Administrative Rules of Montana › Department 6 - STATE AUDITOR › Chapter 6.6 - INSURANCE DEPARTMENT › Subchapter 6.6.35 - Annual Audited Reports and Establishing Accounting Practices and Procedures to Be Used in Annual Statements › Rule 6.6.3515 - REQUIREMENTS FOR AUDIT COMMITTEES

Current through Register Vol. 13, July 5, 2024
(1) This rule
				shall not apply to foreign or alien insurers licensed in this state, an insurer
				that is a SOX compliant entity, or an insurer that is a direct or indirect
				wholly-owned subsidiary of a SOX compliant entity.
(2) 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
				subchapter. Each accountant shall report directly to the audit
				committee.
(3) 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 ARM 6.6.3518.
(4)
				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 ARM
				6.6.3501(3)
				and 6.6.3515(7).
(5) In order to be
				considered independent for purposes of this rule, 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 nonindependent 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.
(6) 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.
(7) To exercise the election of the
				controlling person to designate the audit committee for purposes of this
				subchapter, 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 shall 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.
(8) The audit committee
				shall require the accountant that performs for an insurer any audit required by
				this subchapter 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.