Connecticut Administrative Code › Title 38a - Insurance Department › 54 - Annual Audited Financial Reports › Section 38a-54-11a - Requirements for audit committees

Current through July 10, 2024
(a) This section
			 shall not apply to foreign or alien insurers licensed in this state or an
			 insurer that is a SOX compliant entity or a direct or indirect wholly-owned
			 subsidiary of a SOX compliant entity.
(b) The audit committee shall be directly
			 responsible for the appointment, compensation and oversight of the work of any
			 accountant (including resolution of disagreements between management and the
			 accountant regarding financial reporting) for the purpose of preparing or
			 issuing the audited financial report or related work pursuant to Sections
			 38a-54-1 to
			 38a-54-13,
			 inclusive, of the Regulations of Connecticut State Agencies. Each accountant
			 shall report directly to the audit committee.
(c) Effective January 1, 2017, the audit
			 committee of an insurer or group of insurers shall be responsible for
			 overseeing the insurer's internal audit function and granting the internal
			 audit function suitable authority and resources to fulfill the internal audit
			 function's responsibilities required by Section
			 38a-54-11
			 d of the Regulations of Connecticut State Agencies.
(d) Each member of the audit committee shall
			 be a member of the board of directors of the insurer or a member of the board
			 of directors of an entity elected pursuant to subsection (g) of this section
			 and Section
			 38a-54-2(c)
			 of the Regulations of Connecticut State Agencies.
(e) In order to be considered independent for
			 purposes of this section, a member of the audit committee shall not, other than
			 in his or her 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 entity or be an affiliated person of the entity
			 or any subsidiary thereof. However, if law requires board participation by
			 otherwise non-independent members, that law shall prevail and such members may
			 participate in the audit committee and be designated as independent for audit
			 committee purposes, unless they are an officer or employee of the insurer or
			 one of its affiliates.
(f) If a
			 member of the audit committee ceases to be independent for reasons outside the
			 member's reasonable control, such member, with notice by the responsible entity
			 to the Commissioner, may remain an audit committee member of the responsible
			 entity until the earlier of the next annual meeting of the responsible entity
			 or one year from the occurrence of the event that caused the member to be no
			 longer independent.
(g) To exercise
			 the election of the controlling person to designate the audit committee for
			 purposes of this section, the ultimate controlling person shall provide written
			 notice to the commissioners of the states in which the affected insurers are
			 licensed in or do business in. Timely notification shall be made prior to the
			 issuance of the report of the statutory audit opinion and include a description
			 of the basis for the election. The election may be changed through notice to
			 the Commissioner by the insurer, which shall include a description of the basis
			 for the change. The election shall remain in effect, until rescinded.
(h)
(1) The
			 audit committee shall require the accountant who performs for an insurer any
			 audit required by Sections
			 38a-54-1 to
			 38a-54-13,
			 inclusive, of the Regulations of Connecticut State Agencies to timely report to
			 the audit committee in accordance with the requirements of Statement on
			 Auditing Standards 61, Communication with Audit Committees, or its replacement,
			 including:
(A) all significant accounting
			 policies and material permitted practices;
(B) all material alternative treatments of
			 financial information within statutory accounting principles that have been
			 discussed with management officials of the insurer, ramifications of the use of
			 the alternative disclosures and treatments, and the treatment preferred by the
			 accountant; and
(C) other material
			 written communications between the accountant and the management of the
			 insurer, such as any management letter or schedule of unadjusted
			 differences.