New York Insurers: Corporate Governance Annual Disclosure Requirement

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The Corporate Governance Annual Disclosure (CGAD) Model Act became an accreditation requirement of the National Association of Insurance Commissioner’s (NAIC) on Jan. 1, 2020. New York State Department of Financial Services (DFS) Regulation 215 adopts the NAIC’s guidance, requiring all authorized insurers to submit a CGAD to the DFS by Dec. 1, 2020.[1]

New York State DFS Requirements

The DFS proposal requires CGAD reporting by all New York-authorized insurers.

Although the CGAD disclosures follow the NAIC Models, Regulation 215 goes a step further by making the detailed disclosure items, which are optional in the NAIC Model, mandatory. They include the following:

  • description of insurer’s corporate governance framework and structure
  • policies and practices in place that provide direction to the board of directors and its significant committees
  • policies and practices in place that provide direction to senior management
  • processes by which the board of directors, its significant committees and senior management ensure oversight of critical risk areas impacting the insurer’s business

The proposed regulation requires the CGAD to describe how the board of directors complies with the following duties:

  • act in good faith and in a manner that the members believe to be in the best interests of the insurer or system
  • discharge their duties with the care that a person in a like position reasonably would believe to be appropriate under similar circumstances

The CGAD must define the reporting, information system or controls the insurer or system has implemented to:

  • enable members of the board of directors, or other governing body, to carry out their duties
  • ensure that the members of the board of directors, or other governing body, do not consciously fail to monitor or oversee the insurer’s operations thereby disabling itself from being informed of risks or problems requiring their attention
DHG Views

Insurers should consider potential validation of their corporate governance as described in the CGAD by a third party, which may also provide guidance and assistance in developing and embedding an enterprise risk management (ERM) framework into an insurer’s corporate governance framework.

Insurers should establish a process for the annual submission and take the following steps to prepare for CDAG compliance:
  • Identify gaps in corporate governance framework, structure and oversight policies and procedures
  • List key stakeholders for all CGAD requirements
  • Evaluate the communication process for critical risk areas
  • Complete a gap analysis of policy, procedures, and suitability
  • Documentation for the board of directors
  • Examine key conduct and ethics policies for thoroughness and applicability
  • Review committee charters for completeness

DHG’s team of risk management professionals can assist you in understanding your CGAD responsibilities. Contact us to help your business incorporate CGAD requirements into an effective ERM framework.

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Sources

[1] For more information on the NAIC CGAD guidance, see DHG’s article on Corporate Governance Annual Disclosure: New Accreditation Requirement.

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