Oregon Administrative Rules
Chapter 836 - DEPARTMENT OF CONSUMER AND BUSINESS SERVICES, INSURANCE REGULATION
Division 29 - CAPTIVE INSURERS
Section 836-029-0025 - Annual Audit

Universal Citation: OR Admin Rules 836-029-0025

Current through Register Vol. 63, No. 9, September 1, 2024

(1) All captive insurers shall have an annual audit by an independent certified public accountant, approved by the Director of the Department of Consumer and Business Services, and shall file an audited financial report with the director on or before June 30 for the preceding year. Financial statements furnished under this section shall be prepared in accordance with generally accepted auditing standards as determined by the AICPA. At the discretion of the director, the requirement of an audit may be waived.

(2) The annual audit report shall be filed not later than June 30 and shall be considered part of the captive insurer's annual report of financial condition except with respect to the date by which it must be filed with the director. The director may grant an extension of time for filing the annual audit.

(3) The annual audit shall include all of the following:

(a) Opinion of an Independent Certified Public Accountant. The opinion of the independent certified public accountant shall:
(A) Cover all years presented; and

(B) Be addressed to the captive insurer on stationery of the accountant showing the address of issuance, shall bear original manual signatures and shall be dated.

(b) Internal Controls Letter.
(A) In accordance with AU Section 319 of the Professional Standards of the AICPA, Considerations of Internal Controls in a Financial Statement Audit, the independent certified public accountant shall obtain an understanding of internal controls sufficient to plan the audit. To the extent required by AU 319, for those insurers required to file a Management's Report of Internal Control over Financial Reporting pursuant to 836-029-0030, the independent certified public accountant shall consider (as that term is defined in Statement on Auditing Standards (SAS) No. 102, Defining Professional Requirements in Statements on Auditing Standards or its replacement) the most recently available report in planning and performing the audit of the financial statements.

(B) Based on such understanding, the accountant shall include a letter about the internal controls of the captive insurer relating to the methods and procedures used in the securing of assets and the reliability of the financial records, including but not limited to, controls as the system of authorization and approval and the separation of duties. The review shall be conducted in accordance with generally accepted auditing standards and procedures.

(c) Accountant's Letter of Qualifications. For a captive insurer that has an annual direct written premium of $500 million or more, the accountant shall furnish the captive insurer, for inclusion in the filing of the audited annual report, a letter stating:
(A) That the accountant is independent with respect to the captive insurer and conforms to the standards of the profession as contained in the Code of Professional Ethics and pronouncements of the AICPA and pronouncements of the Financial Accounting Standards Board;

(B) The general background and experience of the staff engaged in the audit, including their experience in auditing captive or other insurance companies;

(C) That the accountant understands that the audited annual report and the accountant's opinions on the audited annual report will be filed in compliance with this rule.

(D) That the accountant consents to the requirements of OAR 836-029-0055;

(E) That the accountant consents and agrees to make the work papers available for review by the director and any designee or agent of the director; and

(F) That the accountant is properly licensed by an appropriate state licensing authority.

(d) Financial Statements. The financial statements required shall include all of the following:
(A) Balance sheet;

(B) Statement of gain or loss from operations;

(C) Statement of changes in financial position;

(D) Statement of cash flow;

(E) Statement of changes in capital paid up, gross paid in and contributed surplus and unassigned funds (surplus); and

(F) Notes to financial statements required by GAAP including:
(i) A reconciliation of differences, if any, between the audited financial report and the statement or form filed with the director;

(ii) A summary of ownership and relationship of the captive insurer and all affiliated corporations or companies insured by the captive;

(iii) A narrative explanation of all material transactions with the captive insurer. For purposes of this provision, no transaction shall be deemed material unless it involves three percent or more of a captive insurer's admitted assets as of the immediately preceding December 31; and

(iv) A reconciliation of differences between capital paid up, gross paid in and contributed surplus and unassigned funds (surplus) prepared on a GAAP and Statutory Accounting basis.

(e) Certification of Loss Reserves and Loss Expense Reserves of the Captive Insurer's Opining Actuary. The annual audit shall include an actuarial opinion as to the reasonableness of the captive insurer's loss reserves and loss expense reserves.
(A) The individual who certifies as to the reasonableness of reserves shall be approved by the director and shall be a Fellow or Associate of the Casualty Actuarial Society and a member in good standing of the American Academy of Actuaries, for property and casualty companies.

(B) The director may waive the requirement under this section to include an actuarial opinion as to the reasonableness of the captive insurer's loss reserves and loss expense reserves.

(C) Certification under this subsection shall be in the form the director determines appropriate.

(4) As used in this rule, "AICPA" means American Institute of Certified Public Accountants.

Stat. Auth.: ORS 731.244, 2012 OL Ch. 84, Sec. 4 (Enrolled SB 1547)

Stats. Implemented: 2012 OL Ch. 84, Sec. 2-22 (Enrolled SB 1547)

Disclaimer: These regulations may not be the most recent version. Oregon may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.