This bill is intended to conform Minnesota law with certain NAIC Model Regulations.

Article 1 — Annual Financial Reporting and Audit

Section 1 modifies definitions related to audit functions of insurers. “Internal audit function” means persons who provide independent objective assurance to improve the effectiveness of risk management, control, and governance processes.

Section 2 provides that the audit committee of an insurer is responsible for overseeing the internal audit function and granting persons performing it suitable authority and resources to fulfill their responsibilities.

Section 3 establishes internal audit function requirements. Exemption for defined small insurers specified.

Article 2 — Insurance Company Holding Systems

Section 1 defines “groupwide supervisor”.

Section 2 defines “internationally active insurance group”.

Section 3 authorizes the commissioner of commerce to act as the groupwide supervisor for any internationally active insurance group. The commissioner may acknowledge another regulatory official as groupwide supervisor in specified circumstances. Factors for the commissioner to consider when making a determination or acknowledgement are set forth. Determination or acknowledgment also required in the event of material change in internationally active insurance group. Commissioner authorized to collect information relevant to determination or acknowledgment of groupwide supervisor. Groupwide supervision activities set forth.

Article 3 —  Risk-Based Capital Trend Test for Health Organization

Section 1 states an excess of capital over the amount produced by the risk-based capital requirements are desirable in the business of health insurance.

Section 2 modifies the definition of “company action level event”.

Article 4 — Corporate Governance Annual Disclosure

Section 1 [Corporate Governance Annual Disclosure]

Subdivision 1 sets forth the purpose of the regulation including providing the commissioner a summary of the insurer or insurance group’s corporate governance structure to permit the commissioner to gain an understanding of the governance framework.

Subdivision 2 establishes definitions for purposes of the regulation.

Subdivision 3 requires an insurer to submit annually a Corporate Governance Annual Disclosure (CGAD) that contains the information specified in Subdivision 4. For purposes of completing the CGAD the insurer may provide info at different corporate levels depending upon how it has structured its system of corporate governance.

Subdivision 4 specifies the contents of the CGAD. Must contain the material info necessary to permit the commissioner to gain an understanding of governance structure and policies, including info related to oversight, policies of the most senior governing entity, and the direction of senior management.

Subdivision 5 gives the commissioner rulemaking authority.

Subdivision 6 makes the information obtained by the commissioner under this section confidential. Information may be used by the commissioner in furtherance of regulatory or legal action. Commissioner not allowed to testify in private civil action related to CGAD information.

Subdivision 7 allows the commissioner to retain third-party professionals as reasonably necessary to assist in reviewing the CGAD.

Subdivision 8 specifies a fine of $1,000 a day for failing to timely file the CGAD.

Effective date of the section is January 1, 2020.