National Association of Insurance Commissioners Working Group Seeking Comments on Updated Corporate Governance Annual Disclosure Model Act and Regulation by April 21, 2014
Apr 10, 2014
After rejecting a request to exempt insurers that write less than $500 million in direct written and assumed premiums from having to file an annual corporate governance disclosure, the National Association of Insurance Commissioners (“NAIC”) Corporate Governance Working Group (“Working Group”) agreed to invite comment on an updated draft of its Corporate Governance Annual Disclosure Model Act (“Model Act”) and Model Regulation through April 21, 2014.
A.M. Best’s BestWeek reported that the request was denied because regulators believe smaller companies may have greater challenges understanding and complying with corporate governance.
According to the national insurance trade association that made the request during the Working Group’s meeting on March 30 at the NAIC Spring 2014 National Meeting, the requirements would create redundant work for both companies and regulators. The request for exemption was made as an alternative to another request to address the filing redundancies in the Model Act, which the Working Group indicated might be considered. For example, BestWeek explained, insurers could be exempted from putting some corporate governance information in documents such as annual reports if they are providing “substantially similar” information to regulators in other filings.
Passage of the Model Act would address a Federal Insurance Office recommendation that asks states to “develop corporate governance principles that impose character and fitness expectations on directors and officers appropriate to the size and complexity of the insurer.”
The comment period for the Model Act coincides with that of the supporting Model Regulation and ends on the same date–April 21. To access both documents, click on the hyperlinks below:
- Draft Corporate Governance Annual Disclosure Model Act
- Draft Corporate Governance Annual Filing Model Regulation
If enacted by a state, the purpose of the Model Act would be to provide an insurance commissioner with a confidential summary of an insurer or insurance group’s corporate governance structure, policies and practices to permit the insurance commissioner to gain and maintain an understanding of the company’s corporate governance framework.
The Model Act defines the term “insurance group” as those insurers and affiliates included within an insurance holding company system as defined by respective state law.
Its definition of “Insurer” would also be the same as the enacting state’s law, but ” . . . would not include agencies, authorities or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.”
A drafting note in the Model Act’s current version would allow for states’ specific inclusion of fraternal insurers, health maintenance organizations, captives, self-insurance funds and others.
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