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.
Ins 50.08(7)
(7) All auditing services and non-audit services provided to an insurer by the qualified independent certified public accountant of the insurer shall be preapproved by the audit committee. The preapproval requirement is waived with respect to non-audit services if the insurer is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity or:
Ins 50.08(7)(a)
(a) The aggregate amount of all such non-audit services provided to the insurer constitutes not more than five percent (5%) of the total amount of fees paid by the insurer to its qualified independent certified public accountant during the fiscal year in which the non-audit services are provided;
Ins 50.08(7)(b)
(b) The services were not recognized by the insurer at the time of the engagement to be non-audit services; and
Ins 50.08(7)(c)
(c) The services are promptly brought to the attention of the audit committee and approved prior to the completion of the audit by the audit committee or by one or more members of the audit committee who are members of the board of directors to whom authority to grant the approvals has been delegated by the audit committee.
Ins 50.08(8)
(8) The audit committee may delegate to one or more designated members of the audit committee the authority to grant the preapprovals required by sub.
(7). The decisions of any member to whom the authority is delegated shall be presented to the full audit committee at each of its scheduled meetings.
Ins 50.08(9)(a)(a) The commissioner shall not recognize an independent certified public accountant as qualified for a particular insurer if a member of the board, president, chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position for the insurer, was employed by the independent certified public accountant and participated in the audit of the insurer during the one-year period preceding the date that the most current statutory opinion is due. This paragraph shall only apply to partners and senior managers involved in the audit. An insurer may make application to the commissioner for relief from the requirement of this paragraph on the basis of unusual circumstances.
Ins 50.08(9)(b)
(b) The insurer shall file with its annual statement filing the approval for relief from par.
(a) with the states that it is licensed in or doing business in and 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 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93;
CR 07-023: cr. (1) (am),
Register September 2007 No. 621, eff. 10-1-07;
CR 08-053: am. (2), cr. (3) to (9)
Register December 2008 No. 636, eff. 1-1-09.
Ins 50.09
Ins 50.09
Consolidated or combined audits. An insurer may file audited consolidated or combined financial statements in lieu of separate annual audited financial statements required under this subchapter if the commissioner approves in writing and if the insurer is part of a group of insurers which utilizes a pooling or 100% reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer cedes all of its direct and assumed business to the pool. If the commissioner permits a consolidated report under this section the report shall include a columnar consolidating or combining work sheet, as follows:
Ins 50.09(1)
(1) Amounts shown on the consolidated or combined audited financial report shall be shown on the work sheet.
Ins 50.09(2)
(2) Amounts for each insurer subject to this section shall be stated separately.
Ins 50.09(3)
(3) Noninsurance operations may be shown on the work sheet on a combined or individual basis.
Ins 50.09(4)
(4) Explanations of consolidating and eliminating entries shall be included.
Ins 50.09(5)
(5) A reconciliation shall be included of any differences between the amounts shown in the individual insurer columns of the work sheet and comparable amounts shown on the annual statements of the insurers.
Ins 50.09 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93.
Ins 50.10
Ins 50.10
Scope of audit and report of independent certified public accountant. Financial statements furnished under s.
Ins 50.06 shall be audited by the independent certified public accountant. The independent certified public accountant shall conduct the audit of the insurer's financial statements in accordance with generally accepted auditing standards. In accordance with AU Section 319 of the Professional Standards of the AICPA, Consideration of Internal Control in a Financial Statement Audit, the independent certified public accountant should obtain an understanding of internal control sufficient to plan the audit. To the extent required by AU Section 319, for those insurers required to file a management's report of internal control over financial reporting pursuant to s.
Ins 50.17, the independent certified public accountant should consider, as that term is defined in Statement on Auditing Standards, SAS, No. 102, Defining Professional Requirements in Statements on Auditing Standards, or its replacement, the most recently available report in planning and performing the audit of the statutory financial statements. The independent certified public accountant shall give consideration to procedures illustrated in the financial condition examiner's handbook promulgated by the national association of insurance commissioners as the independent certified public accountant deems necessary. The commissioner may require that an independent certified public accountant conduct additional procedures or provide additional reports.
Ins 50.11
Ins 50.11
Notification of adverse financial condition. Ins 50.11(1)(1)
An insurer shall require the independent certified public accountant to report, in writing and within 5 business days, to the board of directors of the insurer or its audit committee any determination by the independent certified public accountant that the insurer has materially misstated its financial condition as reported to the commissioner as of the balance sheet date currently under audit or that the insurer does not meet the minimum capital and surplus or compulsory surplus requirements.
Ins 50.11(2)
(2) An insurer who receives a report required under sub.
(1) shall forward a copy of the report to the commissioner within 5 business days of receipt of the report and shall provide the independent certified public accountant making the report with evidence that the report has been furnished to the commissioner.
Ins 50.11(3)
(3) An independent certified public accountant shall furnish to the commissioner a copy of its report required under sub.
(1) within 10 business days after it is furnished to the insurer under sub.
(1) unless the independent certified public accountant receives evidence the insurer has provided it within the 10 business day period to the commissioner as required under sub.
(2).
Ins 50.11(4)
(4) An executive officer or director of an insurer which receives notice under sub.
(1) shall report the notification in writing to the commissioner within 5 business days of the date the executive officer or director first acquires knowledge of the notification unless prior to that date the insurer complies with sub.
(2).
Ins 50.11(5)
(5) If the independent certified public accountant, subsequent to the date of the audited financial report filed pursuant to this chapter, becomes aware of facts that might have affected the report, the independent certified public accountant shall take the action as prescribed in Volume 1, Section AU 561 of the Professional Standards of the AICPA.
Ins 50.11 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93;
CR 08-053: am. (1), cr. (5)
Register December 2008 No. 636, eff. 1-1-09.
Ins 50.12
Ins 50.12
Communication of internal control related matters noted in an audit. Ins 50.12(1)(1)
An insurer shall file with the commissioner within 60 days of the date an annual audited financial report is filed, or is required under s.
Ins 50.05 to be filed, a written communication prepared by the independent certified public accountant describing any unremediated material weaknesses in its internal controls over financial reporting noted during the audit. Such communication shall be prepared by the independent certified public accountant and shall contain a description of any unremediated material weakness, as the term material weakness is defined by Statement on Auditing Standard 60, Communication of Internal Control Related Matters Noted in an Audit, or its replacement, as of December 31 immediately preceding, so as to coincide with the audited financial report discussed in s.
Ins 50.05 (1), in the insurer's internal control over financial reporting noted by the accountant during the course of the audit of the financial statements. If no unremediated material weaknesses were noted, the communication should so state.
Ins 50.12(2)
(2) The insurer shall provide a description of remedial actions taken or proposed to correct unremediated material weaknesses, if the actions are not described in the independent certified public accountant's communication.
Ins 50.12 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93;
CR 08-053: am. (title), renum. to be (1) and am., cr. (2)
Register December 2008 No. 636, eff. 1-1-09.
Ins 50.13
Ins 50.13
Accountant's letter of qualifications. An accountant or accounting firm retained by an insurer to comply with this subchapter shall furnish the insurer, and the insurer shall obtain and include with the filing of the annual audited financial report required under s.
Ins 50.05, a letter from the accountant or accounting firm stating:
Ins 50.13(1)
(1) That the accountant or accounting firm is independent with respect to the insurer and conforms to the standards of his or her profession as contained in the code of professional ethics and pronouncements of the American institute of certified public accountants and the rules of professional conduct of the board of public accountancy of this state, or similar code.
Ins 50.13(2)
(2) The background and experience in general, and the experience in audits of insurers of the staff assigned to the engagement and whether each is an independent certified public accountant. This subchapter does not prohibit the accountant or accounting firm from utilizing such staff as he or she deems appropriate where use is consistent with the standards prescribed by generally accepted auditing standards.
Ins 50.13(3)
(3) That the accountant or accounting firm understands that the annual audited financial report and his or her opinion on the annual audited financial report will be filed in compliance with this chapter and that the commissioner will be relying on this information in the monitoring and regulation of the financial position of insurers.
Ins 50.13(4)
(4) That the accountant or accounting firm consents to the requirements of s.
Ins 50.14 and that the accountant or accounting firm consents and agrees to make available work papers for review by the commissioner.
Ins 50.13(5)
(5) A representation that the accountant or accounting firm is properly licensed by an appropriate state licensing authority and is a member in good standing in the American institute of certified public accountants.
Ins 50.13(6)
(6) A representation that the accountant or accounting firm is an independent certified public accounting firm and that there are no grounds for disqualification of the accountant or accounting firm under s.
Ins 50.08.
Ins 50.13 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93;
CR 08-053: am. (4)
Register December 2008 No. 636, eff. 1-1-09.
Ins 50.14
Ins 50.14
Availability and maintenance of CPA work papers. Ins 50.14(1)(1)
An insurer shall require the accountant or accounting firm which conducts an audit or other procedure under this subchapter to make available for review all work papers and any communications related to the audit or procedure between the insurer and the accountant or accounting firm at the offices of the insurer or at a reasonable place designated by the commissioner. The insurer shall require that the accountant retain the audit work papers and communications until the commissioner has filed a report on examination covering the period of the audit but no longer than 7 years from the date of the audit report.
Ins 50.14(2)
(2) The commissioner may obtain copies of work papers and retain the copies. If copies of work papers are requested in electronic format, the electronic copies must be as fully functional as the original documents. Password protection of the storage medium used to transmit electronic work papers is acceptable in order to securely transfer electronic work papers to the commissioner. Passwords on individual electronic work papers, or passwords that disable features of individual electronic work papers, are not permitted. All working papers and communications obtained by the commissioner under this section are confidential under s.
601.465, Stats.
Ins 50.14 History
History: Cr.
Register, July, 1993, No. 451, eff. 8-1-93;
CR 08-053: renum. from Ins 50.15
Register December 2008 No. 636, eff. 1-1-09;
CR 17-015: am. (2)
Register December 2017 No. 744, eff. 1-1-18.
Ins 50.15
Ins 50.15
Requirements for audit committees. Ins 50.15(1)(1)
This section does not apply to foreign or alien insurers licensed in this state or an insurer that is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity.
Ins 50.15(2)
(2) The audit committee shall be directly responsible for the appointment, compensation and oversight of the work of any 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 this chapter. Each accountant shall report directly to the audit committee.
Ins 50.15(2m)
(2m) The audit committee 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 s.
Ins 50.155.
Ins 50.15(3)
(3) Each member of the audit committee shall 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 sub.
(6) and s.
Ins 50.01 (1r).
Ins 50.15(4)
(4) In order to be considered independent for purposes of this section, a member of the audit committee may not, other than in the capacity as a member of the audit committee, the board of directors, or any other board committee, accept any consulting, advisory or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof. However, if a law requires board participation by otherwise non-independent members, the law shall prevail and the members may participate in the audit committee and be designated as independent for audit committee purposes, unless the members are an officer or employee of the insurer or one of its affiliates.
Ins 50.15(5)
(5) If a member of the audit committee ceases to be independent for reasons outside the member's reasonable control, the member, with notice by the insurer to the commissioner, may remain an audit committee member of the insurer until the earlier of the next annual meeting of the insurer or one year from the occurrence of the event that caused the member to be no longer independent.
Ins 50.15(6)
(6) To exercise the election of the controlling person to designate the audit committee for purposes of this chapter, the ultimate controlling person shall provide written notice to the commissioner of the affected insurers. Notification shall be made timely prior to the issuance of the audited financial report and include a description of the basis for the election. The election can be changed through notice to the commissioner by the insurer, which shall include a description of the basis for the change. The election shall remain in effect for perpetuity, until rescinded.
Ins 50.15(7)(a)(a) The audit committee shall require the independent certified public accountant that performs for an insurer any audit required by this chapter to timely report to the audit committee in accordance with the requirements of SAS 61, Communication with Audit Committees, or its replacement, including:
Ins 50.15(7)(a)1.
1. All significant accounting policies and material permitted practices.
Ins 50.15(7)(a)2.
2. All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramification of the use of the alternative disclosures and treatments, and the treatment preferred by the independent certified public accountant.
Ins 50.15(7)(a)3.
3. Other material written communications between the independent certified public accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.
Ins 50.15(7)(b)
(b) If an insurer is a member of an insurance holding company system, the reports required by sub.
(7) (a) may be provided to the audit committee on an aggregate basis for insurers in the holding company system, provided that any substantial differences among insurers in the system are identified to the audit committee.
Ins 50.15(8)
(8) The proportion of independent audit committee members shall meet or exceed the criteria contained in the following table unless the commissioner orders a greater proportion of independent audit committee members:
-
See PDF for table 
Ins 50.15(9)
(9) An insurer with direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $ 500,000,000 may make application to the commissioner for a waiver from this section based upon hardship. The insurer shall file with its annual statement filing the approval for relief from the requirements of this section with the states that it is licensed in or doing business in and 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 50.155
Ins 50.155 Internal audit function requirements. Ins 50.155(1)(1)
An insurer is exempt from the requirements of this section if:
Ins 50.155(1)(a)
(a) The insurer has total annual direct written and unaffiliated assumed premiums, including international direct and assumed premiums but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $500,000,000; and
Ins 50.155(1)(b)
(b) If the insurer is a member of a group of insurers, the group has total annual direct written and unaffiliated assumed premiums, including international direct and assumed premiums but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $1,000,000,000.
Ins 50.155(2)
(2) An insurer or group of insurers shall establish an internal audit function providing independent, objective, and reasonable assurance to the audit committee and insurer management regarding the insurer's governance, risk management, and internal controls. This assurance shall be provided by performing general and specific audits, reviews, and tests and by employing other techniques deemed necessary to protect assets, evaluate control effectiveness and efficiency, and evaluate compliance with policies and regulations.
Ins 50.155(3)
(3) In order to ensure that internal auditors remain objective, the internal audit function must be organizationally independent. Specifically, the internal audit function will not defer ultimate judgment on audit matters to others, and the insurer or group of insurers shall appoint an individual to head the internal audit function who will have direct and unrestricted access to the board of directors. Organizational independence does not preclude dual-reporting relationships.
Ins 50.155(4)
(4) The head of the internal audit function shall report to the audit committee regularly, but no less than annually, on the periodic audit plan, factors that may adversely impact the internal audit function's independence or effectiveness, material findings from completed audits, and the appropriateness of corrective actions implemented by management as a result of audit findings.
Ins 50.155(5)
(5) If an insurer is a member of an insurance holding company system, as defined in s.
Ins 40.01 (6), or included in a group of insurers, the insurer may satisfy the internal audit function requirements set forth in this section at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level.
Ins 50.16
Ins 50.16
Conduct of insurer in connection with the preparation of required reports and documents. Ins 50.16(1)(1)
No director or officer of an insurer shall, directly or indirectly:
Ins 50.16(1)(a)
(a) Make or cause to be made a materially false or misleading statement to an accountant in connection with any audit, review or communication required under this chapter.
Ins 50.16(1)(b)
(b) Omit to state, or cause another person to omit to state, any material fact necessary in order to make statements made, in light of the circumstances under which the statements were made, not misleading to an accountant in connection with any audit, review or communication required under this chapter.
Ins 50.16(2)
(2) No officer or director of an insurer, or any other person acting under the direction thereof, shall directly or indirectly take any action to coerce, manipulate, mislead or fraudulently influence any independent certified public accountant engaged in the performance of an audit pursuant to this chapter if that person knew or should have known that the action, if successful, could result in rendering the insurer's financial statements materially misleading. In this subsection, actions that “if successful, could result in rendering the insurer's financial statements materially misleading" include actions taken at any time with respect to the professional engagement period to coerce, manipulate, mislead or fraudulently influence an independent certified public accountant:
Ins 50.16(2)(a)
(a) To issue or reissue a report on an insurer's financial statements that is not warranted in the circumstances, due to material violations of statutory accounting principles prescribed by the commissioner, generally accepted auditing standards, or other professional or regulatory standards.
Ins 50.16(2)(b)
(b) Not to perform audit, review or other procedures required by generally accepted auditing standards or other professional standards.
Ins 50.16(2)(d)
(d) Not to communicate matters to an insurer's audit committee.
Ins 50.16 History
History: CR 08-053: cr.
Register December 2008 No. 636, eff. 1-1-09.
Ins 50.17
Ins 50.17
Management's report of internal control over financial reporting. Ins 50.17(1)(1)
Every insurer required to file an audited financial report pursuant to this subchapter that has annual direct written and assumed premiums, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of $ 500,000,000 or more shall prepare a report of the insurer's or group of insurers' internal control over financial reporting as the terms are defined in s.
Ins 50.01. The report shall be filed with the commissioner along with the Communication of Internal Control Related Matters Noted in an Audit described in s.
Ins 50.12. Management's report of internal control over financial reporting shall be as of December 31 immediately preceding.
Ins 50.17(2)
(2) Notwithstanding the premium threshold in sub.
(1), the commissioner may require an insurer to file management's report of internal control over financial reporting if the insurer is in any risk based capital event as described in s.
Ins 51.01, or the insurer is in financially hazardous condition.
Ins 50.17(3)
(3) In lieu of the management's report of internal control over financial reporting, an insurer or a group of insurers may file a report described in sub.
(4) if any of the following criteria are applicable:
Ins 50.17(3)(b)
(b) The insurer is part of a holding company system whose parent is directly subject to Section 404.
Ins 50.17(3)(c)
(c) The insurer is not directly subject to Section 404 but is a SOX Compliant Entity.
Ins 50.17(3)(d)
(d) The insurer is a member of a holding company system whose parent is not directly subject to Section 404 but is a SOX Compliant Entity.
