Or. Admin. Code § 836-011-0223

Current through Register Vol. 63, No. 11, November 1, 2024

Section 836-011-0223 - Requirements for Audit Committee

(1) This rule does not apply to an authorized foreign or alien insurer or to an insurer that is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity.

(2) The audit committee shall be directly responsible for the appointment, compensation and oversight of the work of an 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 OAR 836-011-0100 to 836-011-0230. Each accountant shall report directly to the audit committee.

(3) 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 OAR 836-011-0224.

(4) Each member of the audit committee must 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 section (7) of this rule.

(5) To be considered independent for purposes of this rule, a member of the audit committee may not accept any consulting, advisory or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof, other than in the member's capacity as a member of the audit committee, the board of directors or any other board committee. However, if a law requires board participation by an otherwise non-independent member, that law prevails and the member may participate in the audit committee and be designated as independent for audit committee purposes, unless the member is an officer or employee of the insurer or one of its affiliates.

(6) If a member of the audit committee ceases to be independent for a reason outside the member's reasonable control, that person, with notice by the responsible entity to the Director, may remain an audit committee member of the responsible entity until the earlier of the date 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.

(7) To exercise the election of the controlling person to designate the audit committee for purposes of OAR 836-011-0100 to 836-011-0230, the ultimate controlling person shall provide written notice to the Director. The notice must be provided in a timely manner prior to the issuance of the statutory audit report and must include a description of the basis for the election. The insurer may change the election by notifying the Director. The notice to the Director must include a description of the basis for the change. The election remains in effect for perpetuity, until rescinded.

(8) The audit committee shall require the accountant that performs for an insurer any audit required by OAR 836-011-0100 to 836-011-0230 to timely report to the Audit committee in accordance with the requirements of SAS 61, Communication with Audit Committees, or its replacement, including:

(a) All significant accounting policies and material permitted practices;

(b) 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 referred by the accountant; and

(c) Other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.

(9) If an insurer is a member of an insurance holding company system, the reports required by section (8) of this rule may be provided to the audit committee on an aggregate basis for insurers in the holding company system, but only if any substantial differences among insurers in the system are identified to the Audit committee.

(10) 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 - No minimum requirements. See also Note A and B.

Over $300,000,000 - $500,000,000 - Majority (50% or more) of members shall be independent. See also Note A and B.

Over $500,000,000 - Supermajority of members (75% or more) shall be independent.

See Also Note A.

(11) (Note A) The Director is authorized by state law to require an 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 determined to be in hazardous financial condition or otherwise exhibits qualities of a troubled insurer.

(12) (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.

(13) (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.

(14) An insurer with direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of less than $500,000,000 may apply to the Director for a waiver from the requirements of this rule on the basis of hardship. The insurer shall file, with its annual statement filing, the approval for relief from this rule with the states that it is licensed or authorized in or doing business in and with the NAIC. If a nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

Or. Admin. Code § 836-011-0223

ID 9-2008, f. 6-30-08, cert. ef. 7-1-08; ID 11-2008, f. & cert. ef. 7-29-08; ID 14-2017, amend filed 12/20/2017, effective 12/20/2017

Statutory/Other Authority: ORS 731.244 & 731.488

Statutes/Other Implemented: ORS 731.488