HB2757 HB&I ABST 3-4
HOUSE COMMITTEES ON BANKING AND INSURANCE
COUNSEL: John Reed

ABSTRACT
HOUSE BILL 2757


BY: Delegates Perry, Shook, Ashley, Schoen, Moore, Manchin, Miley, Skaff, Reynolds, and Frazier

SHORT TITLE: Relating to financial audits of insurers
DATE INTRODUCED: February 23, 2009

CODE REFERENCE: §33-33-1, §33-33-2, §33-33-3, §33-33-4, §33-33-5, §33-33-6, §33-33-8, §33-33-9, §33-33-10, §33-33- 10a, §33-33-11, §33-33-12, §33-33-13, §33-33-14, and §33- 33-15 (Amend) §33-33-16 (New)
PROPOSED LAW : WV Code §33-33-1 et seq. is based on a model regulation of the National Association of Insurance Commissioners (NAIC) that was drafted to give guidance for the requirements for financial audits of insurers.  The usual practice is for a given state to require annual independent audits of insurance companies licensed in the State. The NAIC has a program of accreditation which is conducted once every five years. This process is to assure that each accredited state has sufficient authority to regulate the solvency of their domestic industry.

The NAIA model regulation standards require changes to WV's audit statute (§33-33-1 et seq.) that will address three areas:

1. Auditor independence

The lead auditor having primary responsibilityfor the audit may not serve in this capacity for more than 5 consecutive years (currently 7 yrs) and may not serve again for another 5 years (currently 2 yrs); current law requires no more than 7 years and must wait only 2 years before acting in a similar capacity.


An auditor will be precluded from providing an independent audit if he or she provides non-audit services, with certain exceptions. Insurers with less than $100M in direct and assumed premium may request a waiver from this requirement on the grounds of financial or organizational hardship. Partners and senior managers of the audit engagement firm may not serve as a member of the BOD, President, CEO, CFO or Controller of the insurer if employed by the independent public accounting firm.


2. Corporate responsibility/governance.

All insurers are required to have an audit committee that has direct responsibility for the appointment, oversight and compensation of the auditor. Insurer with less than $500 million in direct and assumed premium can apply for a waiver on hardship grounds.


3. Internal control over financial reporting.

The management of insurance companies with more than $500 million in direct and assumed premium (would only apply to Brickstreet and MSBCS) will be required to file a report with the Commissioner regarding their assessment of internal controls over financial reporting. Management will be required to provide a written statement as to the effectiveness of these controls and disclose any unremediated material weaknesses. No CPA attestation or opinion is required for management's assessment


Passage is necessary before 2010 to maintain NAIC accreditation

 TITLE: OK

 FISCAL NOTE: No
COMMITTEE AMENDMENT: The proposed committee amendment makes technical changes and corrections only.
SECOND REFERENCE: Finance

EFFECTIVE DATE: Regular