Code of Maine Rules › 02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION › 031 - BUREAU OF INSURANCE › Chapter 235 - ANNUAL AUDITED FINANCIAL REPORTS › Section 031-235-13 - Requirements for Audit Committees

Current through 2024-29, July 17, 2024
A. The board of
				directors of every insurer required to file an annual audited financial report
				pursuant to this Rule shall appoint an Audit Committee for the purpose of
				overseeing its accounting and financial reporting processes of an insurer and
				audits of financial statements. If a separate Audit Committee is not designated
				by the insurer, the insurer's entire board of directors shall constitute the
				Audit Committee.
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 this Rule. Each accountant shall report directly to the Audit
				Committee.
C. If the insurer is
				required to maintain an internal audit function pursuant to Section
				14, or otherwise maintains an
				internal audit function, the Audit Committee 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.
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 a controlling entity that
				has elected pursuant to Subsection H to have its audit committee serve as the
				insurer's Audit Committee.
E. The
				Audit Committee must include a minimum proportion of independent members in
				accordance with the following table. If the same Audit Committee is responsible
				for multiple insurers, their premium volume shall be combined. If the insurer
				is financially troubled, the Superintendent may impose enhanced independence
				requirements pursuant to applicable laws.
Prior Calendar Year Direct Written and
							 Non-Affiliate Assumed Premiums
Under $300,000,000
Between $300,000,000 and
							 $500,000,000
Over $500,000,000
No minimum requirements. However, insurers are
							 encouraged to structure their Audit Committees so that at least three-fourths
							 of the members are independent.
At least half the members shall be independent.
							 Insurers are encouraged to structure their Audit Committees so that at least
							 three-fourths of the members are independent.
At least three-fourths of the members shall be
							 independent.
F.
				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
				the insurer is required by law to have a board of directors with an
				insufficient number of independent members to meet the standards of Subsection
				E, the insurer shall appoint other directors to the Audit Committee, subject to
				the Superintendent's approval, who are not officers or employees of the insurer
				or any of its affiliates. In evaluating whether a director is independent
				within the meaning of this Section, the Superintendent shall consider the
				standards in Securities and Exchange Commission Final Rule No. 33-8220,
Standards Relating to Listed Company Audit Committees
(adopted
				April 9, 2003), which may be found online at
http://www.sec.gov/rules/final/33-8220.htm
.
G. 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 Superintendent, 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 after the occurrence
				of the event that caused the member to be no longer independent.
H. The controlling person of a group of
				affiliated insurers may designate its audit committee to serve as the Audit
				Committee for one or more of those the insurers for purposes of this Rule. A
				controlling person exercising this election shall provide written notice to
				each of the insurance supervisory officials 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 Superintendent by the insurer, which shall
				include a description of the basis for the change. The election shall remain in
				effect until rescinded.
I.
(1) The Audit Committee shall require the
				accountant that performs any audit required by this Rule for the insurer to
				submit a timely report to the Audit Committee in accordance with generally
				accepted auditing standards, 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.