375.1053. Inapplicability of statute to foreign insurers--audit committee responsibilities, member qualifications--report required--waiver, when.
Inapplicability of statute to foreign insurers--audit committeeresponsibilities, member qualifications--report required--waiver,when.
375.1053. 1. This section shall not apply to foreign or alieninsurers licensed in this state or an insurer that is a SOX compliantentity or a direct or indirect wholly owned subsidiary of a SOX compliantentity.
2. The audit committee shall be directly responsible for theappointment, compensation, and oversight of the work of any accountant,including resolution of disagreements between management and the accountantregarding financial reporting, for the purpose of preparing or issuing theaudited financial report or related work under sections 375.1025 to375.1062. Each accountant shall report directly to the audit committee.
3. Each member of the audit committee shall be a member of the boardof directors of the insurer or a member of the board of directors of anentity elected under subsection 6 of this section and subdivision (6) ofsection 375.1025.
4. In order to be considered independent for purposes of thissection, a member of the audit committee shall not, other than in his orher capacity as a member of the audit committee, the board of directors, orany other board committee, accept any consulting, advisory, or othercompensatory fee from the entity or be an affiliated person of the entityor any subsidiary thereof. However, if law requires board participation byotherwise nonindependent members, such law shall prevail and such membersmay participate in the audit committee and be designated as independent foraudit committee purposes, unless they are an officer or employee of theinsurer or one of its affiliates.
5. If a member of the audit committee ceases to be independent forreasons outside the member's reasonable control, that person, with noticeby the responsible entity to the state, may remain an audit committeemember of the responsible entity until the earlier of the next annualmeeting of the responsible entity or one year from the occurrence of theevent that caused the member to be no longer independent.
6. To exercise the election of the controlling person to designatethe audit committee for purposes of sections 375.1025 to 375.1062, theultimate controlling person shall provide written notice to the chief stateinsurance regulatory officials of the affected insurers. Notificationshall be made timely prior to the issuance of the statutory audit reportand include a description of the basis for the election. The election canbe changed through notice to the director by the insurer, which shallinclude a description of the basis for the change. The election shallremain in effect for perpetuity, until rescinded.
7. (1) The audit committee shall require the accountant thatperforms for an insurer any audit required by sections 375.1025 to 375.1062to timely report to the audit committee in accordance with the requirementsof the auditing profession, including:
(a) All significant accounting policies and material permittedpractices;
(b) All material alternative treatments of financial informationwithin statutory accounting principles that have been discussed withmanagement officials of the insurer, ramifications of the use of thealternative disclosures and treatments, and the treatment preferred by theaccountant; and
(c) Other material written communications between the accountant andthe management of the insurer, such as any management letter or schedule ofunadjusted differences.
(2) If an insurer is a member of an insurance holding company system,the reports required by subdivision (1) of this subsection may be providedto the audit committee on an aggregate basis for insurers in the holdingcompany system; provided that any substantial differences among insurers inthe system are identified to the audit committee.
8. The proportion of independent audit committee members shall meetor exceed the following criteria:
(1) If the insurer wrote direct and assumed premiums of zero to threehundred million dollars during the prior calendar year, no minimumrequirements are required regarding the number or proportion of auditcommittee members who shall be independent;
(2) If the insurer wrote direct and assumed premiums of three hundredmillion to five hundred million dollars during the prior calendar year, atleast a majority of the members of the audit committee shall beindependent; and
(3) If the insurer wrote direct and assumed premiums of five hundredmillion dollars or more during the prior calendar year, a supermajority ofat least seventy-five percent of the members of the audit committee shallbe independent.
9. An insurer with direct written and assumed premium, excludingpremiums reinsured with the Federal Crop Insurance Corporation and FederalFlood Program, less than five hundred million dollars may make applicationto the director for a waiver from the requirements of this section basedupon hardship. The insurer shall file, with its annual statement filing,the approval for relief from this section with the states that it islicensed in or doing business in and the NAIC. If the nondomestic stateaccepts electronic filing with the NAIC, the insurer shall file theapproval in an electronic format acceptable to the NAIC.
(L. 2009 H.B. 577)