California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 3.3 - Annual Financial Reporting › Section 2309.16 - Management's Report of Internal Control over Financial Reporting

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Every insurer
				  required to file an audited financial report pursuant to these regulations 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
				  2309.3. The report shall be filed
				  with the commissioner along with the Communication of Internal Control Related
				  Matters Noted in an Audit described under Section
				  2309.11. Management's Report of
				  Internal Control over Financial Reporting shall be as of December 31
				  immediately preceding.
(b)
				  Notwithstanding the premium threshold in Subsection (a), the commissioner 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 California Insurance Code Sections
				  980, et
				  seq., section
				  1011, or any other
				  statute.
(c) An insurer or a group
				  of insurers that is
(1) directly subject to
				  Section 404;
(2) part of a holding company system whose
				  parent is directly subject to Section
				  404;
(3) not directly subject to Section
				  404 but is a SOX Compliant Entity;
				  or
(4) 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
					 2309.16 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
					 2309.5(b) through
					 2309.5(g) of
					 these regulations) 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
					 2309.5(b) through
					 2309.5(g) of
					 these regulations) 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 insurer's 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
					 2309.16 report, or (ii) the
					 Section 404 Report and a Section
					 2309.16 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.