CT Gen Stat § 38a-142a (2020)
2020 Connecticut General Statutes|Title 38a - Insurance|Chapter 698 - Insurers|Section 38a-142a - Corporate governance annual disclosures. Confidentiality of documents, materials or other information. CGAD reviews. Penalty.

 (a) As used in this section:(1) “Board” means the board of directors of an insurer or insurance group;(2) “CGAD” or “corporate governance annual disclosure” means a confidential report filed by an insurer or insurance group in accordance with the provisions of this section;(3) “Insurance group” has the same meaning as provided in section 38a-142;(4) “Insurer” means any person or combination of persons doing any kind or form of insurance business, including a fraternal benefit society, as described in chapter 700d, and a health care center, as defined in section 38a-175, and includes a receiver of any insurer when the context reasonably permits. “Insurer” does not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state;(5) “NAIC” means the National Association of Insurance Commissioners;(6) “ORSA Summary Report” has the same meaning as provided in section 38a-142; and(7) “Senior management” means any corporate officer of an insurer or insurance group responsible for reporting information to the board at regular intervals or providing information to shareholders or regulators, and includes, but is not limited to, a chief executive officer, chief financial officer, chief operations officer, chief procurement officer, chief legal officer, chief information officer, chief technology officer, chief revenue officer and chief visionary officer.(b) (1) Not later than June 1, 2017, and annually thereafter, each domestic insurer or the insurance group of which such insurer is a member shall submit to the Insurance Commissioner a CGAD that contains the information required under subsection (c) of this section, except that if the insurer is a member of an insurance group, such insurer shall submit the CGAD to the lead state commissioner, as determined by the procedures in NAIC's applicable financial analysis handbook, of the insurance group of which such insurer is a member. If the commissioner is the lead state commissioner of such insurance group, the commissioner shall provide, in a manner consistent with the provisions of subdivision (3) of subsection (e) of this section, a copy of the CGAD upon request to the insurance regulatory official of any state in which such insurance group has a domestic insurer. A domestic insurer that is not required to submit a CGAD to the commissioner under this subdivision shall do so if requested by the commissioner.(2) Each year after the initial submission of the CGAD, such insurer or insurance group shall submit an amended version of the previous year's CGAD that indicates where changes have been made. If no changes were made, such submission shall so state.(c) Each CGAD shall contain the following information:(1) A description of the insurer's or insurance group's corporate governance framework and structure, including (A) (i) its board and each significant committee thereof that is responsible for oversight of the insurer or insurance group and the level at which such oversight occurs, such as the ultimate control level, an intermediate holding company level or an individual legal entity level, and (ii) a description and discussion of its rationale for the current board size and structure, and (B) the duties of the board and such committees, the method by which each is governed, such as through bylaws, a charter or informal mandates, and a description of how the board's leadership is structured, including a discussion of the roles of the chief executive officer and the chairman of the board within the organization;(2) A description of the policies and practices of the board and each significant committee thereof, including a discussion of (A) how the qualifications, expertise and experience of each board member meet the needs of the insurer or insurance group, (B) how the insurer or insurance group ensures an appropriate amount of independence is maintained on the board and such committees, (C) the number of meetings held by the board and such committees during the previous year and information on board member attendance, and (D) how the insurer or insurance group identifies, nominates and elects members to the board and such committees, including (i) whether a nomination committee is in place to identify and select individuals for consideration, (ii) whether term limits are placed on board members, (iii) how the election and reelection processes function, and (iv) whether a board diversity policy is in place and if so, how it functions;(3) A description of the board's processes 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) A description of the insurer's or insurance group's policies and practices for directing senior management, including (A) any processes or practices, such as suitability standards, to determine whether officers and key individuals in control functions have the appropriate background, experience and integrity to fulfill their roles, including (i) identification of specific positions for which suitability standards have been developed and a description of the standards applied, and (ii) the standards and procedures to monitor and evaluate an officer's or key individual's suitability and any changes in an officer's or key individual's suitability in the previous year as a result of applying such standards or procedures, (B) its code of business conduct and ethics, including a discussion of its compliance with laws, rules and regulations and its proactive reporting of any illegal or unethical conduct, (C) its senior management succession plans, and (D) its processes for performance evaluation, compensation and corrective action, to ensure effective senior management throughout the organization, including a description of the general objectives of its significant compensation programs and what such programs are designed to reward. The description under this subdivision shall contain sufficient detail to allow the commissioner to understand how the insurer or insurance group ensures that such compensation programs do not encourage or reward excessive risk-taking, and may include (i) the board's role in overseeing management compensation programs and practices, (ii) the elements of compensation awarded in a compensation program and how the insurer or insurance group determines and calculates the amount of each element of compensation paid, (iii) how the insurer's or insurance group's compensation programs are related to both organizational and individual performance over time, (iv) whether the insurer's or insurance group's compensation programs include risk adjustments and how such adjustments are incorporated into its employee compensation programs at different levels, (v) any clawback provisions built into the insurer's or insurance group's compensation programs to recover awards or payments if the performance measures upon which such awards or payments were based are restated or otherwise adjusted, and (vi) any other factors relevant to understanding how the insurer or insurance group monitors its compensation programs to determine whether its risk management objectives are met by incentivizing its employees.(5) A description of the insurer's or insurance group's processes by which the board, each significant committee thereof and senior management ensure an appropriate amount of oversight of the critical risk areas impacting the insurer's or insurance group's business activities, including a discussion of (A) how oversight and management responsibilities are delegated between the board, such committees and senior management, (B) how the board is kept informed of the insurer's or insurance group's strategic plans, the associated risks and the steps senior management takes or has taken to monitor and manage such risks, and (C) how reporting responsibilities are organized for each critical risk area. The description under subparagraph (C) of this subdivision shall contain sufficient detail to allow the commissioner to understand the frequency at which information on each critical risk area is reported to and reviewed by the board and senior management, and may include the following critical risk areas: (i) Risk management processes. An insurer or insurance group that is required to file an ORSA Summary Report pursuant to section 38a-142 may refer to such report; (ii) actuarial function; (iii) investment decision-making processes; (iv) reinsurance decision-making processes; (v) business strategy and financial decision-making processes; (vi) compliance function; (vii) financial reporting and internal auditing; and (viii) market conduct decision-making processes.(d) (1) For the purposes of completing the CGAD, the insurer or insurance group may provide the required information at the ultimate control level, an intermediate holding company level or an individual legal entity level, depending on the structure of such insurer's or insurance group's corporate governance system. Such insurer or insurance group may report information for the CGAD at the level at which (A) such insurer's or insurance group's risk appetite is determined, (B) such insurer's or insurance group's earnings, capital, liquidity, operations and reputation are overseen collectively and the supervision of such factors are coordinated and exercised, or (C) legal liability would be placed for such insurer's or insurance group's failure to comply with its corporate governance duties. An insurer or insurance group that determines its level of CGAD reporting based on the criteria specified in this subdivision shall indicate in the CGAD which of the three criteria was used to determine its level of reporting and explain any subsequent changes in its level of reporting.(2) The insurer or insurance group may utilize and reference other existing documents such as ORSA Summary Reports, Holding Company Form B or F filings, Securities and Exchange Commission proxy statements or foreign regulatory required filings, that furnish information comparable to that required under subsection (c) of this section. The insurer or insurance group shall attach such other documents to the CGAD, if such documents are not already filed with or available to the commissioner, and clearly reference the applicable information within the CGAD that such other documents are intended to supply.(3) The insurer or insurance group shall have discretion over the information it provides in a CGAD, provided such CGAD is consistent with subsection (c) of this section and contains the material information necessary to allow the commissioner to understand the insurer's or insurance group's corporate governance structure, policies and practices. The insurer or insurance group shall be as descriptive as possible in completing a CGAD and shall include attachments or document examples that such insurer or insurance group uses in its governance process. The commissioner may request additional information the commissioner deems material and necessary to understand the insurer's or insurance group's corporate governing policies, reporting or information system or controls over such policies or systems. The insurer or insurance group shall maintain any CGAD-related documents and supporting information and make such documents and information available to the commissioner upon request.(4) Each CGAD shall be signed by the chief executive officer or corporate secretary of the insurer or insurance group, attesting that to the best of such individual's belief and knowledge, such insurer or insurance group has implemented the corporate governance practices described in the CGAD and that a copy of such CGAD has been provided to the insurer's or insurance group's board or appropriate committee thereof.(e) (1) All documents, materials or other information, including the CGAD, in the possession or control of the Insurance Department that are obtained by, created by or disclosed to the commissioner or any other person pursuant to this section are deemed to be proprietary and to contain trade secrets and shall be confidential by law and privileged, shall not be subject to disclosure under section 1-210, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any civil action in this state. The commissioner may use such documents, materials or information in the furtherance of any regulatory or legal action brought as a part of the commissioner's official duties. The commissioner shall not otherwise make such documents, materials or other information public without the prior written consent of the insurer, except that nothing in this subsection shall be construed to require written consent of the insurer prior to the commissioner sharing or receiving CGAD-related documents, materials or other information pursuant to subdivision (3) of this subsection.(2) Neither the commissioner nor any person who, while acting under the authority of the commissioner, obtained or received CGAD-related documents, materials or other information, or to whom such documents, materials or other information were disclosed, shall be permitted or required to testify in any civil action in this state concerning any such documents, materials or information.(3) To assist the commissioner in the performance of the commissioner's regulatory duties, the commissioner:(A) May share upon request CGAD-related documents, materials or other information, including documents, materials or information deemed proprietary and containing trade secrets, confidential and privileged or not disclosable pursuant to this subsection, with (i) other state, federal and international financial regulatory officials, including members of a supervisory college as described in section 38a-135, (ii) NAIC, and (iii) any third-party consultants engaged by the commissioner pursuant to subsection (f) of this section, provided the recipient of any such documents, materials or other information agrees, in writing, to maintain the confidentiality and privileged status of such documents, materials or other information and has verified, in writing, the recipient's legal authority to maintain confidentiality; and(B) May receive CGAD-related documents, materials or other information, including documents, materials or information deemed proprietary and containing trade secrets, confidential and privileged, from other state, federal and international financial regulatory officials, including members of a supervisory college and NAIC. The commissioner shall maintain as confidential and privileged any such documents, materials or information received with notice or the understanding that such documents, materials or information are confidential and privileged under the laws of the jurisdiction that is the source of such documents, materials or information.(4) A written agreement between the commissioner and NAIC or a third-party consultant governing the sharing and use of documents, materials and information shared or received pursuant to subdivision (3) of this subsection shall expressly require the prior written consent of the insurer to NAIC or such third-party consultant making such documents, materials or information public and shall (A) specify policies and procedures for maintaining the confidentiality and security of such documents, materials or other information that are shared with NAIC or the third-party consultant, including (i) procedures and protocols limiting sharing by NAIC to only regulatory officials of states in which other member insurers of the insurance group of which a domestic insurer is a member are domiciled, and (ii) a provision requiring NAIC or a third-party consultant to agree, in writing, and if applicable, a provision requiring NAIC to obtain from a regulatory official under subparagraph (A)(i) of this subdivision an agreement, in writing, to maintain the confidentiality and privileged status of such documents, materials or other information, and verifying the recipient's legal authority to maintain confidentiality, (B) specify that the commissioner shall retain ownership of such documents, materials or other information and that the use of such documents, materials or other information is subject to the commissioner's discretion, (C) prohibit NAIC or the third-party consultant from storing such documents, materials or other information in a permanent database after the underlying analysis is completed, (D) require NAIC or the third-party consultant to promptly notify the commissioner and the insurer or insurance group whose confidential information is in the possession of NAIC or the third-party consultant if NAIC or the third-party consultant is subject to a request or subpoena for disclosure or production of such documents, materials or other information, and (E) require NAIC or the third-party consultant, if NAIC or such consultant is subject to disclosure of an insurer's or insurance group's confidential documents, materials or other information that has been shared with NAIC or such consultant pursuant to subparagraph (A) of subdivision (3) of this subsection, to allow such insurer or insurance group to intervene in any judicial or administrative action regarding such disclosure.(5) No waiver of any applicable privilege or claim of confidentiality in any CGAD-related documents, materials or other information shall occur as a result of sharing by or disclosure to the commissioner in accordance with this section. Nothing in this subsection shall be construed to delegate any regulatory authority of the commissioner to any person or entity with which any such documents, materials or other information have been shared.(f) (1) Any review of a CGAD or a request for CGAD-related documents, materials or other information shall be conducted by or made through the lead state commissioner, as determined by the procedures in NAIC's applicable financial analysis handbook, of the insurance group of which the insurer is a member.(2) The commissioner may engage the services of third-party consultants including attorneys, actuaries, accountants and other experts not otherwise a part of the commissioner's staff, at the insurer's or insurance group's expense, as shall be reasonably necessary to assist the commissioner in a review of such insurer's or insurance group's CGAD and related documents, materials and other information or of such insurer's or insurance group's compliance with the requirements of this section. Any such consultant shall (A) be under the direction and control of the commissioner and act in an advisory capacity only, and (B) verify to the commissioner and provide notice to the insurer or insurance group that such consultant is free of any conflict of interest regarding such insurer or insurance group and has internal procedures in place to monitor conflicts of interest that may arise and to comply with the confidentiality standards and requirements of this section.(3) Nothing in this section shall be construed to (A) prescribe or impose corporate governance standards or internal procedures beyond that required under state corporation laws, or (B) affect the provisions of section 38a-14 or 38a-14a.(g) The commissioner, after notice and hearing, may impose a civil penalty on an insurer or insurance group that fails, without just cause, to timely file a CGAD, of one hundred seventy-five dollars for each day the failure to file a CGAD continues. The commissioner may reduce the penalty if the insurer or insurance group demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer or insurance group.(P.A. 16-206, S. 1.)History: P.A. 16-206 effective January 1, 2017.