Or. Admin. R. 410-141-5045 - FINANCIAL SOLVENCY REGULATION: Corporate Governance Annual Disclosure Filing

Current through Register Vol. 60, No. 12, December 1, 2021

(1) A CCO shall file a corporate governance annual disclosure report with the Authority, as described in this section, no later than June 1 of each calendar year. A CCO that is not subject to the requirement under this section to submit a CGAD Report shall nevertheless submit a CGAD Report at the Authority's request.

(2) A CGAD Report shall contain the following information:

(a) The CGAD Report shall describe the CCO's corporate governance framework and structure including consideration of the following:

(A) The CCO's Board and the various committees thereof that are ultimately responsible for overseeing the CCO and the level(s) at which that oversight occurs (e.g. ultimate control level, intermediate holding company, legal entity, etc.). The CGAD Report shall describe and discuss the rationale for the current CCO Board size and structure.

(B) The duties of the CCO Board and each of its significant committees and how they are governed (e.g. bylaws, charters, informal mandates, etc.), as well as how the CCO Board's leadership is structured, including a discussion of the roles of Chief Executive Officer and Chairman of CCO Board, as applicable, within the organization.

(C) The membership, structure and authority of the CCO's governing body, if the CCO is a coordinated care organization whose governing body as required by ORS 414.625(2)(o) is not the CCO Board.

(b) The CGAD Report shall describe the policies and practices of the most senior governing entity and significant committees thereof, including a discussion of the following factors:

(A) How the qualifications, expertise and experience of each CCO Board member meet the needs of the CCO.

(B) How an appropriate amount of independence is maintained on the CCO Board and its significant committees.

(C) The number of meetings held by the CCO Board and its significant committees over the past year as well as information on director attendance.

(D) How the CCO or its controlling affiliate nominates, and elects members to the CCO Board and its committees. The discussion should include, for example:

(i) Whether a nomination committee is in place to identify and select individuals for consideration.

(ii) Whether term limits are placed on directors.

(iii) How the election and re-election processes function.

(iv) Whether a CCO Board diversity policy is in place and if so, how it functions.

(E) The processes in place for the CCO Board to evaluate its performance and the performance of its committees, as well as any recent measures taken to improve performance (including any Board or committee training programs that have been put in place).

(c) The CGAD Report shall describe the CCO Board's policies and practices for directing senior management, including a description of the following factors:

(A) Any processes or practices (i.e. suitability standards) to determine whether officers and key persons in control functions have the appropriate background, experience and integrity to fulfill their prospective roles, including identification of the specific positions for which suitability standards have been developed and a description of the standards employed.

(B) Any changes in an officer's or key person's suitability as outlined by the CCO's standards and procedures to monitor and evaluate such changes.

(C) The CCO's code of business conduct and ethics, the discussion of which considers, for example:

(i) Compliance with laws, rules and regulations.

(ii) Proactive reporting of any illegal or unethical behavior.

(iii) The CCO's processes for performance evaluation, compensation and corrective action to ensure effective senior management throughout the organization, including a description of the general objectives of significant compensation programs and what the programs are designed to reward. The description shall include sufficient detail to allow the Authority to understand how the organization ensures that compensation programs do not encourage and/or reward excessive risk taking. Elements to be discussed may include, for example:

(I) The Board's role in overseeing management compensation programs and practices.

(II) The various elements of compensation awarded in the CCO's compensation programs and how the CCO determines and calculates the amount of each element of compensation paid.

(III) How compensation programs are related to both company and individual performance over time.

(IV) Whether compensation programs include risk adjustments and how those adjustments are incorporated into the programs for employees at different levels.

(V) Any claw back provisions built into the programs to recover awards or payments if the performance measures upon which they are based are restated or otherwise adjusted.

(VI) Any other factors relevant in understanding how the CCO monitors its compensation policies to determine whether its risk management objectives are met by incentivizing its employees.

(iv) The CCO's plans for senior management succession.

(d) The CGAD Report shall describe the processes by which the CCO Board, its committees and senior management ensure an appropriate amount of oversight to the critical risk areas impacting the CCO's business activities, including a discussion of:

(A) How oversight and management responsibilities are delegated between the CCO Board, its committees and senior management.

(B) How CCO Board is kept informed of the CCO's strategic plans, the associated risks and steps that senior management is taking to monitor and manage those risks.

(C) How reporting responsibilities are organized for each critical risk area. The description should allow the Authority to understand the frequency at which information on each critical risk area is reported to and reviewed by senior management and the CCO Board. This description may include, for example, the following critical risk areas of the insurer:

(i) Risk management processes.

(ii) Actuarial function.

(iii) Investment decision-making processes.

(iv) Reinsurance decision-making processes.

(v) Business strategy/finance decision-making processes.

(vi) Compliance function.

(vii) Financial reporting/internal auditing.

(viii) Market conduct decision-making processes.

(3) The chief executive officer or corporate secretary of a CCO shall sign the CGAD Report and attest that to the best of the officer's or secretary's belief and knowledge the CCO has implemented the corporate governance practices identified in the CGAD Report and that the CCO's Board, or an appropriate committee of the CCO's Board, has received a copy of the disclosure.

(4) A CCO that submits a CGAD Report under subsection (1) of this section may provide information in the disclosure at any of the following levels:

(a) At the level of the CCO, an intermediate holding company or any controlling affiliate, depending on how the CCO and its controlling affiliates have structured corporate governance.

(b) At the level at which the CCO or any controlling affiliate oversees or coordinates and exercises supervision over the CCO's earnings, capital, liquidity operations and reputation.

(c) At the level at which legal liability for failing in the duties of general corporate governance would occur.

(5) A CCO shall identify the level at which its CGAD Report is presented and explain the basis on which that level was determined to be appropriate. A CCO also shall explain any subsequent changes in the level of reporting.

(6) The CCO shall have discretion regarding the appropriate format for providing the information required by this section and is permitted to customize the CGAD Report to provide the most relevant information necessary to permit the Authority to gain an understanding of the corporate governance structure, policies and practices utilized by the CCO.

(7) Each year following the initial filing of the CGAD Report, the CCO shall file an amended version of the previously filed CGAD Report indicating where changes have been made. If no changes were made in the information or activities reported by the CCO, the filing should so state.

(8) Upon written application of a CCO, the Authority may grant an exemption from compliance with the CGAD Report filing requirement under this section if the Authority finds upon review of the application that compliance would constitute a financial or organizational hardship upon the CCO. An exemption may be granted at any time and from time to time for a specified period or periods. Not later than the 10th day after denial of a CCO's written request for an exemption under this section, the CCO may request in writing a hearing on its application for an exemption.

Notes

Or. Admin. R. 410-141-5045

DMAP 58-2019, adopt filed 12/18/2019, effective 1/1/2020

Statutory/Other Authority: ORS 413.042, 414.615, 414.625, 414.635 & 414.651

Statutes/Other Implemented: ORS 414.610-414.685