Title 26 · WY

26-3-302(a)(vi) and subsection (f) of this section.

Citation: Wyo. Stat. § 26-3-302

Section: 26-3-302

(d) In order to be considered independent for purposes of this section, a member of the audit committee shall not, other than in his 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. If any other provision of law requires board participation by otherwise nonindependent members, that law shall prevail and those members may participate in the audit committee and be designated as independent for audit committee purposes unless they are an officer or employee of the insurer or one (1) of its affiliates. (e) If a member of the audit committee ceases to be independent for reasons outside the member's reasonable control, that person, with notice by the responsible entity to the state, may remain an audit committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one (1) year from the occurrence of the event that caused the member to be no longer independent.

(f) To exercise the election of the controlling person to designate the audit committee for purposes of this article, the ultimate controlling person shall provide written notice to the commissioners of the affected insurers. Notification shall be made timely prior to the issuance of the statutory audit report and include a description of the basis for the election. The election may 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 The election shall remain in effect for perpetuity, until rescinded.

(g) The audit committee shall require the accountant that performs for an insurer any audit required by this article to timely report to the audit committee in accordance with the requirements of Statement on Auditing Standards 61, Communication with Audit Committees, or its replacement, including:

(i) All significant accounting policies and material permitted practices;

(ii) All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramifications of the use of the alternative disclosures and treatments and the treatment preferred by the accountant; and

(iii) Other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.

(h) If an insurer is a member of an insurance holding company system, the reports required under subsection (g) of this section 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. (j) The proportion of independent audit committee members shall meet or exceed the following criteria, except that the commissioner has authority afforded by state law to require the entity's board to enact improvements to the independence of the audit committee membership if the insurer is in any RBC action level event, meets one (1) or more of the standards of an insurer deemed to be in hazardous financial condition or otherwise exhibits qualities of a troubled insurer:

(i) For insurers with prior calendar year direct written and assumed premiums of five hundred million dollars ($500,000,000.00) or less the audit committee shall have a majority of members that are independent and the insurers are encouraged to structure their audit committees with at least seventy-five percent (75%) of the audit committee members being independent;

(ii) For insurers with prior calendar year direct written and assumed premiums of more than five hundred million dollars ($500,000,000.00) at least seventy-five percent (75%) of the members of the audit committee shall be independent;

(iii) For purposes of this subsection, prior calendar year direct written and assumed premiums shall be the combined total of direct premiums and assumed premiums from nonaffiliates for the reporting entities.

(k) An insurer with direct written and assumed premiums, excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than five hundred million dollars ($500,000,000.00) may make application to the commissioner for a waiver from the requirements of this section based on hardship. The insurer shall file, with its annual statement filing, the approval for relief from this section with the states that it is licensed in or doing business in and the National Association of Insurance Commissioners. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

(m) This section shall 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, as defined in W.S. 26-3-302(a)(xiii).

(n) An insurer or group of insurers that is not required to have independent audit committee members or only a majority of independent audit committee members because the total written and assumed premium is below the threshold and subsequently becomes subject to any of the independence requirements due to changes in premiums shall have one (1) year following the year the threshold is exceeded to comply with the independence requirements. An insurer that becomes subject to any of the independence requirements as a result of a business combination shall have one (1) calendar year following the date of acquisition or combination to comply with the independence requirements.

26-3-316. Internal audit function requirements.

(a) An insurer is exempt from the requirements of this section if:

(i) The insurer has 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 five hundred million dollars ($500,000,000.00); and

(ii) If the insurer is a member of a group of insurers, the group has 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 one billion dollars ($1,000,000,000.00).

(b) Each insurer or group of insurers shall establish an internal audit function providing independent oversight regarding the insurer's governance, risk management and internal controls. This oversight 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.

(c) The internal audit function shall be organizationally independent. Specifically, the internal audit function shall not defer ultimate judgment on audit matters to others and shall appoint an individual to head the internal audit function who shall have direct and unrestricted access to the board of directors. Organizational independence does not preclude dual reporting relationships. (d) The head of the internal audit function shall report to the audit committee regularly, but not 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.

(e) If an insurer is a member of an insurance holding company system 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.

26-3-317. Conduct of insurer in connection with preparation of required reports and documents.

(a) No director or officer of an insurer shall, directly or indirectly:

(i) 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 article; or

(ii) 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 article.

(b) 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 accountant engaged in the performance of an audit pursuant to this article if that person knew or should have known that the action, if successful, could result in rendering the insurer's financial statements materially misleading. For purposes of this subsection, actions that, if successful, could result in rendering the insurer's financial statements materially misleading include, but are not limited to, actions taken at any time with respect to the professional engagement period to coerce, manipulate, mislead or fraudulently influence an accountant to:

(i) 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;

(ii) Not perform any audit, review or other procedures required by generally accepted auditing standards or other professional standards;

(iii) Not withdraw an issued report; or

(iv) Not communicate matters to an insurer's audit committee.

26-3-318. Management's report of internal control over financial reporting.

(a) Every insurer required to file an audited financial report pursuant to this article that has annual direct written and assumed premiums, excluding premiums reinsured with the federal crop insurance corporation and federal flood program, of five hundred million dollars ($500,000,000.00) or more shall prepare a report of the insurer's or group of insurers' internal control over financial reporting. The report shall be filed with the commissioner along with the communication of internal control related matters noted in an audit described in W.S. 26- 3-310. Management's report of internal control over financial reporting shall be as of the immediately preceding December 31.

(b) Notwithstanding the premium threshold in subsection (a) of this section, the commissioner may require an insurer to file management's report of internal control over financial reporting if the insurer is in any RBC level event or meets any one (1) or more of the standards of an insurer deemed to be in hazardous financial condition as defined in W.S. 26-3-116.

(c) An insurer or group of insurers that is directly subject to section 404, part of a holding company system whose parent is directly subject to section 404, not directly subject to section 404 but is a SOX compliant entity or a member of a holding company system whose parent is not directly subject to section 404 but is a SOX compliant entity, may file its or its parent's section 404 report and an addendum in satisfaction of this section provided that those internal controls of the insurer or group of insurers having material impact on the preparation of the insurer's or group of insurers' audited statutory financial statements 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 financial statements 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 report under this section or the section 404 report and a report under this section 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.

(d) A management's report of internal control over financial reporting shall include:

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

(ii) 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;

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

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

(v) Disclosure of any unremediated material weaknesses in the internal control over financial reporting identified by management as of the immediately preceding December 31. Management shall 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 (1) or more unremediated material weakness in its internal controls over financial reporting;

(vi) A statement regarding the inherent limitations of internal control systems; and

(vii) Signatures of the chief executive officer and the chief financial officer or the equivalent position.

(e) Management shall document and make available upon financial condition examination the basis upon which its assertions required in subsection (d) of 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. 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 assertions in a cost effective manner and may include assembly of or reference to existing documentation. Management's report on internal control over financial reporting and any documentation provided in support thereof during the course of a financial conditions examination shall be kept confidential by the department.

(f) The requirements of this section are effective beginning with the reporting period ending December 31, 2010 and each year thereafter. An insurer or group of insurers that is not required to file a report because the total written premium is below the threshold and subsequently becomes subject to the reporting requirements shall have two (2) years following the year the threshold is exceeded to file a report. An insurer that becomes subject to any of the reporting requirements as a result of a business combination shall have two (2) calendar years following the date of acquisition or combination to comply with the reporting requirements.

ARTICLE 4 DISCLOSURE OF MATERIAL TRANSACTIONS

26-3-401. Report of material transactions.

(a) Every insurer domiciled in this state, and effective July 1, 1996, every authorized foreign insurer not subject to a substantially similar provision in its domicile, shall file a report with the commissioner disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements unless the acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements have been submitted to the commissioner for review, approval or information purposes pursuant to other provisions of the insurance code, department regulations or other requirements.

(b) The report required in subsection (a) of this section is due within fifteen (15) days after the end of the calendar month in which any of the transactions occur.

(c) One (1) complete copy of the report, including any exhibits or other attachments filed as part of the report, shall be filed with:

(i) The department; and

(ii) The National Association of Insurance Commissioners.

(d) All reports obtained by or disclosed to the commissioner pursuant to this article shall be given confidential treatment, and shall not be made public by the commissioner, the National Association of Insurance Commissioners, or any other person, except:

(i) To persons as authorized by and in accordance with the provisions of W.S. 26-2-113(d);

(ii) Upon the prior written consent of the insurer to which it pertains; or

(iii) If the commissioner, after giving the insurer who would be affected, notice and an opportunity to be heard, determines the interest of policyholders, shareholders or the public will be served by publication of the report, the commissioner may publish all or any part of the report he deems appropriate.

26-3-402. Acquisitions and dispositions of assets.

(a) Subject to subsection (c) of this section, asset acquisitions subject to this article include every purchase, lease, exchange, merger, consolidation, succession or other acquisition other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for such purpose. (b) Subject to subsection (c) of this section, asset dispositions subject to this article include every sale, lease, exchange, merger, consolidation, mortgage, assignment for the benefit of creditors or otherwise, abandonment, destruction or other disposition.

(c) No acquisition or disposition of assets shall be reported pursuant to W.S. 26-3-401 if the acquisition or disposition is not material. A material acquisition, disposition or the aggregate of any series of related acquisitions or dispositions during any thirty (30) day period, is one which is:

(i) Nonrecurring;

(ii) Not in the ordinary course of business; and

(iii) Involves more than five percent (5%) of the reporting insurer's total admitted assets as reported in its most recent statutory statement filed with the insurance department of the insurer's state of domicile.

(d) The following information is required to be disclosed in any report of a material acquisition or disposition of assets:

(i) Date of the transaction;

(ii) Manner of acquisition or disposition;

(iii) Description of the assets involved;

(iv) Nature and amount of the consideration given or received;

(v) Purpose of, or reason for, the transaction;

(vi) Manner by which the amount of consideration was determined;

(vii) Gain or loss recognized or realized as a result of the transaction; and

(viii) Name of the person from whom the assets were acquired or to whom they were disposed. (e) Insurers are required to report material acquisitions and dispositions on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or one hundred percent (100%) reinsurance agreement that affects the solvency and integrity of the insurer's reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if:

(i) The insurer has less than one million dollars ($1,000,000.00) total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement; and

(ii) The net income of the business not subject to the pooling arrangement represents less than five percent (5%) of the insurer's capital and surplus.

26-3-403. Nonrenewals, cancellations or revisions of ceded reinsurance agreements.

(a) No nonrenewal, cancellation or revision of ceded reinsurance agreements need be reported pursuant to W.S.