HB 170: "An Act relating to annual audit reports by insurers, to custodians of insurer assets, to writing workers' compensation insurance by surplus lines insurers, to reports by surplus lines insurers, to the definition of 'wet marine and transportation insurance,' to false or misleading financial statements concerning insurance audits, and to the membership of the Alaska Life and Health Insurance Guaranty Association; and providing for an effective date."
00 HOUSE BILL NO. 170 01 "An Act relating to annual audit reports by insurers, to custodians of insurer assets, to 02 writing workers' compensation insurance by surplus lines insurers, to reports by surplus 03 lines insurers, to the definition of 'wet marine and transportation insurance,' to false or 04 misleading financial statements concerning insurance audits, and to the membership of 05 the Alaska Life and Health Insurance Guaranty Association; and providing for an 06 effective date." 07 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 08 * Section 1. AS 21.09 is amended by adding a new section to read: 09 Sec. 21.09.195. Registration for annual audited financial report. The 10 director shall establish a system of registration, including grounds for revocation of 11 registration, for a certified public accountant who performs duties set out in 12 AS 21.09.200(g). 13 * Sec. 2. AS 21.09.200 is amended by adding new subsections to read:
01 (g) An insurer shall file with the director or the director's designee an annual 02 audited financial report for the previous year by June 1 of each year unless, under a 03 regulation adopted by the director, the director grants an exemption based on a finding 04 that filing an annual audited financial report would constitute a financial or 05 organizational hardship on the insurer. The filing date for the annual audited financial 06 report may be extended by the director upon showing that the standards established by 07 regulation have been met. If the director gives the insurer 90 days' advance notice, and 08 for good cause, the director may require an insurer to file an audited financial report 09 earlier than June 1 of each year. The annual audited financial report must be prepared 10 by a qualified independent certified public accountant registered under AS 21.09.195. 11 (h) Within 60 days after filing the annual audited financial report under (g) of 12 this section, the insurer shall file a written report on any unremediated material 13 weakness in internal control over financial reporting noted during the audit. 14 (i) For good cause, the director may require the insurer to file a report 15 describing internal control over financial reporting. An insurer shall file the report on 16 internal control by the date specified by the director. 17 (j) If the director requires the submission of additional information, the insurer 18 shall supplement the reports required by (h) and (i) of this section by the date specified 19 by the director. The reports on internal control filed with the director under (h) and (i) 20 of this section are confidential and subject to the provisions of AS 21.06.060. 21 (k) In accordance with regulations adopted by the director, an insurer shall 22 designate an audit committee to engage a qualified independent certified public 23 accountant registered under AS 21.09.195 to conduct the annual audit. The audit 24 committee shall oversee services performed by the certified public accountant. If an 25 insurer does not designate an audit committee, the entire governing board of the 26 insurer is considered to be the audit committee for purposes of this subsection. 27 (l) The certified public accountant conducting the annual audit required by (g) 28 of this section shall notify the governing board of the insurer or the audit committee in 29 writing of any determination by the certified public accountant that the insurer has 30 misstated its financial condition as reported to the director or that the insurer does not 31 meet the minimum capital requirements and surplus requirements of this title as of the
01 date of the balance sheet currently under audit. An insurer that has received a report 02 under this subsection shall forward a copy to the director. The certified public 03 accountant shall also forward the report to the director unless the insurer provides 04 evidence satisfactory to the certified public accountant that the report has been 05 forwarded to the director. 06 * Sec. 3. AS 21.21.410 is repealed and reenacted to read: 07 Sec. 21.21.410. Custodian of insurer assets. (a) The custodian for assets, 08 securities, or investments of the insurer may be only a bank, trust company, securities 09 firm, or clearing corporation that is properly authorized by the insurer and approved 10 by the director. 11 (b) When securities are deposited with a clearing corporation, certificates 12 representing securities of the same class of the same issuer may be merged and held in 13 bulk in the name of the nominee of the clearing corporation with any other securities 14 deposited with the clearing corporation by any person, regardless of the ownership of 15 the securities, and certificates representing securities of small denominations may be 16 merged into one or more certificates of larger denominations. The records of any 17 custodian through which an insurer holds securities in a clearing corporation must 18 show that the securities are held for the insurer and for which accounts of the insurer. 19 Ownership of, and other interest in, the securities may be transferred by bookkeeping 20 entry on the books of the clearing corporation without physical delivery of certificates 21 representing the securities. 22 (c) A custodial agreement between an insurer and an institution holding the 23 assets, securities, or investments of the insurer must be in writing and must be 24 authorized by a resolution of the board of directors of the insurance company or of an 25 authorized committee of the board. The terms of the custodial agreement must comply 26 with the requirements of the director. 27 * Sec. 4. AS 21.34.030(a) is amended to read: 28 (a) Workers' compensation insurance may be placed in and written by a 29 nonadmitted insurer if 30 (1) the director considers it in the best interest of the public and issues 31 an order [A DIRECTIVE] to that effect;
01 (2) the insurance is written in accordance with this chapter; and 02 (3) all conditions established for writing workers' compensation 03 insurance in a nonadmitted market receive compliance. 04 * Sec. 5. AS 21.34.170(a) is amended to read: 05 (a) A surplus lines broker shall file with the director on or before the end of 06 each month, on forms prescribed by the director, a [VERIFIED] report of all surplus 07 lines insurance, by type of insurance as required to be reported in the annual statement 08 that must be filed with the director by admitted insurers. The report must include all 09 surplus lines insurance transactions during the preceding calendar month showing the 10 aggregate gross premiums written, the aggregate return premiums, the amount of 11 aggregate tax remitted to this state, and the amount of aggregate tax remitted to each 12 other state for which an allocation is made under AS 21.34.180. 13 * Sec. 6. AS 21.34.900(9) is amended to read: 14 (9) "wet marine and transportation insurance" means one or more of 15 the following: 16 (A) insurance upon, of interest in, or relating to vessels, crafts, 17 hulls, except vessels of 50 displacement tons or less; 18 (B) insurance of marine builders risks, marine war risks, and 19 contracts of marine protection and indemnity insurance; 20 (C) insurance of freight and disbursements pertaining to a 21 subject of insurance coming within this paragraph; or [AND] 22 (D) insurance of personal property and interests in personal 23 property, in course of exportation from or importation into a country or in the 24 course of coastal or inland water transportation, including transportation by 25 land, water, or air from point of origin to final destination in connection with 26 any and all risks or perils of navigation, transit, or transportation, and while 27 being repaired for and while awaiting shipment, and during any delays, 28 transshipment, or reshipment incident to them. 29 * Sec. 7. AS 21.36.060 is amended by adding new subsections to read: 30 (c) A person may not, directly or indirectly, in connection with any audit, 31 review, or communication required under AS 21.09.200
01 (1) make or cause to be made a materially false or misleading 02 statement to an accountant; or 03 (2) omit to state or cause another person to omit to state any material 04 fact necessary in order to make other statements made not misleading to an 05 accountant. 06 (d) A person may not, directly or indirectly, take any action to coerce, 07 manipulate, mislead, or fraudulently influence any accountant engaged in the 08 performance of an audit under AS 21.09.200 if that person knew or should have 09 known that the action, if successful, could result in rendering the insurer's financial 10 statement materially misleading. 11 * Sec. 8. AS 21.79.040(a) is amended to read: 12 (a) There is established as a nonprofit legal entity the Alaska Life and Health 13 Insurance Guaranty Association. Each member insurer [AN INSURER THAT 14 ISSUES AN INSURANCE POLICY DESCRIBED IN AS 21.79.020(b)] shall be a 15 member of the association as a condition of the insurer's authority to transact 16 insurance in this state. The association shall perform its functions under a plan of 17 operation established and approved under AS 21.79.080 and shall exercise its powers 18 through the Board of Governors established under AS 21.79.050. For purposes of 19 administration and assessment, the association shall maintain the following accounts: 20 (1) the health insurance account; and 21 (2) the life insurance and annuity account, including the following 22 subaccounts: 23 (A) life insurance account; 24 (B) annuity account that must include annuity contracts owned 25 by a governmental retirement benefit plan, or its trustee, qualified under 26 26 U.S.C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 (Internal Revenue Code), but 27 that otherwise excludes unallocated annuities; and 28 (C) unallocated annuity account that must exclude contracts 29 owned by a governmental retirement benefit plan, or its trustee, qualified under 30 26 U.S.C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 (Internal Revenue Code). 31 * Sec. 9. AS 21.79.900(10) is amended to read:
01 (10) "member insurer" means an insurer licensed to transact insurance 02 in the state for which coverage is provided [THAT ISSUES A POLICY 03 DESCRIBED] in AS 21.79.020 [AS 21.79.020(a) AND (b)], or a subscriber contract 04 providing benefits described in AS 21.87.120(a)(2) - (4) or 21.87.130(a)(2) and (3), 05 and includes an insurer whose license or certificate of authority in this state may have 06 been suspended, revoked, not renewed, or voluntarily withdrawn; "member insurer" 07 does not include 08 (A) a health maintenance organization licensed under 09 AS 21.86; 10 (B) a fraternal benefit society licensed under AS 21.84; 11 (C) a mandatory state pooling plan; 12 (D) a mutual assessment company or an entity that operates on 13 an assessment basis; 14 (E) an insurance exchange licensed under AS 21.75; 15 (F) a hospital or medical service organization licensed under 16 AS 21.87; 17 (G) an organization that has a license or certificate limited to 18 the issuance of charitable gift annuities; or 19 (H) an entity similar to one described under (A) - (G) of this 20 paragraph; 21 * Sec. 10. The uncodified law of the State of Alaska is amended by adding a new section to 22 read: 23 TRANSITION: REGULATIONS. The director of insurance may immediately proceed 24 to adopt regulations under AS 21.06.090 necessary to implement this Act. The regulations 25 take effect under AS 44.62 (Administrative Procedure Act), but not before the effective date 26 of the statutory changes. 27 * Sec. 11. Section 3 of this Act takes effect January 1, 2008. 28 * Sec. 12. Section 10 of this Act takes effect immediately under AS 01.10.070(c). 29 * Sec. 13. Except as provided in secs. 11 and 12 of this Act, this Act takes effect July 1, 30 2007.