Adoption of the Corporate Governance Annual Disclosure Model Act and the Corporate Governance Annual Disclosure Model Regulation
Insurance company executives are used to the scrutiny and standards of fiduciary care that may apply to their positions. The standards that apply can be complicated for an insurance company’s senior executives, who have responsibilities related to their shareholders, as well as obligations to the policyholders of the company, subject to robust state regulatory oversight. The National Association of Insurance Commissioners has been studying the states’ general corporate fiduciary standards and working on model corporate governance disclosures that will apply to insurers and/or their holding companies.
Recently, the National Association of Insurance Commissioners’ (NAIC’s) Executive Committee/Plenary voted to adopt the Corporate Governance Annual Disclosure Model Act and the Corporate Governance Annual Disclosure Model Regulation.
Depending on how the insurer or insurance group has structured its system of corporate governance, disclosures may be needed at the ultimate controlling party level, an intermediate holding company level, and/or the individual legal entity level. Disclosures will include the following information: (1) the insurer’s corporate governance framework and structure; (2) the policies and practices of its board of directors and significant committees, including information regarding board member qualifications and independence; (3) the policies and practices directing senior management, including information regarding significant compensation programs; and (4) the processes by which the board of directors, its committees, and senior management ensure an appropriate level of oversight of the critical risk areas impacting the insurer’s business activities.
According to the NAIC, some states are expected to start requiring disclosures at the beginning of 2016, with all states and territories on board by 2019. In fact, legislation has already been introduced in Indiana to adopt components of the Acts.
For more information on this topic, please see The Demotech Difference article “Changing Regulatory Landscape: Gauging the Impact of the Corporate Governance Annual Disclosure Model Act and Regulation.”