House File 455 - Introduced
HOUSE FILE
BY COMMITTEE ON COMMERCE
(SUCCESSOR TO HSB 140)
A BILL FOR
1 An Act requiring the submission of a corporate governance
2 annual disclosure to the commissioner of insurance by
3 certain insurers or insurance groups, and including
4 penalties and applicability date provisions.
5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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1 1 Section 1. NEW SECTION. 521H.1 Purpose and scope.
1 2 1. The purpose of this chapter is to do all of the
1 3 following:
1 4 a. Provide the commissioner with a summary of an insurer's
1 5 or insurance group's corporate governance structure, policies,
1 6 and practices to permit the commissioner to gain and maintain
1 7 an understanding of the insurer's or insurance group's
1 8 corporate governance framework.
1 9 b. Outline the requirements for an insurer or insurance
1 10 group to complete a corporate governance annual disclosure for
1 11 submission to the commissioner.
1 12 c. Provide for the confidential treatment of the corporate
1 13 governance annual disclosure and related information that
1 14 contains confidential and sensitive information related to
1 15 an insurer's or insurance group's internal operations and
1 16 proprietary and trade secret information which, if made
1 17 public, could potentially cause the insurer or insurance group
1 18 competitive harm or disadvantage.
1 19 2. Nothing in this chapter shall be construed to prescribe
1 20 or impose corporate governance standards or internal procedures
1 21 beyond those which are required under applicable state
1 22 corporate law. In addition, nothing in this chapter shall be
1 23 construed to limit the commissioner's authority under chapter
1 24 507, or the rights or obligations of third parties thereunder.
1 25 3. The requirements of this chapter shall apply to all
1 26 insurers domiciled in this state.
1 27 Sec. 2. NEW SECTION. 521H.2 Definitions.
1 28 1. "Commissioner" means the commissioner of insurance.
1 29 2. "Corporate governance annual disclosure" or "disclosure"
1 30 means a confidential report filed by an insurer or insurance
1 31 group pursuant to the requirements of this chapter.
1 32 3. "Insurance group" means those insurers and affiliates
1 33 included within an insurance holding company system.
1 34 4. "Insurance holding company system" means the same as
1 35 defined in section 521A.1.
2 1 5. "Insurer" means the same as defined in section 521A.1.
2 2 Sec. 3. NEW SECTION. 521H.3 Corporate governance annual
2 3 disclosure requirement.
2 4 1. An insurer, or the insurance group of which the insurer
2 5 is a member, shall, no later than June 1 of each calendar
2 6 year, submit to the commissioner a corporate governance annual
2 7 disclosure that contains the information described in section
2 8 521H.5. Notwithstanding any request from the commissioner
2 9 made pursuant to subsection 2, if an insurer is a member of
2 10 an insurance group, the insurer shall submit the disclosure
2 11 required by this section to the commissioner of insurance of
2 12 the lead state of the insurance group of which the insurer is
2 13 a member, in accordance with the laws of the lead state, as
2 14 determined by procedures contained in the financial analysis
2 15 handbook adopted by the national association of insurance
2 16 commissioners.
2 17 2. An insurer or insurance group that is not required to
2 18 submit a corporate governance annual disclosure under this
2 19 section shall do so upon the commissioner's request.
2 20 3. Review of the corporate governance annual disclosure and
2 21 any additional requests for information shall be made through
2 22 the lead state as determined by procedures contained in the
2 23 financial analysis handbook adopted by the national association
2 24 of insurance commissioners.
2 25 4. Insurers or insurance groups that provide information
2 26 substantially similar to the information required by this
2 27 chapter in other documents provided to the commissioner,
2 28 including proxy statements filed in conjunction with the form B
2 29 insurance holding company system annual registration statement
2 30 requirements as provided in section 521A.4, or other state or
2 31 federal filings provided to the commissioner, are not required
2 32 to duplicate that information in the corporate governance
2 33 annual disclosure, but shall cross reference the document in
2 34 which the information is included.
2 35 Sec. 4. NEW SECTION. 521H.4 Rules.
3 1 The commissioner shall adopt rules pursuant to chapter 17A
3 2 to administer this chapter.
3 3 Sec. 5. NEW SECTION. 521H.5 Contents of corporate
3 4 governance annual disclosure.
3 5 1. An insurer, or the insurance group of which the insurer
3 6 is a member, shall have discretion over the responses to
3 7 corporate governance annual disclosure inquiries, provided
3 8 the corporate governance annual disclosure contains the
3 9 material information necessary to permit the commissioner to
3 10 gain an understanding of the insurer's or insurance group's
3 11 corporate governance structure, policies, and practices. The
3 12 commissioner may request additional information that the
3 13 commissioner deems material and necessary to provide a clear
3 14 understanding of the insurer's or insurance group's corporate
3 15 governance policies, reporting or information systems, or the
3 16 controls implementing such policies or systems.
3 17 2. The corporate governance annual disclosure shall be
3 18 prepared consistent with rules adopted by the commissioner
3 19 pursuant to chapter 17A. Documentation and supporting
3 20 information prepared pursuant to this chapter and related rules
3 21 shall be maintained and made available upon examination by or
3 22 upon request of the commissioner.
3 23 3. The corporate governance annual disclosure shall include
3 24 the signature of the insurer's or insurance group's chief
3 25 executive officer or corporate secretary, attesting that to the
3 26 best of that individual's belief and knowledge the insurer or
3 27 the insurance group has implemented the corporate governance
3 28 practices described in the disclosure and that a copy of the
3 29 disclosure has been provided to the insurer's or the insurance
3 30 group's board of directors or the appropriate committee of the
3 31 board.
3 32 4. a. For purposes of completing a corporate governance
3 33 annual disclosure, an insurer or insurance group may report
3 34 information regarding corporate governance at the ultimate
3 35 controlling parent level, at an intermediate holding company
4 1 level, or at the individual legal entity level, depending upon
4 2 how the insurer or insurance group has structured its system
4 3 of corporate governance.
4 4 b. An insurer or insurance group is encouraged to report
4 5 information in the corporate governance annual disclosure at
4 6 the level at which the insurer's or insurance group's risk
4 7 tolerance is determined; at the level at which the earnings,
4 8 capital, liquidity, operations, and reputation of the insurer
4 9 or insurance group are overseen collectively and the level
4 10 at which the supervision of these factors is coordinated and
4 11 exercised; or at the level at which legal liability for failure
4 12 of general corporate governance duties would be placed. If an
4 13 insurer or insurance group determines the level of reporting
4 14 based upon the criteria set forth in this paragraph, the
4 15 insurer or insurance group shall indicate which of the three
4 16 criteria was used to determine the level of reporting and
4 17 explain any subsequent changes that are made in the level of
4 18 reporting.
4 19 Sec. 6. NEW SECTION. 521H.6 Confidentiality.
4 20 1. Documents, materials, or other information, including
4 21 a corporate governance annual disclosure, in the possession
4 22 or control of the insurance division of the department of
4 23 commerce, that is obtained by, created by, or disclosed to the
4 24 commissioner or to any other person pursuant to this chapter,
4 25 is recognized in this state as being proprietary and containing
4 26 trade secrets. All such documents, materials, or other
4 27 information, including the disclosure, shall be confidential
4 28 and privileged, shall not be subject to chapter 22, shall
4 29 be considered confidential under chapter 507, shall not be
4 30 subject to subpoena, and shall not be subject to discovery
4 31 or admissible in evidence in any private civil action.
4 32 However, the commissioner is authorized to use such documents,
4 33 materials, or other information, including the disclosure, in
4 34 the furtherance of any regulatory or legal action brought as a
4 35 part of the commissioner's official duties. The commissioner
5 1 shall not otherwise make the documents, materials, or other
5 2 information, including the disclosure, public without the
5 3 prior written consent of the insurer or insurance group that
5 4 provided the documents, materials, or other information,
5 5 including the disclosure. Nothing in this section shall
5 6 be construed to require written consent of the insurer or
5 7 insurance group before the commissioner may share or receive
5 8 confidential documents, materials, or other information related
5 9 to governance of an insurer or insurance group pursuant to
5 10 subsection 3 to assist in the performance of the commissioner's
5 11 regular duties.
5 12 2. The commissioner or any other person who received
5 13 documents, materials, or other information related to corporate
5 14 governance, through examination or otherwise, while acting
5 15 under the authority of the commissioner or with whom such
5 16 documents, materials, or other information is shared pursuant
5 17 to this chapter, shall not be permitted or required to testify
5 18 in any private civil action concerning any confidential
5 19 documents, materials, or information, including disclosures,
5 20 subject to subsection 1.
5 21 3. In order to assist in the performance of the
5 22 commissioner's regulatory duties, the commissioner may do any
5 23 of the following:
5 24 a. Upon request, share documents, materials, or corporate
5 25 governance annual disclosure=related information, including
5 26 the confidential and privileged documents, materials, or
5 27 information subject to subsection 1, and including proprietary
5 28 and trade secret documents, materials, or information,
5 29 with other state, federal, or international financial
5 30 regulatory agencies, including members of any supervisory
5 31 college as defined in section 521A.1, with the national
5 32 association of insurance commissioners, or with any third=party
5 33 consultants designated by the commissioner pursuant to
5 34 subsection 4, provided that the recipient agrees in writing
5 35 to maintain the confidentiality and privileged status of the
6 1 documents, materials, or other corporate governance annual
6 2 disclosure=related information and verifies in writing the
6 3 legal authority to maintain such confidentiality and privilege.
6 4 b. Receive documents, materials, or other corporate
6 5 governance annual disclosure=related information, including
6 6 otherwise confidential and privileged documents, materials,
6 7 or information, and proprietary and trade secret documents,
6 8 materials, and information, from regulatory officials of
6 9 other state, federal, or international regulatory agencies,
6 10 including members of any supervisory college as defined in
6 11 section 521A.1, and from the national association of insurance
6 12 commissioners, and shall maintain as confidential or privileged
6 13 any documents, materials, or information received with notice
6 14 or the understanding that the documents, materials, or other
6 15 information received is confidential and privileged under the
6 16 laws of the jurisdiction that is the source of the documents,
6 17 materials, or information.
6 18 4. In order to assist in the performance of the
6 19 commissioner's regulatory duties under this chapter the
6 20 commissioner may retain, at the insurer's or insurance
6 21 group's expense, third=party consultants, including attorneys,
6 22 actuaries, accountants, and other experts not otherwise a part
6 23 of the commissioner's staff, as may be reasonably necessary to
6 24 assist the commissioner in reviewing a disclosure and related
6 25 information submitted under this chapter or ensuring compliance
6 26 of an insurer or insurance group with the requirements of this
6 27 chapter.
6 28 a. Any persons retained under this subsection shall be under
6 29 the direction and control of the commissioner and shall act in
6 30 a purely advisory capacity.
6 31 b. As part of the retention process, a third=party
6 32 consultant shall verify to the commissioner, with notice to
6 33 the insurer, that the third=party consultant is free of any
6 34 conflict of interest and that the third=party consultant
6 35 has internal procedures in place to monitor compliance
7 1 if a conflict arises and to ensure compliance with the
7 2 confidentiality standards and requirements of this chapter.
7 3 5. A written agreement entered into by the commissioner
7 4 with the national association of insurance commissioners or
7 5 with a third=party consultant governing the sharing and use of
7 6 information provided pursuant to this chapter shall expressly
7 7 require the written consent of the insurer prior to making
7 8 public information provided under this chapter and shall
7 9 contain a provision that does each of the following:
7 10 a. Expressly provides that the national association of
7 11 insurance commissioners and any third=party consultants
7 12 retained are subject to the same confidentiality standards
7 13 and requirements governing the sharing and use of information
7 14 provided pursuant to this chapter as the commissioner.
7 15 b. Specifies procedures and protocols regarding the
7 16 confidentiality and security of information related to a
7 17 corporate governance annual disclosure that is shared with
7 18 the national association of insurance commissioners or with a
7 19 third=party consultant pursuant to this chapter and specifies
7 20 procedures and protocols for sharing information by the
7 21 national association of insurance commissioners only with other
7 22 state insurance regulators from states in which an insurance
7 23 group has domiciled insurers. The agreement shall require
7 24 that the recipient of such information must agree in writing
7 25 to maintain the confidentiality and privileged status of the
7 26 documents, materials, or other information related to the
7 27 corporate governance annual disclosure and verify in writing
7 28 the legal authority to maintain confidentiality and privilege.
7 29 c. Specifies that ownership of information shared with
7 30 the national association of insurance commissioners or with
7 31 a third=party consultant pursuant to this chapter remains
7 32 with the commissioner and that use of the information by
7 33 the national association of insurance commissioners or by a
7 34 third=party consultant is subject to the direction of the
7 35 commissioner.
8 1 d. Prohibits the national association of insurance
8 2 commissioners or a third=party consultant from storing the
8 3 information shared pursuant to this chapter in a permanent
8 4 database after the underlying analysis is completed.
8 5 e. Requires the national association of insurance
8 6 commissioners or a third=party consultant to give prompt notice
8 7 to the commissioner and to an insurer or insurance group whose
8 8 confidential information is in the possession of the national
8 9 association of insurance commissioners or a third=party
8 10 consultant pursuant to this chapter, that the information is
8 11 subject to a request or subpoena to the national association
8 12 of insurance commissioners or the third=party consultant for
8 13 disclosure or production.
8 14 f. Requires the national association of insurance
8 15 commissioners or a third=party consultant to consent to
8 16 intervention by an insurer or insurance group in any judicial
8 17 or administrative action in which the national association of
8 18 insurance commissioners or the third=party consultant may be
8 19 required to disclose confidential information about the insurer
8 20 or insurance group that was shared with the association or
8 21 consultant pursuant to this chapter.
8 22 6. The sharing of documents, materials, or information by
8 23 the commissioner pursuant to this chapter shall not constitute
8 24 a delegation of regulatory authority or rulemaking, and the
8 25 commissioner is solely responsible for the administration,
8 26 execution, and enforcement of the provisions of this chapter.
8 27 7. No waiver of any applicable privilege or claim of
8 28 confidentiality in the documents, proprietary and trade
8 29 secret materials, or other corporate governance annual
8 30 disclosure=related information shall occur as a result of the
8 31 disclosure of such documents, materials, or information to the
8 32 commissioner under this section or as a result of sharing those
8 33 documents, materials, or information as authorized in this
8 34 chapter.
8 35 Sec. 7. NEW SECTION. 521H.7 Penalties.
9 1 1. If an insurer or insurance group fails, without just
9 2 cause, to timely file a corporate governance annual disclosure
9 3 as required in this chapter, the commissioner shall, after
9 4 notice and hearing, impose a penalty of five hundred dollars
9 5 for each day's delay. The penalty shall be collected by the
9 6 commissioner and paid to the treasurer of state for deposit
9 7 as provided in section 505.7. The maximum penalty which may
9 8 be imposed under this section for any single failure is five
9 9 thousand dollars.
9 10 2. The commissioner may reduce the penalty to be imposed if
9 11 the insurer or insurance group demonstrates to the commissioner
9 12 that imposition of the penalty would constitute a financial
9 13 hardship to the insurer or insurance group.
9 14 Sec. 8. NEW SECTION. 521H.8 Severability.
9 15 If any provision of this chapter other than section
9 16 521H.6, or the application of this chapter to any person or
9 17 circumstance, is held invalid, such holding shall not affect
9 18 the provisions or applications of this chapter which can be
9 19 given effect without the invalid provision or application, and
9 20 to that end the provisions of this chapter, with the exception
9 21 of section 521H.6, are severable.
9 22 Sec. 9. APPLICABILITY. The provisions of this Act are
9 23 applicable beginning January 1, 2016, and the first filings of
9 24 corporate governance annual disclosures shall be made pursuant
9 25 to chapter 521H, as enacted in this Act, in 2016.
9 26 EXPLANATION
9 27 The inclusion of this explanation does not constitute agreement with
9 28 the explanation's substance by the members of the general assembly.
9 29 This bill creates new Code chapter 521H which requires
9 30 certain insurers domiciled in the state, or the insurance group
9 31 of which such an insurer is a member, to file a corporate
9 32 governance annual disclosure with the commissioner of
9 33 insurance. The purpose of the new Code chapter's requirements
9 34 is to provide the commissioner with a yearly summary of an
9 35 insurer's or insurance group's governance structure, policies,
10 1 and practices to permit the commissioner to understand the
10 2 insurer's or insurance group's corporate governance framework.
10 3 Beginning in 2016, an insurer or insurance group is
10 4 required to submit by June 1, annually, a corporate governance
10 5 annual disclosure to the commissioner that contains material
10 6 information necessary to permit the commissioner to gain an
10 7 understanding of the insurer's or insurance group's corporate
10 8 governance structure, policies, and practices. The disclosure
10 9 must be signed by the insurer's or insurance group's chief
10 10 executive officer or secretary attesting that the corporate
10 11 practices described in the disclosure have been implemented
10 12 and that a copy of the disclosure has been provided to the
10 13 insurer's or insurance group's board of directors or the
10 14 appropriate committee of the board. If an insurer is a member
10 15 of an insurance group, the insurer shall submit the disclosure
10 16 to the commissioner of insurance of the lead state of the
10 17 insurance group as determined by procedures contained in the
10 18 financial analysis handbook adopted by the national association
10 19 of insurance commissioners.
10 20 For purposes of the disclosure, the insurer or insurance
10 21 group may report information regarding corporate governance
10 22 at the ultimate parent controlling level, an intermediate
10 23 holding company level, or at the individual legal entity
10 24 level depending on how its system of corporate governance is
10 25 structured. The insurer or insurance group is encouraged to
10 26 make its disclosure at the level at which its risk tolerance
10 27 is determined; at the level at which its earnings, capital,
10 28 liquidity, operations, and reputation are overseen collectively
10 29 and the level at which the supervision of these factors is
10 30 coordinated and exercised; or at the level at which legal
10 31 liability for failure of general corporate governance duties
10 32 would be placed, and to indicate which of these factors
10 33 were used to determine the level of reporting, including any
10 34 subsequent changes.
10 35 The commissioner is directed to adopt rules to administer
11 1 new Code chapter 521H.
11 2 Documents, materials, or other information, including a
11 3 corporate governance annual disclosure, in the possession or
11 4 control of the insurance division of the department of commerce
11 5 or any other person pursuant to the bill that is obtained by,
11 6 created by, or disclosed to the commissioner or to any other
11 7 person pursuant to the bill, is recognized as being proprietary
11 8 and containing trade secrets. Such documents, materials, or
11 9 other information, including the disclosure, is confidential,
11 10 is not subject to Code chapter 22 (open records), shall be
11 11 considered confidential under Code chapter 507 (examination of
11 12 insurance companies), shall not be subject to subpoena, and
11 13 shall not be subject to discovery or admissible in evidence in
11 14 any private civil action. The commissioner is authorized to
11 15 use such information in the furtherance of any regulatory or
11 16 legal action brought as part of the commissioner's official
11 17 duties. The commissioner shall not otherwise make such
11 18 information public without the prior written consent of
11 19 the insurer or insurance group. The commissioner or any
11 20 other person with access to such information shall not be
11 21 permitted or required to testify in any civil action concerning
11 22 confidential information.
11 23 In performing regulatory duties, the commissioner may
11 24 share confidential and privileged information with specified
11 25 regulatory and other entities including certain third=party
11 26 consultants, and may receive such information from specified
11 27 regulatory and other entities.
11 28 In order to assist in the performance of the commissioner's
11 29 regulatory duties, the commissioner may retain, at the
11 30 insurer's or insurance group's expense, third=party
11 31 consultants, including attorneys, actuaries, accountants, and
11 32 other experts not otherwise part of the commissioner's staff,
11 33 as necessary to assist in reviewing a disclosure and related
11 34 information or ensuring compliance with the requirements of
11 35 the new Code chapter. Third=party consultants retained are
12 1 under the direction and control of the commissioner and act
12 2 in an advisory capacity only. Such third=party consultants
12 3 must verify that they are free of any conflict of interest
12 4 and that they have internal procedures in place to monitor
12 5 compliance if there is a conflict and to ensure compliance with
12 6 the confidentiality standards and requirements of the new Code
12 7 chapter.
12 8 A written agreement entered into by the commissioner with
12 9 the national association of insurance commissioners or with
12 10 a third=party consultant that governs the sharing and use of
12 11 information provided pursuant to new Code chapter 521H shall
12 12 expressly require the written consent of the insurer prior to
12 13 making information provided under the new Code chapter public.
12 14 The agreement must specify that those parties are subject to
12 15 the same confidentiality standards and requirements governing
12 16 the sharing and use of information as the commissioner; specify
12 17 procedures and protocols for the confidentiality and security
12 18 of information shared and require that the recipient of such
12 19 information agree in writing to maintain the confidentiality
12 20 and privileged status of the information and verify the
12 21 legal authority to do so; specify that ownership of shared
12 22 information remains with the commissioner, who directs its
12 23 use; prohibit storage of the information in a permanent
12 24 database after analysis is complete; require prompt notice to
12 25 the commissioner and to an insurer or insurance group if the
12 26 insurer's or insurance group's information is subject to a
12 27 request or subpoena for disclosure or production; and require
12 28 that an insurer or insurance group be allowed to intervene in
12 29 any judicial or administrative action in which the national
12 30 association of insurance commissioners or a third=party
12 31 consultant may be required to disclose confidential information
12 32 that was shared pursuant to the new Code chapter.
12 33 The sharing of information pursuant to new Code chapter 521H
12 34 does not constitute a delegation of regulatory authority or
12 35 rulemaking by the commissioner, or a waiver of any applicable
13 1 privilege or claim of confidentiality.
13 2 If an insurer or insurance group fails, without just cause
13 3 to timely file a corporate governance annual disclosure as
13 4 required in new Code chapter 521H, the commissioner shall,
13 5 after notice and hearing, impose a penalty of $500 for each
13 6 day's delay, up to a maximum penalty of $5,000 for any single
13 7 failure to file. The penalties collected by the commissioner
13 8 are to be paid to the treasurer of state for deposit in the
13 9 department of commerce revolving fund as provided in Code
13 10 section 505.7. The commissioner may reduce the penalty if the
13 11 insurer or insurance group demonstrates that imposition of the
13 12 penalty would constitute a financial hardship to the insurer
13 13 or insurance group.
13 14 The provisions of the new Code chapter are severable,
13 15 with the exception of Code section 521H.6, relating to
13 16 confidentiality, in the event that application of the Code
13 17 chapter to any person or circumstance is held to be invalid.
13 18 New Code chapter 521H is applicable beginning on January 1,
13 19 2016.
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