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Ins 50.01(7t)(c) (c) The internal control over financial reporting requirements of Section 404, item 308 of SEC Regulation S-K.
Ins 50.01(8) (8) "State of domicile" means the state where an insurer is domiciled or, for an alien insurer, its port of entry state.
Ins 50.01(8m) (8m) "Ultimate controlling person" means a person who is not controlled by any other person.
Ins 50.01(9) (9) "Work papers" means records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to the independent certified public accountant's examination of the financial statements of an insurer. "Work papers" include, but are not limited to, audit planning documentation, audit guides, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents and schedules or commentaries prepared or obtained by the independent certified public accountant in the course of examination of the financial statements of an insurer or which support the opinion of the independent certified public accountant regarding the financial statements.
Ins 50.01 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; correction in (4) made under s. 13.93 (2m) (b) 7., Stats., Register, June, 2001, No. 546; CR 07-023: cr. (4m), Register September 2007 No. 621, eff. 10-1-07; CR 08-053: cr. (1g), (1r), (4g), (4r), (6m), (7d), (7h), (7p), (7t) and (8m) Register December 2008 No. 636, eff. 1-1-09.
Ins 50.02 Ins 50.02 Applicability. Unless otherwise ordered by the commissioner, this subchapter applies to all insurers except:
Ins 50.02(1) (1) An insurer is not subject to this subchapter for a calendar year in which the insurer has:
Ins 50.02(1)(a) (a) Direct premiums written in this state of less than $100,000 and less than 1,000 policyholders or certificate holders of directly written policies in the state at the end of the calendar year; and
Ins 50.02(1)(b) (b) Assumed premiums nationwide of less than $1,000,000 under reinsurance contracts or treaties and direct premiums written nationwide of less than $1,000,000.
Ins 50.02(2) (2) A foreign or alien insurer is exempt from this chapter except for s. Ins 50.03 if:
Ins 50.02(2)(a) (a) It complies with another state's requirement to submit audited financial reports and the other state's requirement is found by the commissioner to be substantially similar to the requirements of this chapter; and
Ins 50.02(2)(b) (b) It files audited financial reports with that state's commissioner of insurance or equivalent agency.
Ins 50.02(3) (3) An insurer licensed under ch. 612, Stats., if the insurer meets all of the following requirements:
Ins 50.02(3)(a) (a) Has direct total written premium for the calendar year, including premiums on nonproperty coverage, of less than $500,000;
Ins 50.02(3)(b) (b) Has a net of reinsurance premium to policyholder surplus ratio of less than 3 to 1 as of the December 31 of the year for which an audited financial report is otherwise required.
Ins 50.02(3)(c) (c) Is not authorized under its articles of incorporation to do business in more than 8 counties.
Ins 50.02(3)(d) (d) Does not engage in the writing of nonproperty coverage unless the nonproperty coverage is 90% reinsured.
Ins 50.02 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; am. (1) (b), Register, December, 1995, No. 480, eff. 1-1-96; am. (3) (intro.) and (a) to (d) and r. (3) (e) and (f), Register, June, 2001, No. 546, eff. 1-1-02; CR 08-053: am. (2) (a) Register December 2008 No. 636, eff. 1-1-09.
Ins 50.03 Ins 50.03 Filing by exempt foreign and alien insurers. A foreign or alien insurer which is exempt from this subchapter under s. Ins 50.02 (2) shall:
Ins 50.03(1) (1) File a copy of the audited financial report, report on significant deficiencies in internal controls, and the accountant's letter of qualifications which are filed with the other state with the commissioner not later than the filing dates specified in ss. Ins 50.05, 50.12 and 50.13, respectively. Canadian insurers which are not subject to this subchapter under s. Ins 50.02 (2) shall submit to the commissioner accountants' reports as filed with the Canadian Dominion department of insurance not later than the filing dates specified in s. Ins 50.05.
Ins 50.03(2) (2) File with the commissioner a copy of any notification of adverse financial condition report filed with, or required to be filed with, the other state within the time specified in s. Ins 50.11.
Ins 50.03 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93.
Ins 50.04 Ins 50.04 Authority to obtain information or examine not restricted. This subchapter does not limit the authority of the commissioner to require an insurer or any other person to provide information, or to conduct an examination of an insurer or any other person, under any other statute or rule.
Ins 50.04 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93.
Ins 50.05 Ins 50.05 General requirements related to filing and extensions for filing of annual audited financial reports and audit committee appointment.
Ins 50.05(1) (1) An insurer shall:
Ins 50.05(1)(a) (a) Annually obtain or cause an audit of the insurer by an independent certified public accountant; and
Ins 50.05(1)(b) (b) File an audited financial report that complies with s. Ins 50.06 with the commissioner on or before June 1 for the immediately preceding calendar year.
Ins 50.05(2) (2) The commissioner may require an insurer to file the audited financial report earlier than the date specified under sub. (1) if the commissioner gives 90 days advance notice to the insurer.
Ins 50.05(3) (3) The commissioner may grant extensions of the filing date under sub. (1) for 31-day periods if the insurer and independent certified public accountant establish there is good cause for an extension. A request for an extension shall be submitted in writing not less than 10 days prior to the due date in sufficient detail to permit the commissioner to make an informed decision with respect to the requested extension. If an extension is granted in accordance with this subsection, a similar extension of 31 days is granted to the filing of management's report of internal control over financial reporting.
Ins 50.05(4) (4) An insurer may not retain an accountant or accounting firm to comply with sub. (1) or s. Ins 50.07 unless the accountant or accounting firm is an independent certified public accountant, regardless of whether the commissioner has issued a ruling under s. Ins 50.08 (1). An insurer may not retain an accountant or accounting firm to comply with sub. (1) or s. Ins 50.07 if the commissioner under s. Ins 50.08 (1) rules that the accountant or accounting firm is not qualified or if the accountant or accounting firm does not comply with s. Ins 50.08 (2).
Ins 50.05(5) (5) Every insurer required to file an annual audited financial report pursuant to this chapter shall designate a group of individuals to constitute its audit committee. The audit committee of an entity that controls an insurer may be deemed to be the insurer's audit committee for purposes of this chapter at the election of the controlling person.
Ins 50.05 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; CR 08-053: am. (title) and (3), cr. (5) Register December 2008 No. 636, eff. 1-1-09.
Ins 50.06 Ins 50.06 Contents of annual audited financial report. The annual audited financial report required under s. Ins 50.05 shall comply with all of the following:
Ins 50.06(1) (1) Report the financial position of the insurer as of the end of the most recent calendar year and the results of its operations, cash flows and changes in capital and surplus for the year then ended in conformity with statutory accounting practices prescribed, or otherwise permitted, by the department of insurance, or equivalent agency, of the state of domicile, or, for a domestic insurer, in conformity with accounting practices prescribed or permitted in annual statements filed with the commissioner, as provided under s. Ins 7.02.
Ins 50.06(2) (2) Include all of the following:
Ins 50.06(2)(a) (a) The report of the independent certified public accountant.
Ins 50.06(2)(b) (b) A balance sheet reporting admitted assets, liabilities, capital and surplus.
Ins 50.06(2)(c) (c) A statement of operations.
Ins 50.06(2)(d) (d) A statement of cash flows.
Ins 50.06(2)(e) (e) A statement of changes in capital and surplus.
Ins 50.06(2)(f) (f) Notes to financial statements. These notes shall be those required by the appropriate national association of insurance commissioners' annual statement instructions and accounting practices and procedures manual. The notes shall include a reconciliation of differences, if any, between the audited statutory financial statements and the annual statement filed pursuant to subch. II with a written description of the nature of these differences.
Ins 50.06(3) (3) Include financial statements prepared in a form and using language and groupings substantially the same as the relevant sections of the annual statement of the insurer filed with the commissioner. The financial statement shall be comparative, presenting the amounts as of December 31 of the current year and the amounts as of the immediately preceding December 31, except in the first year in which an insurer is required to file an audited financial report, the comparative data may be omitted.
Ins 50.06 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; CR 01-050: renum. (2) (f) (intro.) and am., r. (2) (f) 1. and 2., Register October 2001 No. 550, eff. 11-1-01.
Ins 50.07 Ins 50.07 Designation of independent certified public accountant.
Ins 50.07(1)(1) An insurer shall, within 60 days after the insurer becomes subject to this subchapter:
Ins 50.07(1)(a) (a) Provide the commissioner in writing the name and address of the independent certified public accountant retained to conduct the annual audit required by this subchapter.
Ins 50.07(1)(b) (b) File with the commissioner a copy of the letter required to be obtained under sub. (3).
Ins 50.07(2) (2) Insurers not retaining an independent certified public accountant on the effective date of this rule shall register the name and address of their retained independent certified public accountant not less than 6 months before the date when the first audited financial report is to be filed.
Ins 50.07(3) (3) An insurer shall obtain a letter from the independent certified public accountant it retains to conduct the annual audit required by this subchapter. The letter shall state that the independent certified public accountant:
Ins 50.07(3)(a) (a) Is aware of the provisions of the insurance code and the rules and regulations of the insurance department or equivalent agency of the state of domicile of the insurer that relate to accounting and financial matters of insurers; and
Ins 50.07(3)(b) (b) Will express an opinion on whether the financial statements conform to the statutory accounting practices prescribed or otherwise permitted by that department or equivalent agency and will specify exceptions as appropriate.
Ins 50.07(4) (4) If an independent certified public accountant for the immediately preceding filed audited financial report of an insurer is dismissed or resigns, the insurer shall comply with all of the following:
Ins 50.07(4)(a) (a) The insurer shall within 5 business days notify the commissioner of the dismissal or resignation.
Ins 50.07(4)(b) (b) The insurer shall within 15 business days furnish the commissioner with a letter which clearly states that there was no disagreement required to be disclosed under this paragraph or which describes any disagreement between the insurer and the independent certified public accountant in the 24 months preceding the dismissal or resignation, which:
Ins 50.07(4)(b)1. 1. Was on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; and
Ins 50.07(4)(b)2. 2. Would require the independent certified public accountant to make reference to the subject matter of the disagreement in connection with the opinion required under s. Ins 50.06. The requirement to provide a description applies regardless of whether the disagreement was resolved or whether the former independent certified public accountant was satisfied with the resolution.
Ins 50.07(4)(c) (c) The insurer shall within 15 business days furnish the commissioner with a letter from the independent certified public accountant addressed to the insurer stating whether the independent certified public accountant agrees with the statements contained in the insurer's letter required under par. (b) and, if not, stating the reasons why not.
Ins 50.07 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93.
Ins 50.08 Ins 50.08 Qualifications of independent certified public accountants.
Ins 50.08(1)(1) The commissioner may rule that an accountant or accounting firm is not qualified for purposes of expressing an opinion on the financial statements in the annual audited financial report required under this subchapter and prohibit insurers from retaining the accountant or an accounting firm, and require insurers to replace the accountant or accounting firm, if the commissioner finds there is cause, including, but not limited to, a finding that the accountant or accounting firm:
Ins 50.08(1)(a) (a) Is not in good standing with the American institute of certified public accountants and in all states in which the accountant or accounting firm is, or is required to be, licensed to practice, or, for a Canadian or British company, that it is not a chartered accountant;
Ins 50.08(1)(am) (am) Has either directly or indirectly entered into an agreement of indemnification with respect to the audit of the insurer;
Ins 50.08(1)(b) (b) Has not conformed to the standards of the accounting profession as contained in the code of professional ethics of the American institute of certified public accountants and rules and regulations and code of ethics and rules of professional conduct of the accounting examining board, or a similar code;
Ins 50.08(1)(c) (c) Has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 USC 1961 to 1968, or any dishonest conduct or practices under federal or state law;
Ins 50.08(1)(d) (d) Has been found to have violated the insurance laws or rules of this state; or
Ins 50.08(1)(e) (e) Has demonstrated a pattern or practice of failing to detect or disclose material information in financial reports.
Ins 50.08(2) (2) After December 31, 1994, and prior to January 1, 2010, no accounting firm partner or other person responsible for rendering a report required of an independent certified public accountant may act in that capacity for more than 7 consecutive years. Following any period of service such a person shall be disqualified from acting in that or a similar capacity for the same company or its insurance subsidiaries or affiliates for a period of 2 years. Effective January 1, 2010, the lead or coordinating audit partner having primary responsibility for the audit may not act in that capacity for more than 5 consecutive years, including consecutive years immediately preceding January 1, 2010, and shall be disqualified from acting in that or a similar capacity for the same company or its insurance subsidiaries or affiliates for a period of 5 consecutive years. An insurer may make application to the commissioner for relief from the rotation requirement on the basis of unusual circumstances. The application should be made at least thirty days before the end of the calendar year. Factors the commissioner may consider in determining if the relief should be granted include, but are not limited to:
Ins 50.08(2)(a) (a) Number of partners, expertise of the partners or the number of insurance clients in the currently registered firm;
Ins 50.08(2)(b) (b) Premium volume of the insurer; or
Ins 50.08(2)(c) (c) Number of jurisdictions in which the insurer transacts business.
Ins 50.08(3) (3) The insurer shall file with its annual statement filing the approval for relief from sub. (2) with the states that it is licensed in or doing business in and with the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.
Ins 50.08(4)(a)(a) The commissioner shall not recognize as a qualified independent certified public accountant a person who, or accept an annual audited financial report prepared in whole or in part by a person who, provides to an insurer, contemporaneously with the audit, the following non-audit services:
Ins 50.08(4)(a)1. 1. Bookkeeping or other services related to the accounting records or financial statements of the insurer.
Ins 50.08(4)(a)2. 2. Financial information systems design and implementation.
Ins 50.08(4)(a)3. 3. Appraisal or valuation services, fairness opinions, or contribution in-kind reports.
Ins 50.08(4)(a)4. 4. Actuarially-oriented advisory services involving the determination of amounts reported in the financial statements. The accountant may assist an insurer in understanding the methods, assumptions and inputs used in the determination of amounts recorded in the financial statement only if it is reasonable to conclude that the services provided will not be subject to audit procedures during an audit of the insurer's financial statements. An accountant's actuary may also issue an actuarial opinion or certification "opinion" on an insurer's reserves if the following conditions have been met:
Ins 50.08(4)(a)4.a. a. Neither the accountant nor the accountant's actuary has performed any management functions or made any management decisions;
Ins 50.08(4)(a)4.b. b. The insurer has competent personnel, or engages a third party actuary, to estimate the reserves for which management takes responsibility; and
Ins 50.08(4)(a)4.c. c. The accountant's actuary tests the reasonableness of the reserves after the insurer's management has determined the amount of the reserves;
Ins 50.08(4)(a)5. 5. Internal audit outsourcing services.
Ins 50.08(4)(a)6. 6. Management functions or human resources.
Ins 50.08(4)(a)7. 7. Broker or dealer, investment advisor, or investment banking services.
Ins 50.08(4)(a)8. 8. Legal services or expert services unrelated to the audit.
Ins 50.08(4)(a)9. 9. Any other services that the commissioner determines are impermissible. The commissioner may consider utilizing the guidance provided in the Securities and Exchange Commission Final Rule No. 33-8183, Strengthening the Commission's Requirements Regarding Auditor Independence, adopted January 28, 2003, in order to evaluate whether the provision of such services impairs the independence of the accountant.
Ins 50.08(4)(b) (b) In general, the principles of independence with respect to services provided by the qualified independent certified public accountant are largely predicated on three basic principles, violations of which would impair the accountant's independence. The principles are that the accountant cannot function in the role of management, cannot audit the accountant's own work, and cannot serve in an advocacy role for the insurer.
Ins 50.08(5) (5) Insurers having direct written and assumed premiums of less than $ 100,000,000 in any calendar year may request an exemption from sub. (4) (a). The insurer shall file with the commissioner a written statement discussing the reasons why the insurer should be exempt from the provisions. If the commissioner finds upon review of the statement that compliance with sub. (4) (a) would constitute a financial or organizational hardship upon the insurer, an exemption may be granted.
Ins 50.08(6) (6) A qualified independent certified public accountant who performs the audit may engage in other non-audit services, including tax services, that are not described in sub. (4) (a) or that do not conflict with sub. (4) (b), only if the activity is approved in advance by the audit committee, in accordance with sub. (7), provided that the audit committee is in compliance with the Securities and Exchange Commission Final Rule 33-8183, Strengthening the Commission's Requirements Regarding Auditor Independence, adopted January 28, 2003.
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