Section 50.17. Management's report of internal control over financial reporting.

 

(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.

(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.

(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:

(a) The insurer is directly subject to Section 404.

(b) The insurer is part of a holding company system whose parent is directly subject to Section 404.

(c) The insurer is not directly subject to Section 404 but is a SOX Compliant Entity.

(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.

(4)  An insurer qualifying under sub. (3) may file its or its parent's Section 404 report and an addendum in satisfaction of the requirements under sub. (1) or (2) , provided that the internal controls of the insurer or group of insurers having a material impact on the preparation of the insurer's or group of insurer's audited statutory financial statements, those items included in s. Ins 50.06 (2) (b) to (3) , were included in the scope of the Section 404 report. The addendum shall be a positive statement by management that there are no material processes with respect to the preparation of the insurer's or group of insurers' audited statutory financial statements, those items included in s. Ins 50.06 (2) (b) to (3) , excluded from the Section 404 report. If there are internal controls of the insurer or group of insurers that have a material impact on the preparation of the insurer's or group of insurers' audited statutory financial statements and those internal controls were not included in the scope of the Section 404 report, the insurer or group of insurers may either file:

(a) A management's report of internal control over financial reporting pursuant to sub. (1) or (2) ; or

(b) The Section 404 report and a management's report of internal control over financial reporting for those internal controls that have a material impact on the preparation of the insurer's or group of insurers' audited statutory financial statements not covered by the Section 404 report.

(5)  Management's report of internal control over financial reporting shall include:

(a) A statement that management is responsible for establishing and maintaining adequate internal control over financial reporting.

(b) A statement that management has established internal control over financial reporting and an assertion to the best of management's knowledge and belief, after diligent inquiry, as to whether its internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles.

(c) A statement that briefly describes the approach or processes by which management evaluated the effectiveness of its internal control over financial reporting.

(d) A statement that briefly describes the scope of work that is included and whether any internal controls were excluded.

(e) Disclosure of any unremediated material weaknesses in the internal control over financial reporting identified by management as of December 31 immediately preceding. Management may not conclude that the internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles if there is one or more unremediated material weaknesses in its internal control over financial reporting.

(f) A statement regarding the inherent limitations of internal control systems.

(g) Signatures of the chief executive officer and the chief financial officer, or equivalent position or title.

(6)  Management shall document and make available upon financial condition examination the basis upon which its assertions required in this section are made. Management may base its assertions, in part, upon its review, monitoring and testing of internal controls undertaken in the normal course of its activities.

(a) Management shall have discretion as to the nature of the internal control framework used, and the nature and extent of documentation, in order to make its assertion in a cost effective manner and, as such, may include assembly of or reference to existing documentation.

(b) Management's report on internal control over financial reporting, required by this section, and any documentation provided in support thereof during the course of a financial condition examination, shall be kept confidential.

History: CR 08-053 : cr. Register December 2008 No. 636 , eff. 1-1-09.