375.1056. Report required by insurer, when, contents.
Report required by insurer, when, contents.
375.1056. 1. Every insurer required to file an audited financialreport under sections 375.1025 to 375.1062 that has annual direct writtenand assumed premiums, excluding premiums reinsured with the Federal CropInsurance Corporation and Federal Flood Program, of five hundred milliondollars or more shall prepare a report of the insurer's or group ofinsurers' internal control over financial reporting, as such terms aredefined in section 375.1025. The report shall be filed with the directoralong with the communication of internal control-related matters noted inan audit described under section 375.1047. Management's report of internalcontrol over financial reporting shall be as of December thirty-firstimmediately preceding.
2. Notwithstanding the premium threshold in subsection 1 of thissection, the director may require an insurer to file management's report ofinternal control over financial reporting if the insurer is in any RBClevel event, or meets any one or more of the standards of an insurer deemedto be in hazardous financial condition as defined in rules adopted by thedirector.
3. An insurer or a group of insurers that is:
(1) Directly subject to Section 404;
(2) Part of a holding company system whose parent is directly subjectto Section 404;
(3) Not directly subject to Section 404 but is a SOX compliantentity; or
(4) A member of a holding company system whose parent is not directlysubject to Section 404 but is a SOX compliant entity
may file its or its parent's Section 404 report and an addendum insatisfaction of the requirement of this section, provided that thoseinternal controls of the insurer or group of insurers having a materialimpact on the preparation of the insurer's or group of insurers' auditedstatutory financial statements, namely those items included in subdivisions(2) to (6) of subsection 2 of section 375.1032, were included in the scopeof the Section 404 report. The addendum shall be a positive statement bymanagement that there are no material processes with respect to thepreparation of the insurer's or group of insurers' audited statutoryfinancial statements excluded from the Section 404 report. If there areinternal controls of the insurer or group of insurers that have a materialimpact on the preparation of the insurer's or group of insurers' auditedstatutory financial statements and those internal controls were notincluded in the scope of the Section 404 report, the insurer or group ofinsurers may either file a report under this section, or the Section 404report and a report under this section for those internal controls thathave a material impact on the preparation of the insurer's or group ofinsurers' audited statutory financial statements not covered by the Section404 report.
4. Management's report of internal control over financial reportingshall include:
(1) A statement that management is responsible for establishing andmaintaining adequate internal control over financial reporting;
(2) A statement that management has established internal control overfinancial reporting and an assertion, to the best of management's knowledgeand belief, after diligent inquiry, as to whether its internal control overfinancial reporting is effective to provide reasonable assurance regardingthe reliability of financial statements in accordance with statutoryaccounting principles;
(3) A statement that briefly describes the approach or processes bywhich management evaluated the effectiveness of its internal control overfinancial reporting;
(4) A statement that briefly describes the scope of work that isincluded and whether any internal controls were excluded;
(5) Disclosure of any unremediated material weaknesses in theinternal control over financial reporting identified by management as ofDecember thirty-first immediately preceding. Management is not permittedto conclude that the internal control over financial reporting is effectiveto provide reasonable assurance regarding the reliability of financialstatements in accordance with statutory accounting principles if there isone or more unremediated material weaknesses in its internal control overfinancial reporting;
(6) A statement regarding the inherent limitations of internalcontrol systems; and
(7) Signatures of the chief executive officer and the chief financialofficer, or the equivalent position or title.
5. Management shall document and make available upon financialcondition examination the basis upon which its assertions required insubsection 4 of this section are made. Management may base its assertions,in part, upon its review, monitoring and testing of internal controlsundertaken in the normal course of its activities. Management shall havediscretion as to the nature of the internal control framework used, and thenature and extent of documentation, in order to make its assertion in acost-effective manner and, as such, may include assembly of or reference toexisting documentation. Management's report on internal control overfinancial reporting, required by subsection 1 of this section, and anydocumentation provided in support thereof during the course of a financialcondition examination, shall be kept confidential by the department.
6. No officer responsible for financial reporting may be a member ofthe audit committee.
(L. 2009 H.B. 577)