Code of Massachusetts Regulations › 211 CMR - DIVISION OF INSURANCE › Title 211 CMR 26.00 - Annual Financial Reporting For Years Ending 2010 And After › Section 26.16 - Requirements for Audit Committees

Current through Register 1525, July 5, 2024
211 CMR 26.16 shall not apply to foreign or alien insurers
				licensed in Massachusetts 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 this
			 regulation. 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
			 insurer's Internal audit function and granting the person or persons performing
			 the function suitable authority and resources to fulfill their responsibilities
			 if required by
			 211
			 CMR 26.17.
(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 211 CMR 26.16(6) and
			 211 CMR 26.04:
Audit Committee
.
(4) In order to be considered independent for
			 purposes of 211 CMR 26.16, 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 state, 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.
(6) To exercise the
			 election of the controlling person to designate the Audit committee for
			 purposes of
			 211 CMR 26.00, the ultimate
			 controlling person shall provide written notice to the insurance 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 for an insurer any audit required by
			 211 CMR 26.00 to timely
			 report to the Audit committee in accordance with the requirements of SAS 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.
If an insurer is a member of an insurance holding company
				system, the reports required by 211 CMR 26.16(7)(c) 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.