N.M. Admin. Code § 13.2.5.23 - MANAGEMENT'S REPORT OF INTERNAL CONTROL OVER FINANCIAL REPORTING
A. An insurer
required to file an audited financial report pursuant to this rule 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
insurer's internal control over financial reporting, as these terms are defined
in this rule. The report shall be submitted to the superintendent along with
the communication of internal control related matters noted in an audit
described in this rule. Management's report of internal control over financial
reporting shall be as of December 31 immediately preceding.
B. Notwithstanding the premium threshold in
this section the superintendent may require an insurer to submit managements
report of internal control over financial reporting if the insurer is in any
risk based capital level event, or if the insurer meets one or more of the
standards of an insurer deemed to be in hazardous financial
condition.
C. An insurer or a group
of insurer's that is:
(1) directly subject to
Section 404;
(2) part of a holding
company system whose parent is directly subject to Section 404;
(3) not directly subject to Section 404, but
is a SOX compliant entity; or
(4)
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 insurer's having a
material impact on the preparation of the insurer's or group of insurer's'
audited statutory financial statements 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 insurer's' audited statutory financial statements
excluded from the Section 404 report. If there are internal controls of the
insurer or group of insurer's that have a material impact on the preparation of
the insurer's or group of insurer's' audited statutory financial statements and
those internal controls were not included in the scope of the Section 404
report, the insurer or group of insurer's may either file (i) a report required
by this section, or (ii) the Section 404 report and a report required by this
section for those internal controls that have a material impact on the
preparation of the insurer's or group of insurer's audited statutory financial
statements not covered by the Section 404 report.
D. Managements report of internal control
over financial reporting shall include:
(1) a
statement that management is responsible for establishing and maintaining
adequate internal control over financial reporting:
(2) 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;
(3) a statement that briefly describes the
approach or processes by which management evaluated the effectiveness of its
internal control over financial reporting;
(4) a statement that briefly describes the
scope of work that is included and whether any internal controls were
excluded;
(5) 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;
(6) a statement regarding the inherent
limitations of internal control systems; and
(7) signatures of the chief executive officer
and the chief financial officer (or the equivalent position or
title).
E. Management
shall document and make available upon financial condition examination the
basis upon which its assertions, required in this section, 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.
F. 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.
G. Management's
report on internal control over financial reporting, required by this section,
and any documentation provided in support thereof during the course of a
financial condition examination, will be kept confidential by the OSI in
accordance with state law.
Notes
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