The proposed rule changes are:
SECTION 1. Ins 40.01 (5m) and (7m) are created to read:
Ins 40.01 (5m) “Group-wide supervisor” means the regulatory official who is authorized to conduct and coordinate group-wide supervision activities and who is determined or acknowledged by the commissioner to have sufficient significant contacts with the internationally active insurance group.
(7m) “Internationally active insurance group” means an insurance holding company system that includes an insurer registered consistent with s. Ins 40.03 and all the following: (a) Premiums written in at least three countries.
(b) The percentage of gross premiums written outside the United States is at least 10 percent of the insurance holding company’s total gross written premiums.
(c) Based on a 3-year rolling average, either the total assets of the insurance holding company system are at least $50 billion dollars, or the total gross written premiums of the insurance holding company system are at least $10 billion dollars.
SECTION 2. Ins 40.05 is amended to read:
Ins 40.05 Privileged information. The information required to be filed with the commissioner under to ss. Ins 40.02 and, Ins 40.025, 40.07, and 40.08, is required pursuant to s. 601.42, Stats., and is subject to s. 601.465, Stats. SECTION 3. Ins 40.07 to 40.09 are created to read:
Ins 40.07 Designation of the group-wide supervisor of internationally active insurance groups. (1) (a) The commissioner is authorized to act as the group-wide supervisor for any internationally active insurance group in accordance with this section. The commissioner may acknowledge that another regulatory official is a more appropriate group-wide supervisor when the internationally active insurance group meets any of the following requirements:
1. Does not have substantial insurance operations in the United States.
2. Has substantial insurance operations in the United States, but not in Wisconsin.
3. Has substantial insurance operations in the United States and Wisconsin, but the commissioner has determined pursuant to the factors set forth in sub. (2) and s. Ins 40.08 (2), that another regulatory official is the appropriate group-wide supervisor. (b) An insurance holding company system that does not qualify as an internationally active insurance group may request that the commissioner either act as the group-wide supervisor or acknowledge another regulatory official as the group-wide supervisor.
(2) When determining the appropriate group-wide supervisor, the commissioner shall consider the following factors, in cooperation with other state, federal and international regulatory officials involved with supervision of the internationally active insurance group and its members, and in consultation with the internationally active insurance group:
(a) The place of domicile of the insurers within the internationally active insurance group that hold the largest share of the group’s written premiums, assets or liabilities.
(b) The place of domicile of the top-tiered insurer in the insurance holding company system of the internationally active insurance group.
(c) The location of the executive offices or largest operational offices of the internationally active insurance group.
(d) Whether the regulatory system of a regulatory official who is acting, or is interested in acting, as the group-wide supervisor is substantially similar to the laws of Wisconsin or is sufficient for group-wide supervision, enterprise risk analysis, and cooperation with other regulatory officials.
(e) Whether another regulatory official acting or seeking to act as the group-wide supervisor provides the commissioner with reasonably reciprocal recognition and cooperation.
(3) In the event of a material change in the internationally active insurance group the commissioner shall make a determination to act as the group-wide supervisor or acknowledge another regulatory official as the appropriate group-wide supervisor for the internationally active insurance group pursuant to subs. (1) and (2).
(4) The commissioner is authorized to collect from any insurer registered under s. Ins 40.03, all information necessary to determine whether the commissioner may act as the group-wide supervisor of an internationally active insurance group or acknowledge another regulatory official to act as the group-wide supervisor. Prior to issuing a determination that an internationally active insurance group is subject to group-wide supervision by the commissioner, the commissioner shall notify the insurer registered as required by s. Ins 40.03, and the ultimate controlling person within the internationally active insurance group. The internationally active insurance group shall have not less than 30 days to provide the commissioner with additional information pertinent to the pending determination. The commissioner shall publish on its Internet website the identity of internationally active insurance groups that the commissioner has determined are subject to group-wide supervision by the commissioner. Ins 40.08 Duties of the group-wide supervisor. (1) If the commissioner is the group-wide supervisor for an internationally active insurance group, the commissioner is authorized to engage in any of the following group-wide supervision activities:
(a) Assess the enterprise risks within the internationally active insurance group to ensure the following:
1. The material financial condition and liquidity risks to the members of the internationally active insurance group that are engaged in the business of insurance are identified by management.
2. Reasonable and effective risk mitigation measures are in place.
(b) Request information necessary and appropriate to assess enterprise risk from any member of an internationally active insurance group subject to the commissioner’s supervision, including information about the members of the internationally active insurance group regarding the following:
1. Governance, risk assessment and management.
2. Capital adequacy.
3. Material intercompany transactions.
(c) Coordinate and compel, through the authority of the regulatory officials of the jurisdictions where members of the internationally active insurance group are domiciled, the development and implementation of reasonable measures designed to ensure that the internationally active insurance group is able to timely recognize and mitigate enterprise risks to members of such internationally active insurance group that are engaged in the business of insurance.
(d) Communicate with other state, federal and international regulatory agencies for members within the internationally active insurance group and share relevant information subject to the confidentiality provisions in s. Ins 40.05, and through supervisory colleges under s. 617.215, Stats. (e) Enter into agreements with, or obtain documentation from, any insurer registered under s. Ins 40.03, any member of the internationally active insurance group, and any other state, federal and international regulatory agencies for members of the internationally active insurance group, providing the basis for or otherwise clarifying the commissioner's role as group-wide supervisor, including provisions for resolving disputes with other regulatory officials. Such agreements or documentation shall not serve as evidence in any proceeding that any insurer or person within an insurance holding company system not domiciled or incorporated in Wisconsin is doing business in Wisconsin or is otherwise subject to the jurisdiction of Wisconsin. (f) Other group-wide supervision activities, consistent with the authorities and purposes enumerated above, as considered necessary by the commissioner.
(2) If the commissioner acknowledges that another regulatory official from a jurisdiction that is not accredited by the NAIC is the group-wide supervisor, the commissioner is authorized to reasonably cooperate, including through supervisory colleges, with group-wide supervision undertaken by the group-wide supervisor, when the following provisions are met:
(a) The commissioner's cooperation is in compliance with the laws of Wisconsin.
(b) The regulatory official acknowledged as the group-wide supervisor also recognizes and cooperates with the commissioner's activities as a group-wide supervisor for other internationally active insurance groups where applicable. Where such recognition and cooperation is not reasonably reciprocal, the commissioner is authorized to refuse recognition and cooperation.
(3) The commissioner is authorized to enter into agreements with, or obtain documentation from, any insurer registered as required by s. Ins 40.03, any affiliate of the insurer, and other state, federal and international regulatory agencies for members of the internationally active insurance group that provide the basis for or otherwise clarify a regulatory official's role as group-wide supervisor. Ins 40.09 Insurer’s duty to pay reasonable expenses. (1) An insurer registered under s. Ins 40.03 that is also subject to ss. Ins 40.07 to 40.08, shall pay, pursuant to s. Ins 16.01 (6) (d), the reasonable expenses of the commissioner's participation in the administration of the internationally active group, including any of the following: (a) The commissioner’s expenses from the engagement of attorneys, actuaries and any other professionals.
(b) The commissioner’s reasonable travel expenses.
SECTION 4. Ins Ch. 53 (title) and chapter are created to read: Ins 53 (title)
CHAPTER INS 53
Corporate Governance Annual Disclosures
Ins 53.01 Purpose. The purpose of these regulations is to set forth the procedures for filing, and the required contents of, the corporate governance annual disclosure, deemed necessary by the commissioner to carry out the provisions of s. 610.80, Stats. Ins 53.02 Definitions. In addition to definitions contained in s. 610.80 (1), Stats., the following definitions shall apply in this chapter: (1) “Commissioner” means the Wisconsin insurance commissioner.
(2) “Insurance group” means those insurers and affiliates included within an insurance holding company system as defined at s. 622.03 (2), Stats. (3) “Senior management” means any corporate officer responsible for reporting information to the board of directors at regular intervals or providing this information to shareholders or regulators and shall include, for example, the Chief Executive Officer (CEO), Chief Financial Officer, Chief Operating Officer, or any other “C” level executives.
Ins 53.03 Filing procedures. Each year following the initial filing of the corporate governance annual disclosure, the insurer or insurance group shall file an amended version of the previously filed disclosure indicating where changes have been made. If no changes were made in the information or activities reported by the insurer or insurance group, the filing should so state.
Ins 53.04 Contents of the corporate governance annual disclosure. (1) The insurer or insurance group shall be as descriptive as possible in completing the corporate governance annual disclosure, with inclusion of attachments or example documents that are used in the governance process, since these may provide a means to demonstrate the strengths of their governance framework and practices.
(2) The corporate governance annual disclosure shall describe the insurer’s or insurance group’s corporate governance framework and structure including consideration of all of the following:
(a) The board and its various committees that are ultimately responsible for overseeing the insurer or insurance group and the level at which oversight occurs, for example, the ultimate control level, intermediate holding company level, or legal entity level. The insurer or insurance group shall describe and discuss the rationale for the current board size and structure.
(b) The duties of the board and each of its significant committees and how they are governed, including bylaws, charters, informal mandates, as well as how the board’s leadership is structured, including a discussion of the roles of CEO and chairman of the board within the organization.
(c) The insurer or insurance group shall describe the policies and practices of the most senior governing entity and significant committees including a discussion of the following factors:
1. How the qualifications, expertise and experience of each board member meet the needs of the insurer or insurance group.
2. How an appropriate amount of independence is maintained on the board and its significant committees.
3. The number of meetings held by the board and its significant committees over the past year as well as information on director attendance.
4. How the insurer or insurance group identifies, nominates and elects members to the board and its committees. The discussion should include, for example:
a. Whether a nomination committee is in place to identify and select individuals for consideration.
b. Whether term limits are placed on directors.
c. How the election and re-election processes function.
d. Whether a board diversity policy is in place and if so, how it functions.
5. The processes in place for the board to evaluate its performance and the performance of its committees, as well as any recent measures taken to improve performance including any board or committee training programs that have been put in place.
(d) The insurer or insurance group shall describe the policies and practices for directing senior management, including a description of the following factors:
1. Any processes or practices including, as an example, the suitability standards, to determine whether officers and key persons in control functions have the appropriate background, experience and integrity to fulfill their prospective roles, including:
a. Identification of the specific positions for which suitability standards have been developed and a description of the standards employed.
b. Any changes in an officer’s or key person’s suitability as outlined by the insurer’s or insurance group’s standards and procedures to monitor and evaluate such changes.
2. The insurer’s or insurance group’s code of business conduct and ethics, the discussion of which considers, for example, the following:
a. Compliance with laws, rules, and regulations.
b. Proactive reporting of any illegal or unethical behavior.
3. The insurer’s or insurance group’s processes for performance evaluation, compensation and corrective action to ensure effective senior management throughout the organization, including a description of the general objectives of significant compensation programs and what the programs are designed to reward. The description shall include sufficient detail to allow the commissioner to understand how the organization ensures that compensation programs do not encourage or reward excessive risk taking. Elements to be discussed may include, for example, all of the following:
a. The board’s role in overseeing management compensation programs and practices.
b. The various elements of compensation awarded in the insurer’s or insurance group’s compensation programs and how the insurer or insurance group determines and calculates the amount of each element of compensation paid.
c. How compensation programs are related to both company and individual performance over time.
d. Whether compensation programs include risk adjustments and how those adjustments are incorporated into the programs for employees at different levels.
e. Any claw back provisions built into the programs to recover awards or payments if the performance measures upon which they are based are restated or otherwise adjusted.
f. Any other factors relevant in understanding how the insurer or insurance group monitors its compensation policies to determine whether its risk management objectives are met by incentivizing its employees.
4. The insurer’s or insurance group’s plans for CEO and senior management succession.
(e) The insurer or insurance group shall describe the processes by which the board, its committees and senior management ensure an appropriate amount of oversight to the critical risk areas impacting the insurer’s business activities, including a discussion of the following:
1. How oversight and management responsibilities are delegated between the board, its committees and senior management.
2. How the board is kept informed of the insurer’s strategic plans, the associated risks, and steps that senior management is taking to monitor and manage those risks.
3. How reporting responsibilities are organized for each critical risk area. The description should allow the commissioner to understand the frequency at which information on each critical risk area is reported to and reviewed by senior management and the board. This description shall include the following critical risk areas of the insurer:
a. Risk management processes. An own risk and solvency assessment summary report filer may refer to its assessment summary report under s. 622.09, Stats. b. Actuarial function.
