Kentucky Administrative Regulations › Title 806 - PUBLIC PROTECTION CABINET - DEPARTMENT OF INSURANCE › Chapter 49 - Captive Insurers › Section 806 KAR 49:030 - Captive insurer reporting requirements

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO: KRS 304.49-010-304.49-230
NECESSITY, FUNCTION, AND CONFORMITY:
				KRS
				304.2-110 provides that the Commissioner of
				Insurance may promulgate administrative regulations necessary for or as an aid
				to the effectuation of any provisions of the Kentucky Insurance Code.
				KRS
				304.49-140 authorizes the Commissioner of
				Insurance to establish and amend administrative regulations related to captive
				insurance companies as necessary to effectuate the provisions of
				KRS
				304.49-010 to
				304.49-230.
				KRS
				304.49-070(2) requires the
				Commissioner of Insurance to promulgate administrative regulations concerning
				the reporting requirements of captive insurers. This administrative regulation
				establishes financial and reporting requirements for captive insurers.
Section 1. Definition. "Company" means the
			 captive insurer.
Section 2. A
			 consortium captive insurer, and a pure or industrial insured captive insurer
			 engaged in insurance in Kentucky shall annually submit to the commissioner a
			 report of its financial condition, verified by oath of two (2) of its executive
			 officers on the Annual Statement Convention Blank. The report shall be filed in
			 the same format and content as required by
			 KRS
			 304.2-205 and
			 304.3-240.
Section 3.
(1) A captive insurer shall have an annual
			 audit by an independent certified public accountant, authorized by the
			 commissioner, and shall file an audited financial report with the commissioner
			 on or before July 1 for the year ending December 31 immediately
			 preceding.
(2) 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 shall be filed with the
			 commissioner.
(3) The annual audit
			 shall consist of the following:
(a) Opinion
			 of independent certified public accountant.
1.
			 Financial statements furnished pursuant to this section shall be examined by an
			 independent certified public accountant in accordance with generally-accepted
			 auditing standards as determined by the American Institute of Certified Public
			 Accountants.
2. The opinion of the
			 independent certified public accountant shall cover all years
			 presented.
3. The opinion shall:
a. Be addressed to the company on stationery
			 of the accountant showing the address of issuance;
b. Bear original manual signatures;
			 and
c. Be dated.
(b) Report of
			 evaluation of internal controls.
1. 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 the controls as the system of
			 authorization and approval, and the separation of duties.
2. 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 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 opinions thereon will be filed in compliance with
			 this administrative regulation with the Kentucky Department of
			 Insurance;
4. That the accountant
			 consents to the requirements of Section 6 of this administrative regulation and
			 that the accountant consents and agrees to make available for review by the
			 commissioner, his designee or his appointed agent, the work papers as defined
			 in Section 6 of this administrative regulation;
5. That the accountant is properly licensed
			 by an appropriate state licensing authority; and
6. That the accountant is a member in good
			 standing in the American Institute of Certified Public Accountants.
(d) Financial statements. The
			 following statements are required:
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 or unassigned surplus; and
5. Notes to financial statements. The notes
			 to financial statements shall be those required by generally accepted
			 accounting principles, and shall include:
a.
			 A reconciliation of differences, if any, between the audited financial report
			 and the statement or form filed with the commissioner;
b. A summary of ownership and relationship of
			 the company and all affiliated corporations or companies insured by the
			 captive; and
c. A narrative
			 explanation of all material transactions and balances with the
			 company.
(e)
			 Certification of loss reserves and loss expense reserves.
1. The annual audit shall include an opinion
			 as to the adequacy of the company's loss reserves and loss expense
			 reserves.
2. The individual who
			 certifies as to the adequacy of reserves shall be approved by the commissioner
			 and shall be:
a. A Fellow of the Casualty
			 Actuarial Society;
b. A member in
			 good standing of the American Academy of Actuaries; or c. An individual who has
			 demonstrated his competence in loss reserve evaluation to the
			 commissioner.
3.
			 Certification shall be in the form as the commissioner deems
			 appropriate.
(f) A
			 filing fee for audited financial statements shall be as prescribed by
			 806 KAR
			 4:010.