NAIC Adopts Corporate Governance Models
August 19, 2014 by NAIC
LOUISVILLE, Ky. (Aug. 18, 2014) —The National Association of Insurance Commissioners (NAIC) adopted a Corporate Governance Annual Disclosure Model Act and supporting Model Regulation, which provides a means for insurance regulators to receive additional information on the corporate governance practices of U.S. insurers on an annual basis.
Under the requirements of the Model Act, U.S. insurers will be required to provide a detailed narrative describing governance practices to their lead state or domestic regulator by June 1st of each year. The narrative will be protected by strict confidentiality measures, which were included within the models to encourage insurers to be open and transparent in describing their governance practices to regulators. Insurers will be allowed some discretion in determining the level within the organization to report their corporate governance practices at, depending upon their structure and organization. The new disclosure requirements are expected to commence in 2016.
“The Corporate Governance Annual Disclosure Model Act represents nearly five years of thoughtful discussion and work regarding regulatory guidance that details best practices for the corporate governance of insurers,” said Susan Donegan, Commissioner of the Vermont Department of Financial Regulation and Chair of the Corporate Governance Working Group. “This model act was developed to promote regulatory oversight as well as protect the confidentiality of the insurer.”
“Annual and transparent disclosure of corporate governance practices of insurers will ensure that state regulators have a comprehensive understanding of the corporate governance structure, policies and practices utilized by the insurer,” said Joseph Torti, III, Rhode Island Deputy Director and Superintendent of Insurance and Banking, and Chair of the NAIC Financial Condition Committee, which oversees the work of the Corporate Governance Working Group.
Key items required to be described within the corporate governance disclosure include:
- The insurer’s corporate governance framework and structure including duties and structure of the Board of Directors and its committees;
- The policies and practices of its Board of Directors and significant committees including appointment practices, the frequency of meetings held and review procedures;
- The policies and practices directing Senior Management including a description of defined suitability standards, the insurer’s code of conduct and ethics, performance evaluation and compensation practices, and succession planning; and
- The processes by which the Board of Directors, its committees and senior management ensure an appropriate level of oversight to the critical risk areas impacting the insurer’s business activities including risk management processes, the actuarial function, and investment, reinsurance and business strategy decision-making processes.
Click HERE for more information on the Corporate Governance Working Group.
About the NAIC
The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For more information, visit www.naic.org.
