Louisiana Administrative Code › Title 37 - INSURANCE › Part XIII - Regulations › Chapter 137 - Regulation Number 98-Annual Financial Reporting › Section XIII-13727 - Requirements for Audit Committees

Current through Register Vol. 50, No. 6, June 20, 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.
1. 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 Regulation 98.
				Each accountant shall report directly to the audit committee.
2. The audit committee of an insurer or group
				of insurers shall be responsible for overseeing the insurers internal audit
				function and granting the person or persons performing the function suitable
				authority and resources to fulfill their responsibilities if required by §13728 of this Regulation.
3. 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
				§13727.A.6 and as defined by
				§13705
4. In order to be considered independent for
				purposes of this Section, a member of the audit committee may 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.
5. If a
				member of the audit committee ceases to be independent for reasons outside the
				member's reasonable control, that person, with notice by the responsible entity
				to the department, 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 no
				longer be independent.
6. To
				exercise the election of the controlling person to designate the audit
				committee for purposes of Regulation 98, the ultimate controlling person shall
				provide written notice to the commissioners of the affected insurers.
				Notification shall be made timely prior to the issuance of the statutory audit
				report and include a description of the basis for the election. The election
				can 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 for perpetuity, until rescinded.
7. The audit committee shall require the
				accountant that performs any audit for an insurer required by Regulation 98 to
				timely report to the audit committee in accordance with the requirements of SAS
				61, Communication with audit committees, or its replacement as well as
				subsequent statements on auditing standards that may be issued requiring
				communications to audit committees or others charged with governance 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.
8. If an insurer is a member of an insurance
				holding company system, the reports required by §13727.A.7 may be provided to
				the audit committee on an aggregate basis for insurers in the holding company
				system, provided that any substantial differences among insurers in the system
				are identified to the audit committee.
9. The proportion of independent audit
				committee members shall meet or exceed the following criteria.
Prior Calendar Year Direct Written and Assumed
							 Premiums
$0 - $300,000,000
Over $300,000,000 -$500,000,000
Over $500,000,000
No minimum requirements. See also Note A and
							 B.
Majority (50% or more) of members shall be
							 independent. See also Note A and B.
Super majority of members (75% or more) shall be
							 independent. See also Note A.
Note A: The commissioner has authority afforded by state law
				  to require the entity's board to enact improvements to the independence of the
				  audit committee membership if the insurer is in a Risk Based Capital (RBC)
				  action level event, meets one or more of the standards of an insurer deemed to
				  be in hazardous financial condition, or otherwise exhibits qualities of a
				  troubled insurer.
Note B: All insurers with less than $500,000,000 in prior
				  year direct written and assumed premiums are encouraged to structure their
				  audit committees with at least a supermajority of independent audit committee
				  members.
Note C: Prior calendar year direct written and assumed
				  premiums shall be the combined total of direct premiums and assumed premiums
				  from non-affiliates for the reporting entities.
10. An insurer with direct written and
				assumed premium, excluding premiums reinsured with the Federal Crop Insurance
				Corporation and the Federal Flood Program, of less than $500,000,000 may make
				application to the commissioner for a waiver from the §13727 requirements based
				upon hardship. The insurer shall file, with its annual statement filing, the
				approval for relief from §13727 with the states that it is licensed in or doing
				business in and with the NAIC. If the non-domestic state accepts electronic
				filing with the NAIC, the insurer shall file the approval in an electronic
				format acceptable to the NAIC.