The Corporate Governance Annual Disclosure Model Regulation - How Will It Affect U.S. Insurers?
In August, the National Association of Insurance Commissioners (NAIC) adopted a Corporate Governance Annual Disclosure Model Act and supporting Model Regulation. The Corporate Governance Annual Disclosure (CGAD), if adopted into law, will require all U.S. insurers to provide annual, detailed narratives of their corporate governance structures and practices to their lead state regulators. The new disclosure requirements are expected to commence in 2016.
At a high level, the narrative must provide information on the following areas:
1. Corporate Governance Framework and Structure
2. Board of Directors Policies and Procedures
3. Senior Management Policies and Procedures
4. Oversight of the Critical Risk Areas Impacting the Insurer’s Business Activities
The NAIC’s Corporate Governance Annual Disclosure Model Regulation outlines more detailed requirements for each of the points listed above. There is flexibility in the level at which information is to be provided (ultimate parent company, holding company or insurer). Additionally, the structure of the narrative is left up to the author.
How does the CGAD differ from the Own Risk and Solvency Assessment (ORSA) Summary Report? Unlike the ORSA, the Model Act does not have a premium threshold that exempts smaller companies. If adopted into law, all insurers in the U.S., regardless of size or annual written premium, will need to submit a CGAD annually, starting in 2016.
If you have already provided a narrative about your organization’s corporate governance as part of your ORSA, the CGAD allows insurers the ability to reference information that has been provided in other regulatory filings, such as the ORSA or an SEC proxy statement.
So what should you do to prepare for the CGAD? One approach is to analyze the Model Act and create a checklist that summarizes the requirements. You are likely to find that much of what you already do at your organization will meet some of the requirements. Give your organization credit for what it’s already doing.
CGAD provides an opportunity for insurers to summarize existing corporate governance practices and identify potential new practices that will enhance the insurer’s corporate governance framework.
For more information, please see the NAIC website or contact your Gen Re Account Executive.