The National Association of Insurance Commissioners (NAIC) enacted the Corporate Governance Annual Disclosure Model Act (#305), and the Corporate Governance Annual Disclosure Model Regulation (#306) effective January 1, 2016, collectively referred to as CGAD or the model in this article. CGAD does not attempt to impose additional corporate governance rules, standards or procedures on insurance companies. Rather, CGAD requires a new filing to be submitted by each insurance company (excluding risk retention groups) that describes the corporate governance structure, policies and practices in use at the company. The filing is intended to provide information to insurance regulators to assist them in fulfilling their oversight responsibilities. Regulatory oversight of insurance companies has changed significantly in the past 5 years. Regulators are concerned about how a Company manages itself, and, in particular, how it identifies, assesses and mitigates risks.
The CGAD filing and all attachments are confidential, and must be certified by the Chief Executive Officer or Secretary of the Insurance Company to attest that the Insurance Company has implemented the corporate governance practices described in the CGAD filing and that a copy of the filing has been provided to the Board of Directors.
Are All Insurance Companies Required to File?
Yes. There are no exemptions granted for the CGAD filing, once adopted by the state of domicile, except for risk retention groups, who must comply with the Corporate Governance section of the Risk Retention Model Act (#705) beginning in 2017.
There are two ways in which the CGAD may apply to your insurance company: first, your state of domicile may have enacted the model legislation or is planning to, and, second, the NAIC may adopt the model as an accreditation standard, in which case, all states and jurisdictions are required to enact the model in some form.
Has my state adopted CGAD?
You can determine if your state has enacted the model by reviewing the back section of the model on the NAIC website, as it lists the legislation enacted or in process for each jurisdiction. As of October 2017, California, Connecticut, Florida, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Montana, Nebraska, Nevada, New Hampshire, Ohio, Oregon, Rhode Island, Vermont and Virginia have adopted the model in either 2016 or 2017.
All model acts are available at no cost by going to the NAIC publication website. Navigate to this page http://www.naic.org/prod_serv_publications.htm, scroll down alphabetically until you find the publication Model Laws, Regulations and Guidelines. After the description of the Model Law publication, you will see three topics to select from:
If you open the Table of Contents, you can select the model law you want while scrolling through the topics. Of course, you can subscribe to the complete Model Law Set with quarterly updates through the NAIC.
Has the NAIC adopted the CGAD as an accreditation standard?
The NAIC Financial Regulation Standards and Accreditation (F) Committee will meet the first week in December of 2017 to discuss the status of the Corporate Governance Annual Disclosure Model Act (#305) and the Corporate Governance Annual Disclosure Model Regulation (#306) as a possible addition to the accreditation standards. If adopted as an accreditation standard, all states are required to enact CGAD, usually within a two year period. Eide Bailly will continue to provide updates as to the status of this topic in our insurance industry newsletter. You may also call us to inquire.
Is There a CGAD Filing Form?
No, there is no prescribed form to use for the CGAD filing. The Model Act is the law prescribing who must file and the Model Regulation provides information guidelines as to what to include, but there is no standard report format or outline. However, all insurance companies already have the tools needed to effectively gather the appropriate information and construct an effective CGAD filing. Eide Bailly will include the tools for filing the CGAD in a future article.