New Mexico Administrative Code › Title 13 - INSURANCE › Chapter 2 - INSURANCE COMPANY LICENSING AND OPERATION › Part 5 - ANNUAL AUDITED FINANCIAL REPORTS › Section 13.2.5.16 - REQUIREMENTS FOR AUDIT COMMITTEE

Current through Register Vol. 35, No. 13, July 16, 2024
This section shall not apply to foreign or alien insurer's
				  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.
A. 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.
B. The audit committee of an insurer or group
				of insurer's shall be responsible for overseeing the insurer's audit function
				and granting the person or person's performing the function suitable authority
				and resources to fulfill their responsibilities.
C. 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 Subsection F of this section and
				Subsection C of
				13.2.5.7
				NMAC.
D. 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, the 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.
E. 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.
F. To exercise the election of the
				controlling person to designate the audit committee for purposes of this rule,
				the ultimate controlling person shall provide a written notice to the
				superintendent. Notification shall be made 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 for perpetuity, until rescinded.
G. The audit committee shall require the
				accountant that performs for an insurer any audit required by this rule to
				report to the audit committee in accordance with the requirements of SAS 61,
				communication with audit committees, or its replacement, including:
(1) all significant accounting policies and
				material permitted practices;
(2)
				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
(3) other material written communications
				between the accountant and the management of the insurer, such as any
				management letter or schedule of unadjusted differences.