Alabama Administrative Code › Title 482 - ALABAMA DEPARTMENT OF INSURANCE › Chapter 482-1-138 - CAPTIVE INSURERS › Section 482-1-138-.04 - Annual Audit

Current through Register Vol. 42, No. 9, June 28, 2024
(1) All companies
			 shall have an annual audit by an independent certified public accountant,
			 authorized by the commissioner and shall file such audited financial report
			 with the commissioner on or before June 30 for the year ending December 31
			 immediately preceding. The annual audit report shall be considered part of the
			 company's annual report of financial condition except with respect to the date
			 by which it must be filed with the commissioner.
(2) The annual audit shall consist of the
			 following:
(a) Opinion of Independent
			 Certified Public Accountant. Financial statements furnished pursuant to this
			 section shall be examined by independent certified public accountants in
			 accordance with generally accepted auditing standards as determined by the
			 American Institute of Certified Public Accountants. The opinion of the
			 independent certified public accountant shall cover all years presented. The
			 opinion shall be addressed to the company on stationery of the accountant
			 showing the address of issuance, shall bear original manual signatures and
			 shall be dated.
(b) Report of
			 Evaluation of Internal Controls. This report shall include an evaluation of the
			 internal controls of the company relating to the methods and procedures used in
			 the securing of assets and the reliability of the financial records, including
			 but not limited to such 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 the report filed with the
			 commissioner.
(c) Accountant's
			 Letter. The accountant shall furnish the company, for inclusion in the filing
			 of the audited annual report, a letter stating:
1. That he or she is independent with respect
			 to the company and conforms to the standards of his profession as contained in
			 the Code of Professional Ethics and pronouncements of the American Institute of
			 Certified Public Accountants and pronouncements of the Financial Accounting
			 Standards Board.
2. The general
			 background and experience of the staff engaged in audit including the
			 experience in auditing captives or other insurance companies.
3. That the accountant understands that the
			 audited annual report and his or her opinions thereon will be filed in
			 compliance with this chapter with the Department of Insurance.
4. That the accountant consents to the
			 requirements of Rule
			 482-1-138-.07 and that the
			 accountant consents and agrees to make available for review by the
			 commissioner, his or her designee or appointed agent, the work papers as
			 defined in Rule
			 482-1-138-.07.
5. That the accountant is properly licensed
			 by an appropriate state licensing authority and that he or she is a member in
			 good standing in the American Institute of Certified Public
			 Accountants.
(d)
			 Financial Statements. Statements required shall be as follows:
1. Balance sheet.
2. Statement of gain or loss from
			 operations.
3. Statement of changes
			 in financial position.
4. Statement
			 of changes in capital paid up, gross paid in and contributed surplus and
			 unassigned funds (surplus).
5.
			 Notes to financial statements. The notes to financial statements shall be those
			 required by generally accepted accounting principles, and shall include:
(i) A reconciliation of differences, if any,
			 between the audited financial report and the statement or form filed with the
			 commissioner.
(ii) A summary of
			 ownership and relationship of the company and all affiliated corporations or
			 companies insured by the captive.
(iii) A narrative explanation of all material
			 transactions and balances with the company.
(e) Certification of Loss Reserves and Loss
			 Expense Reserves. The annual audit shall include an opinion as to the adequacy
			 of the company's loss reserves and loss expense reserves. The individual who
			 certifies as to the adequacy of reserves shall be approved by the commissioner
			 and shall be a Fellow of the Casualty Actuarial Society, a member in good
			 standing of the American Academy of Actuaries, or an individual who has
			 demonstrated his or her competence in loss reserve evaluation to the
			 commissioner. Certification shall be in such form as the commissioner deems
			 appropriate.