Chapter Ins 50

Ch. Ins 50 Note Note: Chapter Ins 50 was created as an emergency rule effective March 12, 1993.

subch. I of ch. Ins 50 Subchapter I — Annual Audited Financial Reports

Ins 50.01 Ins 50.01 Definitions. In this chapter:

Ins 50.01(1) (1) “Alien insurer” has the meaning provided under s. 600.03 (2), Stats.

Ins 50.01(1g) (1g) “Affiliate” of, or person “affiliated” with, a specific person means a person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.

Ins 50.01(1r) (1r) “Audit committee” means a committee or equivalent body established by the board of directors of an entity for the purpose of overseeing the accounting and financial reporting processes of an insurer or group of insurers, the internal audit function of an insurer or group of insurers, and audits of financial statements of the insurer or group of insurers. The audit committee of any entity that controls a group of insurers may be deemed to be the audit committee for one or more of the controlled insurers solely for the purposes of this chapter at the election of the controlling person under s. Ins 50.15 (6). If an audit committee is not designated by the insurer, the insurer’s entire board of directors shall constitute the audit committee.

Ins 50.01(2) (2) “Audited financial report” means a financial report prepared and conforming to s. Ins 50.06.

Ins 50.01(3) (3) “Executive officer” means any individual charged with the active management and control in an executive capacity of a person, whether incorporated or unincorporated and includes, but is not limited to, a chair of the board, president, vice president, treasurer, secretary, controller, and any individuals performing similar functions.

Ins 50.01(4) (4) “Foreign insurer” has the meaning provided under s. 600.03 (20), Stats.

Ins 50.01(4g) (4g) “Group of insurers” means those licensed insurers included in the reporting requirements of ch. 617, Stats., or a set of insurers identified by the insurers’ management or controlling person for the purpose of assessing the effectiveness of internal control over financial reporting.

Ins 50.01(4m) (4m) “Indemnification” means an agreement of indemnity or a release from liability where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing or other misrepresentations made by the insurer or its representatives.

Ins 50.01(4r) (4r) “Independent board member” has the meaning given in s. Ins 50.15 (4).

Ins 50.01(5) (5) “Independent certified public accountant” means:

Ins 50.01(5)(a) (a) An independent certified public accountant, or independent accounting firm, in good standing with the American institute of certified public accountants and in all states in which the accountant or firm is licensed, or required to be licensed, to practice; or

Ins 50.01(5)(b) (b) For Canadian and British companies, a Canadian chartered or British chartered accountant.

Ins 50.01(6) (6) “Insurer” means an insurer licensed under s. 185.981, Stats., or ch. 611, 612, 613, 614 or 618, Stats., and the state life fund.

Ins 50.01(6g) (6g) “Internal audit function” means a person or persons who provide independent, objective, and reasonable assurance designed to add value and improve an organization’s operations and accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

Ins 50.01(6m) (6m) “Internal control over financial reporting” means a process effected by an entity’s board of directors, management and other personnel designed to provide reasonable assurance regarding the reliability of financial statements, including the items specified in s. Ins 50.06 (2) (b) to (3), and includes those policies and procedures that:

Ins 50.01(6m)(a) (a) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;

Ins 50.01(6m)(b) (b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, including those items specified in s. Ins 50.06 (2) (b) to (3), and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

Ins 50.01(6m)(c) (c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the audited financial statements, including those items specified in s. Ins 50.06 (2) (b) to (3).

Ins 50.01(7) (7) “Policyholder surplus” means capital and surplus.

Ins 50.01(7d) (7d) “SEC” means the United States Securities and Exchange Commission.

Ins 50.01(7h) (7h) “Section 404” means section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s rules and regulations promulgated thereunder.

Ins 50.01(7p) (7p) “Section 404 Report” means management’s report on internal control over financial reporting as defined by the SEC and the related attestation report of the independent certified public accountant.

Ins 50.01(7t) (7t) “SOX Compliant Entity” means an entity that either is required to be compliant with, or voluntarily is compliant with, all of the following provisions of the Sarbanes-Oxley Act of 2002:

Ins 50.01(7t)(a) (a) The preapproval requirements of section 201, section 10 A (i), of the Securities and Exchange Act of 1934;

Ins 50.01(7t)(b) (b) The audit committee independence requirements of section 301, section 10 A (m) (3) of the Securities and Exchange Act of 1934; and

Ins 50.01(7t)(c) (c) The internal control over financial reporting requirements of Section 404, item 308 of SEC Regulation S-K.

Ins 50.01(8) (8) “State of domicile” means the state where an insurer is domiciled or, for an alien insurer, its port of entry state.

Ins 50.01(8m) (8m) “Ultimate controlling person” means a person who is not controlled by any other person.

Ins 50.01(9) (9) “Work papers” means records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to the independent certified public accountant’s examination of the financial statements of an insurer. “Work papers” include, but are not limited to, audit planning documentation; audit guides; work programs; analyses; memoranda; letters of confirmation and representation; abstracts of company documents; financial compilations, even if not produced during a full audit; and schedules or commentaries prepared or obtained by the independent certified public accountant in the course of examination of the financial statements of an insurer or which support the opinion of the independent certified public accountant regarding the financial statements.

Ins 50.01 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; correction in (4) made under s. 13.93 (2m) (b) 7., Stats., Register, June, 2001, No. 546; CR 07-023: cr. (4m), Register September 2007 No. 621, eff. 10-1-07; CR 08-053: cr. (1g), (1r), (4g), (4r), (6m), (7d), (7h), (7p), (7t) and (8m) Register December 2008 No. 636, eff. 1-1-09; CR 17-015: am. (1r), cr. (6g) Register December 2017 No. 744, eff. 1-1-18; CR 22-075: am. (9) Register June 2023 No. 810, eff. 7-1-23.

Ins 50.02 Ins 50.02 Applicability. Unless otherwise ordered by the commissioner, this subchapter applies to all insurers except:

Ins 50.02(1) (1) An insurer is not subject to this subchapter for a calendar year in which the insurer has:

Ins 50.02(1)(a) (a) Direct premiums written in this state of less than $100,000 and less than 1,000 policyholders or certificate holders of directly written policies in the state at the end of the calendar year; and

Ins 50.02(1)(b) (b) Assumed premiums nationwide of less than $1,000,000 under reinsurance contracts or treaties and direct premiums written nationwide of less than $1,000,000.

Ins 50.02(2) (2) A foreign or alien insurer is exempt from this chapter except for s. Ins 50.03 if:

Ins 50.02(2)(a) (a) It complies with another state’s requirement to submit audited financial reports and the other state’s requirement is found by the commissioner to be substantially similar to the requirements of this chapter; and

Ins 50.02(2)(b) (b) It files audited financial reports with that state’s commissioner of insurance or equivalent agency.

Ins 50.02(3) (3) An insurer licensed under ch. 612, Stats., if the insurer meets all of the following requirements:

Ins 50.02(3)(a) (a) Has direct total written premium for the calendar year, including premiums on nonproperty coverage, of less than $500,000;

Ins 50.02(3)(b) (b) Has a net of reinsurance premium to policyholder surplus ratio of less than 3 to 1 as of the December 31 of the year for which an audited financial report is otherwise required.

Ins 50.02(3)(c) (c) Is not authorized under its articles of incorporation to do business in more than 8 counties.

Ins 50.02(3)(d) (d) Does not engage in the writing of nonproperty coverage unless the nonproperty coverage is 90% reinsured.

Ins 50.02 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; am. (1) (b), Register, December, 1995, No. 480, eff. 1-1-96; am. (3) (intro.) and (a) to (d) and r. (3) (e) and (f), Register, June, 2001, No. 546, eff. 1-1-02; CR 08-053: am. (2) (a) Register December 2008 No. 636, eff. 1-1-09.

Ins 50.03 Ins 50.03 Filing by exempt foreign and alien insurers. A foreign or alien insurer which is exempt from this subchapter under s. Ins 50.02 (2) shall:

Ins 50.03(1) (1) File a copy of the audited financial report, report on significant deficiencies in internal controls, and the accountant’s letter of qualifications which are filed with the other state with the commissioner not later than the filing dates specified in ss. Ins 50.05, 50.12 and 50.13, respectively. Canadian insurers which are not subject to this subchapter under s. Ins 50.02 (2) shall submit to the commissioner accountants’ reports as filed with the Canadian Dominion department of insurance not later than the filing dates specified in s. Ins 50.05.

Ins 50.03(2) (2) File with the commissioner a copy of any notification of adverse financial condition report filed with, or required to be filed with, the other state within the time specified in s. Ins 50.11.

Ins 50.03 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93.

Ins 50.04 Ins 50.04 Authority to obtain information or examine not restricted. This subchapter does not limit the authority of the commissioner to require an insurer or any other person to provide information, or to conduct an examination of an insurer or any other person, under any other statute or rule.

Ins 50.04 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93.

Ins 50.05 Ins 50.05 General requirements related to filing and extensions for filing of annual audited financial reports and audit committee appointment.

Ins 50.05(1) (1) An insurer shall:

Ins 50.05(1)(a) (a) Annually obtain or cause an audit of the insurer by an independent certified public accountant; and

Ins 50.05(1)(b) (b) File an audited financial report that complies with s. Ins 50.06 with the commissioner on or before June 1 for the immediately preceding calendar year.

Ins 50.05(2) (2) The commissioner may require an insurer to file the audited financial report earlier than the date specified under sub. (1) if the commissioner gives 90 days advance notice to the insurer.

Ins 50.05(3) (3) The commissioner may grant extensions of the filing date under sub. (1) for 31-day periods if the insurer and independent certified public accountant establish there is good cause for an extension. A request for an extension shall be submitted in writing not less than 10 days prior to the due date in sufficient detail to permit the commissioner to make an informed decision with respect to the requested extension. If an extension is granted in accordance with this subsection, a similar extension of 31 days is granted to the filing of management’s report of internal control over financial reporting.

Ins 50.05(4) (4) An insurer may not retain an accountant or accounting firm to comply with sub. (1) or s. Ins 50.07 unless the accountant or accounting firm is an independent certified public accountant, regardless of whether the commissioner has issued a ruling under s. Ins 50.08 (1). An insurer may not retain an accountant or accounting firm to comply with sub. (1) or s. Ins 50.07 if the commissioner under s. Ins 50.08 (1) rules that the accountant or accounting firm is not qualified or if the accountant or accounting firm does not comply with s. Ins 50.08 (2).

Ins 50.05(5) (5) Every insurer required to file an annual audited financial report pursuant to this chapter shall designate a group of individuals to constitute its audit committee. The audit committee of an entity that controls an insurer may be deemed to be the insurer’s audit committee for purposes of this chapter at the election of the controlling person.

Ins 50.05 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; CR 08-053: am. (title) and (3), cr. (5) Register December 2008 No. 636, eff. 1-1-09.

Ins 50.06 Ins 50.06 Contents of annual audited financial report. The annual audited financial report required under s. Ins 50.05 shall comply with all of the following:

Ins 50.06(1) (1) Report the financial position of the insurer as of the end of the most recent calendar year and the results of its operations, cash flows and changes in capital and surplus for the year then ended in conformity with statutory accounting practices prescribed, or otherwise permitted, by the department of insurance, or equivalent agency, of the state of domicile, or, for a domestic insurer, in conformity with accounting practices prescribed or permitted in annual statements filed with the commissioner, as provided under s. Ins 7.02.

Ins 50.06(2) (2) Include all of the following:

Ins 50.06(2)(a) (a) The report of the independent certified public accountant.

Ins 50.06(2)(b) (b) A balance sheet reporting admitted assets, liabilities, capital and surplus.

Ins 50.06(2)(c) (c) A statement of operations.

Ins 50.06(2)(d) (d) A statement of cash flows.

Ins 50.06(2)(e) (e) A statement of changes in capital and surplus.

Ins 50.06(2)(f) (f) Notes to financial statements. These notes shall be those required by the appropriate national association of insurance commissioners’ annual statement instructions and accounting practices and procedures manual. The notes shall include a reconciliation of differences, if any, between the audited statutory financial statements and the annual statement filed pursuant to subch. II with a written description of the nature of these differences.

Ins 50.06(3) (3) Include financial statements prepared in a form and using language and groupings substantially the same as the relevant sections of the annual statement of the insurer filed with the commissioner. The financial statement shall be comparative, presenting the amounts as of December 31 of the current year and the amounts as of the immediately preceding December 31, except in the first year in which an insurer is required to file an audited financial report, the comparative data may be omitted.

Ins 50.06 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93; CR 01-050: renum. (2) (f) (intro.) and am., r. (2) (f) 1. and 2., Register October 2001 No. 550, eff. 11-1-01.

Ins 50.07 Ins 50.07 Designation of independent certified public accountant.

Ins 50.07(1) (1) An insurer shall, within 60 days after the insurer becomes subject to this subchapter:

Ins 50.07(1)(a) (a) Provide the commissioner in writing the name and address of the independent certified public accountant retained to conduct the annual audit required by this subchapter.

Ins 50.07(1)(b) (b) File with the commissioner a copy of the letter required to be obtained under sub. (3).

Ins 50.07(2) (2) Insurers not retaining an independent certified public accountant on the effective date of this rule shall register the name and address of their retained independent certified public accountant not less than 6 months before the date when the first audited financial report is to be filed.

Ins 50.07(3) (3) An insurer shall obtain a letter from the independent certified public accountant it retains to conduct the annual audit required by this subchapter. The letter shall state that the independent certified public accountant:

Ins 50.07(3)(a) (a) Is aware of the provisions of the insurance code and the rules and regulations of the insurance department or equivalent agency of the state of domicile of the insurer that relate to accounting and financial matters of insurers; and

Ins 50.07(3)(b) (b) Will express an opinion on whether the financial statements conform to the statutory accounting practices prescribed or otherwise permitted by that department or equivalent agency and will specify exceptions as appropriate.

Ins 50.07(4) (4) If an independent certified public accountant for the immediately preceding filed audited financial report of an insurer is dismissed or resigns, the insurer shall comply with all of the following:

Ins 50.07(4)(a) (a) The insurer shall within 5 business days notify the commissioner of the dismissal or resignation.

Ins 50.07(4)(b) (b) The insurer shall within 15 business days furnish the commissioner with a letter which clearly states that there was no disagreement required to be disclosed under this paragraph or which describes any disagreement between the insurer and the independent certified public accountant in the 24 months preceding the dismissal or resignation, which:

Ins 50.07(4)(b)1. 1. Was on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; and

Ins 50.07(4)(b)2. 2. Would require the independent certified public accountant to make reference to the subject matter of the disagreement in connection with the opinion required under s. Ins 50.06. The requirement to provide a description applies regardless of whether the disagreement was resolved or whether the former independent certified public accountant was satisfied with the resolution.

Ins 50.07(4)(c) (c) The insurer shall within 15 business days furnish the commissioner with a letter from the independent certified public accountant addressed to the insurer stating whether the independent certified public accountant agrees with the statements contained in the insurer’s letter required under par. (b) and, if not, stating the reasons why not.

Ins 50.07 History History: Cr. Register, July, 1993, No. 451, eff. 8-1-93.

Ins 50.08 Ins 50.08 Qualifications of independent certified public accountants.

Ins 50.08(1) (1) The commissioner may rule that an accountant or accounting firm is not qualified for purposes of expressing an opinion on the financial statements in the annual audited financial report required under this subchapter and prohibit insurers from retaining the accountant or an accounting firm, and require insurers to replace the accountant or accounting firm, if the commissioner finds there is cause, including, but not limited to, a finding that the accountant or accounting firm: