(1) Every insurer
required to file an Audited financial report pursuant to this regulation that
has annual direct written and assumed premiums, excluding premiums reinsured
with the Federal Crop Insurance Corporation and Federal Flood Program, of
$500,000,000 or more shall prepare a report of the insurer's or Group of
insurers' Internal control over financial reporting, as these terms are defined
in
120-2-60-.03.
The report shall be filed with the Commissioner along with the Communication of
Internal Control Related Matters Noted in an Audit described under
120-2-60-.11. Management's Report
of Internal Control over Financial Reporting shall be as of December 31
immediately preceding.
(2)
Notwithstanding the premium threshold in paragraph 1, the Commissioner may
require an insurer to file Management's Report of Internal Control over
Financial Reporting if the insurer is in any RBC level event, or meets any one
or more of the standards of an insurer deemed to be in hazardous financial
condition as defined in 120-2-54.
(3) An insurer or a Group of insurers that is
(a) directly subject to Section
404;
(b) part of a holding company
system whose parent is directly subject to Section 404;
(c) not directly subject to Section 404 but
is a SOX Compliant Entity; or
(d) a
member of a holding company system whose parent is not directly subject to
Section 404 but is a SOX Compliant Entity;
may file its or its parent's Section 404 Report and an
addendum in satisfaction of this requirement provided that those internal
controls of the insurer or Group of insurers having a material impact on the
preparation of the insurer's or Group of insurers' audited statutory financial
statements (those items included in
120-2-60-.05(2)(b) -
(g)) were included in the scope of the
Section 404 Report. The addendum shall be a positive statement by management
that there are no material processes with respect to the preparation of the
insurer's or Group of insurers' audited statutory financial statements (those
items included in
120-2-60-.05(2)(b) -
(g)) excluded from the Section 404 Report. If
there are internal controls of the insurer or Group of insurers that have a
material impact on the preparation of the insurer's or Group of insurers'
audited statutory financial statements and those internal controls were not
included in the scope of the Section 404 Report, the insurer or Group of
insurers may either file (i) a
120-2-60-.16 report, or (ii) the
Section 404 Report and a
120-2-60-.16 report for those
internal controls that have a material impact on the preparation of the
insurer's or Group of insurers' audited statutory financial statements not
covered by the Section 404 Report.
(4) Management's Report of Internal Control
over Financial Reporting shall include:
(a) A
statement that management is responsible for establishing and maintaining
adequate Internal control over financial reporting;
(b) A statement that management has
established Internal control over financial reporting and an assertion, to the
best of management's knowledge and belief, after diligent inquiry, as to
whether its Internal control over financial reporting is effective to provide
reasonable assurance regarding the reliability of financial statements in
accordance with statutory accounting principles;
(c) A statement that briefly describes the
approach or processes by which management evaluated the effectiveness of its
Internal control over financial reporting; and
(d) A statement that briefly describes the
scope of work that is included and whether any internal controls were
excluded;
(e) Disclosure of any
unremediated material weaknesses in the Internal control over financial
reporting identified by management as of December 31 immediately preceding.
Management is not permitted to conclude that the Internal control over
financial reporting is effective to provide reasonable assurance regarding the
reliability of financial statements in accordance with statutory accounting
principles if there is one or more unremediated material weaknesses in its
Internal control over financial reporting;
(f) A statement regarding the inherent
limitations of internal control systems; and
(g) Signatures of the chief executive officer
and the chief financial officer (or equivalent position/title).
(5) Management shall document and
make available upon financial condition examination the basis upon which its
assertions, required in paragraph 4 above, are made. Management may base its
assertions, in part, upon its review, monitoring and testing of internal
controls undertaken in the normal course of its activities.
(a) Management shall have discretion as to
the nature of the internal control framework used, and the nature and extent of
documentation, in order to make its assertion in a cost effective manner and,
as such, may include assembly of or reference to existing
documentation.
(b) Management's
Report on Internal Control over Financial Reporting, required by
120-2-60-.16(1)
above, and any documentation provided in support thereof during the course of a
financial condition examination, shall be kept confidential by the state
insurance department.
Notes
Ga. Comp. R.
& Regs. R.
120-2-60-.17
O.C.G.A. Secs.
33-2-9,
33-2-11,
33-2-13,
33-2-14,
33-3-21.
Original Rule entitled
"Exemptions and Effective Dates" adopted. F. Nov.
19, 2009; eff. Dec. 9,
2009.
Repealed: New Rule entitled "Management's Report of
Internal Control over Financial Reporting" adopted. F.
June 25, 2015; eff.
July 15,
2015.