(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 chapter.
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 Rule
482-1-141-.15.
(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 paragraph (6) of this rule and
paragraph (3) of Rule
482-1-141-.03.
(4) 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 subsidiary thereof. However, if a 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 this regulation, 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
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)
(a) The
audit committee shall require the accountant that performs for an insurer any
audit required by this regulation to timely report to the audit committee in
accordance with the requirements of SAS 61,
Communication with Audit
Committees, or its replacement, including all of the following:
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 or schedule of unadjusted differences.
(b) If an insurer is a member of an insurance
holding company system, the reports required by paragraph (7)(a) 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.
(8) The proportion of independent
audit committee members shall meet or exceed the following criteria:
|
Prior Calendar Year Direct Written and Assumed
Premiums
|
|
$0 - $300,000,000
|
Over $300,000,000 -$500,000,000
|
Over $500,000,000
|
|
No minimum requirements. See also Note A and
B.
|
Majority (50% or more) of members shall be
independent. See also Note A and B.
|
Supermajority of members (75% or more) shall be
independent. See also Note A.
|
Note A: The commissioner has authority afforded by
state law to require the entity's board to enact improvements to the
independence of the audit committee membership if the insurer is in a RBC
action level event, meets one or more of the standards of an insurer deemed to
be in hazardous financial condition, or otherwise exhibits qualities of a
troubled insurer.
Note B: All insurers with less than $500,000,000
in prior year direct written and assumed premiums are encouraged to structure
their audit committees with at least a supermajority of independent audit
committee members.
Note C: Prior calendar year direct written and
assumed premiums shall be the combined total of direct premiums and assumed
premiums from non-affiliates for the reporting entities.
(9) An insurer with direct written and
assumed premium, excluding premiums reinsured with the Federal Crop Insurance
Corporation and Federal Flood Program, less than $500,000,000 may make
application to the commissioner for a waiver from the rule
482-1-141-.14 requirements based
upon hardship. The insurer shall file, with its annual statement filing, the
approval for relief from rule
482-1-141-.14 with the states
that it is licensed in or doing business in and the NAIC. If the nondomestic
state accepts electronic filing with the NAIC, the insurer shall file the
approval in an electronic format acceptable to the NAIC.
(10) This rule shall not apply to foreign or
alien insurers 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.
Notes
Ala. Admin. Code
r. 482-1-141-.14
New: Filed January 31,
2008; effective July 1, 2008. Filed with LRS February 1, 2008. Rule is not
subject to the Alabama Administrative Procedure Act.
Amended by
Alabama
Administrative Monthly Volume XXXVI, Issue No. 09, June 29, 2018,
eff. 1/1/2019. Rule
is not subject to the Alabama Administrative Procedure
Act.
Author: Commissioner of Insurance
Statutory Authority:
Code of Ala.
1975, ยงยง
27-2-17,
27-3-26,
27-7-43.
