Haw. Code R. § 16-185-115 - Management's report of internal control over financial reporting
(a) Every insurer required to file an audited
financial report that has annual direct written and assumed premiums, excluding
premiums reinsured with the Federal Crop Insurance Corporation and Federal
Flood Program, of $500,000,000 or more shall prepare a report of the insurer's
or group of insurers' internal control over financial reporting, as these terms
are defined in section 16-185-102, Hawaii Administrative Rules The report shall
be filed with the commissioner along with the communication of internal control
related matters noted in an audit described under section 16-185-110, Hawaii
Administrative Rules Management's report of internal control over financial
reporting shall be as of the December 31 immediately preceding
(b) Notwithstanding the premium threshold in
subsection (a) the commissioner may require an insurer to file management's
report of internal control over financial reporting if the insurer is in any
risk-based capital level event, as defined in section
431:3-401, HRS, or
meets any one or more of the standards of an insurer deemed to be in hazardous
financial condition as defined in section
431:15-103.5,
HRS.
(c) An insurer or a group of
insurers that is:
(1) Directly subject to
section 404;
(2) Part of a holding
company system whose parent is directly subject to section 404;
(3) Not directly subject to section 404 but
is a SOX compliant entity; or
(4) 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's requirement
provided that those internal controls of the insurer or group of insurers
having a material impact on the preparation of the insurer's or group of
insurers' audited statutory financial statements, those items included in
section 16-185-104(2) through (7), Hawaii Administrative Rules, 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 statutory
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 required by this section, or the section 404 report and
this section's report 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) Management's report of
internal control over financial reporting shall include:
(1) A statement that management is
responsible for establishing and maintaining adequate internal control over
financial reporting;
(2) 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;
(3) A statement that
briefly describes the approach or processes by which management evaluated the
effectiveness of its internal control over financial reporting;
(4) A statement that briefly describes the
scope of work that is included and whether any internal controls were
excluded;
(5) Disclosure of any
unremediated material weaknesses in the internal control over financial
reporting identified by management as of the December 31 immediately preceding.
Management is not permitted to 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 or more unremediated material weaknesses in its
internal control over financial reporting;
(6) A statement regarding the inherent
limitations of internal control systems; and
(7) Signatures of the chief executive officer
and the chief financial officer or equivalent position or title.
(e) Management shall document and
make available upon financial condition examination the basis upon which its
assertions required, in subsection (d), 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. Additionally:
(1) 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 assertion in a cost-effective manner and,
as such, may include assembly of or reference to existing documentation; and
(2) Management's report on internal
control over financial reporting, required by subsection (a) and any
documentation provided in support thereof during the course of a financial
condition examination, shall be kept confidential by the insurance division.
Notes
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