At its recent meeting, the National Association of Insurance Commissioners (NAIC) adopted new models requiring US insurers to report corporate governance practices to regulators, stating that this will "provide a means for insurance regulators to receive additional information on the corporate governance practices of U.S. insurers on an annual basis."
"Under the requirements of the [NAIC's] Model Act [and Model Regulation], U.S. insurers will be required to provide a detailed narrative describing governance practices to their lead state or domestic regulator by June 1st of each year. The narrative will be protected by strict confidentiality measures, which were included within the models to encourage insurers to be open and transparent in describing their governance practices to regulators. Insurers will be allowed some discretion in determining the level within the organization to report their corporate governance practices. . . . The new disclosure requirements are expected to commence in 2016."
Key items required to be described within the corporate governance disclosure include:
- The insurer’s corporate governance framework and structure including duties and structure of the Board of Directors and its committees;
- The policies and practices of its Board of Directors and significant committees including appointment practices, the frequency of meetings held and review procedures;
- The policies and practices directing Senior Management including a description of defined suitability standards, the insurer’s code of conduct and ethics, performance evaluation and compensation practices, and succession planning; and
- The processes by which the Board of Directors, its committees and senior management ensure an appropriate level of oversight to the critical risk areas impacting the insurer’s business activities including risk management processes, the actuarial function, and investment, reinsurance and business strategy decision-making processes.