall give written notice to the superintendent of the selection of its audit
committee within 30 days of the effective date of this Part and within 30 days
of any change in membership of the audit committee. The notice shall include a
description of the reason for the change.
(f)
(1) The
audit committee shall require the CPA that performs any audit for a company
that is required by this Part to timely report to the audit committee:
(i) all significant accounting policies and
material permitted practices;
(ii)
all material alternative treatments of financial information within statutory
accounting principles that have been discussed with management officials of the
company, ramifications of the use of the alternative disclosures and
treatments, and the treatment preferred by the CPA; and
(iii) other material written communications
between the CPA and the management of the company, such as any management
letter or schedule of unadjusted differences.
(2) If a company is a member of a group of
companies, the reports required by paragraph (1) of this subdivision may be
provided to the audit committee on an aggregate basis for the group, provided
that any substantial differences among companies in the system are identified
to the audit committee.
(g) The proportion of independent audit
committee members for a company shall meet or exceed the following minimum
criteria:
(1) if the company's prior calendar
year direct written and assumed premiums are equal to or less than
$300,000,000, no members of the audit committee shall be required to be
independent;
(2) if the company's
prior calendar year direct written and assumed premiums are greater than
$300,000,000 but not more than $500,000,000, 50 percent or more of the members
of the audit committee shall be independent, unless otherwise provided by law
as for a MCO; or
(3) if the
company's prior calendar year direct written and assumed premiums are more than
$500,000,000, 75 percent or more of the members of the audit committee shall be
independent.
(h)
Changes in required number of independent audit committee members.
(1) A company that is required to
have a higher number of independent audit committee members due to changes in
premium shall have one year following the year the threshold is exceeded to
comply with the independence requirements; and
(2) a company that becomes subject to a
different independence requirement as a result of a business combination shall
have one calendar year following the date of acquisition or combination to
comply with the newly effective independence requirements.
(i) This section shall not apply to:
(1) a domestic life insurer if its holding
company or parent corporation is a foreign or domestic insurer, a mutual
insurance holding company established pursuant to the laws of the United
States, or a publicly held corporation incorporated in the United States,
having a board of directors and committees thereof that meet the same
requirements as have been established for a domestic stock life insurer
pursuant to Insurance Law section 1202(b)(1) and (2);
(2) a foreign insurer or an alien insurer not
entered into this State through a United States branch; or
(3) a company that is a SOX compliant company
or a directly or indirectly wholly-owned subsidiary of a SOX compliant
company.
