2019 US Virgin Islands Code
Title 22 - Insurance
Chapter 26 - Annual Audit and Financial Reporting
§ 634. Requirements for audit committees
- This section does not apply to foreign or alien insurers licensed in this Territory or an insurer that is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity.
(a) The audit committee is directly responsible for the appointment, compensation and oversight of the work of any accountant including resolution of disagreements between management and the accountant regarding financial reporting for the purpose of preparing or issuing the audited financial report or related work pursuant to this Chapter. Each accountant shall report directly to the audit committee.
(b) The audit committee of an insurer or group of insurers is responsible for overseeing the insurer’s Internal audit function and granting the person or persons performing the function suitable authority and resources to fulfill their responsibilities if required by section 635.
(c) Each member of the audit committee is a member of the board of directors of the insurer or a member of the board of directors of an entity elected pursuant to section (f) and section 621(c).
(d) To be considered independent for purposes of this subsection, a member of the audit committee may not, other than in the member’s capacity as a member of the audit committee, the board of directors, or any other board committee, accept any consulting, advisory or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof. However, if the law requires board participation by otherwise non-independent members, that law prevails and the members may participate in the audit committee and be designated as independent for audit committee purposes, unless they are an officer or employee of the insurer or one of its affiliates.
(e) If a member of the audit committee ceases to be independent for reasons outside the member’s reasonable control, that person, with notice by the responsible entity to the state or territory, may remain an audit committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one year from the occurrence of the event that caused the member to be no longer independent. In determining independence, the Commissioner shall consider utilizing guidance provided in the SEC’s Final Rule No. 33-8220, Standards Relating to Listed Company Audit Committees adopted April 9, 2003 and any amendments thereto.
(f) To exercise the election of the controlling person to designate the audit committee for purposes of this Chapter, the ultimate controlling person shall provide written notice to the commissioners of the affected insurers. Notification must be made timely prior to the issuance of the statutory audit report and include a description of the basis for the election. The election can be changed through notice to the Commissioner by the insurer, which must include a description of the basis for the change. The election remains in effect for perpetuity, until rescinded.
(g)
(1) The audit committee shall require the accountant that performs for an insurer any audit required by this Chapter to timely report to the audit committee in accordance with the requirements of SAS 61, Communication with Audit Committees, or its replacement, including:
(A) All significant accounting policies and material permitted practices;
(B) All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the accountant; and
(C) Other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.
(2) If an insurer is a member of an insurance holding company system, the reports required by paragraph (1) may be provided to the audit committee on an aggregate basis for insurers in the holding company system, provided that any substantial differences among insurers in the system are identified to the audit committee.
(h) The proportion of independent audit committee members must meet or exceed the following criteria:
| Prior Calendar Year Direct Written and Assumed Premiums | ||
| $0 - $300,000,000 | Over $300,000,000 - $500,000,000 | Over $500,000,000 |
| No minimum requirements. See also Note A and B. | Majority (50% or more) of members shall be independent. See also Note A and B. | Supermajority of members (75% or more) shall be independent. See also Note A. |
(i) An insurer with direct written and assumed premiums, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $500,000,000 may make application to the Commissioner for a waiver from the requirements of this section based upon hardship. The insurer shall file, with its annual statement filing, the approval for relief from the requirements of this section with the states that it is licensed in or doing business in and the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.
(j) The company officer responsible for financial reporting under section 637 may not be a member of the audit committee.
(k) The independent committee members shall meet periodically, with no management present, with the independent certified public accountant to discuss the strengths and weaknesses of the insurer’s or group of insurers’ internal control environments.
