November 27, 2018, Introduced by Rep. Theis and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
(MCL 500.100 to 500.8302) by adding chapter 17A.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
CHAPTER 17A
CORPORATE GOVERNANCE ANNUAL DISCLOSURE
Sec. 1751. This chapter does not prescribe or impose corporate
governance standards and internal procedures beyond that which is
required under applicable state corporate law. However, this
chapter does not limit the director's authority, or the rights or
obligations of third parties, under chapter 2.
Sec. 1753. This chapter applies to all insurers domiciled in
this state.
Sec. 1755. As used in this chapter:
(a) "Corporate governance annual disclosure" or "CGAD" means a
confidential report filed by the insurer or insurance group made in
accordance with the requirements of this chapter.
(b) "Insurance group" means insurers and affiliates included
within an insurance holding company system.
(c) "Insurer" means that term as defined in section 1701.
(d) "NAIC" means that term as defined in section 1701.
(e) "ORSA Summary Report" means that term as defined in
section 1701.
Sec. 1757. (1) An insurer, or the insurance group of which the
insurer is a member, shall, no later than June 1 of each calendar
year, submit to the director a corporate governance annual
disclosure. Notwithstanding any request from the director made
under subsection (3), if the insurer is a member of an insurance
group, the insurer shall submit the report required by this section
to the commissioner of the lead state for the insurance group, in
accordance with the laws of the lead state, as determined by the
procedures outlined in the most recent "Financial Analysis
Handbook" adopted by the NAIC.
(2) The CGAD required under subsection (1) must include a
signature of the insurer or insurance group's chief executive
officer or corporate secretary attesting to the best of that
individual's belief and knowledge that the insurer has implemented
the corporate governance practices and that a copy of the
disclosure has been provided to the insurer's board of directors or
the appropriate committee of the insurer's board of directors.
(3) An insurer not required to submit a CGAD under this
section shall submit a CGAD on the director's request.
(4) For purposes of completing the CGAD, the insurer or
insurance group may provide information regarding corporate
governance at the ultimate controlling parent level, an
intermediate holding company level, or the individual legal entity
level, or any 1 or more of those levels, depending on how the
insurer or insurance group has structured its system of corporate
governance. The insurer or insurance group is encouraged to make
the CGAD disclosures at the level at which the insurer's or
insurance group's risk appetite is determined, or at which the
earnings, capital, liquidity, operations, and reputation of the
insurer are overseen collectively and at which the supervision of
those factors is coordinated and exercised, or the level at which
legal liability for failure of general corporate governance duties
would be placed. If the insurer or insurance group determines the
level of reporting based on the criteria described in this
subsection, the insurer or insurance group shall indicate which of
the 3 criteria was used to determine the level of reporting and
explain any subsequent changes in level of reporting.
(5) The review of the CGAD and any additional requests for
information must be made through the lead state as determined by
the procedures within the most recent Financial Analysis Handbook
as provided in subsection (1).
(6) An insurer that provides information substantially similar
to the information required by this chapter in other documents
provided to the director, including proxy statements filed in
conjunction with Form B requirements, or other state or federal
filings provided to the department is not required to duplicate
that information in the CGAD and is only required to cross-
reference the document in which the information is included.
Sec. 1759. (1) The insurer or insurance group has discretion
over the responses to the CGAD inquiries if the CGAD contains the
material information necessary to permit the director to gain an
understanding of the insurer's or group's corporate governance
structure, policies, and practices. The director may request
additional information that he or she considers material and
necessary to provide the director with a clear understanding of the
corporate governance policies, the reporting or information system,
or the controls implementing those policies.
(2) Notwithstanding subsection (1), the CGAD must be prepared
consistent with chapter 10. Documentation and supporting
information must be maintained and made available on examination or
on request of the director.
Sec. 1761. (1) Documents, materials, or other information,
including the CGAD, in the possession or control of the director
that are obtained by, created by, or disclosed to the director or
any other person under this chapter are considered proprietary and
to contain trade secrets. The documents, materials, or other
information are confidential and privileged, are not subject to
disclosure under the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246, are not subject to subpoena, and are not subject
to discovery or admissible in evidence in any private civil action.
However, the director may use the documents, materials, or other
information in the furtherance of any regulatory or legal action
brought as a part of the director's official duties. The director
shall not otherwise make the documents, materials, or other
information public without the prior written consent of the
insurer. This section does not require written consent of the
insurer before the director may share or receive confidential
documents, materials, or other CGAD-related information under
subsection (3) to assist in the performance of the director's
regular duties.
(2) The director or any person who received documents,
materials, or other CGAD-related information, through examination
or otherwise, while acting under the authority of the director, or
with whom the documents, materials, or other information are shared
under this act shall not testify in any private civil action
concerning any confidential documents, materials, or information
subject to subsection (1).
(3) The director may do any of the following:
(a) Except as otherwise provided in this subdivision, on
request, share documents, materials, or other CGAD-related
information, including the confidential and privileged documents,
materials, or information described in subsection (1), including
proprietary and trade secret documents and materials with other
state, federal, and international financial regulatory agencies,
including members of any supervisory college under chapter 13, with
the NAIC, and with third-party consultants retained by the director
under section 1763. The director shall not share documents,
materials, or other CGAD-related information unless the recipient
agrees in writing to maintain the confidentiality and privileged
status of the CGAD-related documents, materials, or other
information and has verified in writing the legal authority to
maintain confidentiality.
(b) Except as otherwise provided in this subdivision, receive
documents, materials, or other CGAD-related information, including
otherwise confidential and privileged documents, materials, or
information, including proprietary and trade-secret information or
documents, from regulatory officials of other state, federal, and
international financial regulatory agencies, including members of
any supervisory college under chapter 13, and from the NAIC. The
director shall maintain as confidential or privileged any
documents, materials, or information received with notice or the
understanding that it is confidential or privileged under the laws
of the jurisdiction that is the source of the document, material,
or information.
(4) The sharing of information and documents by the director
under this chapter is not a delegation of regulatory authority or
rule-making, and the director is solely responsible for the
administration, execution, and enforcement of this chapter.
(5) The disclosure or sharing of documents, proprietary and
trade-secret materials, or other CGAD-related information to the
director under this chapter is not a waiver of an applicable
privilege or claim of confidentiality.
Sec. 1763. (1) The director may retain, at the insurer's
expense, third-party consultants, including attorneys, actuaries,
accountants, and other experts not otherwise a part of the
director's staff as may be reasonably necessary to assist the
director in reviewing the CGAD and related information or the
insurer's compliance with this chapter.
(2) A person retained under subsection (1) is under the
direction and control of the director and shall act in a purely
advisory capacity.
(3) The NAIC and third-party consultants are subject to the
same confidentiality standards and requirements as the director.
(4) As part of the retention process, a third-party consultant
shall verify to the director, with notice to the insurer, that it
is free of a conflict of interest and that it has internal
procedures in place to monitor compliance with a conflict and to
comply with the confidentiality standards and requirements of this
chapter.
(5) A written agreement with the NAIC or a third-party
consultant, or both, under subsection (4) governing sharing and use
of information provided under this chapter must contain all of the
following provisions and expressly require the written consent of
the insurer before making public information provided under this
chapter:
(a) Specific procedures and protocols for maintaining the
confidentiality and security of CGAD-related information shared
with the NAIC or a third-party consultant under this chapter.
(b) Procedures and protocols for sharing by the NAIC only with
other state regulators from states in which the insurance group has
domiciled insurers. The agreement must provide that the recipient
agrees in writing to maintain the confidentiality and privileged
status of the CGAD-related documents, materials, or other
information and has verified in writing the legal authority to
maintain confidentiality.
(c) A provision specifying that ownership of the CGAD-related
information shared with the NAIC or a third-party consultant
remains with the department and the NAIC's or third-party
consultant's use of the information is subject to the direction of
the director.
(d) A provision that prohibits the NAIC or a third-party
consultant from storing the information shared under this chapter
in a permanent database after the underlying analysis is completed.
(e) A provision requiring the NAIC or third-party consultant
to provide prompt notice to the director and to the insurer or
insurance group regarding any subpoena, request for disclosure, or
request for production of the insurer's CGAD-related information.
(f) A requirement that the NAIC or a third-party consultant
consent to intervention by an insurer in any judicial or
administrative action in which the NAIC or a third-party consultant
may be required to disclose confidential information about the
insurer shared with the NAIC or a third-party consultant under this
chapter.
Sec. 1765. An insurer that does not, without just cause,
timely file the CGAD as required in this chapter, after notice and
hearing, shall pay a civil fine of $1,000.00 for each day's delay,
to be recovered by the director and paid into the general fund of
this state. The maximum civil fine under this section is
$75,000.00. The director may reduce the penalty if the insurer
demonstrates to the director that the penalty would cause a
financial hardship to the insurer.
Sec. 1767. If in a final decision a court holds section 1761
of this chapter to be invalid, that section is not severable, and
the entire chapter is void as of the date of the court decision.