Identical to S 141, filed 2/26/19.

Part I.

Enacts GS 58-19-38 to require the Commissioner of Insurance of North Carolina (Commissioner) to identify a single group-wide supervisor (supervisor) for an internationally active insurance group; allows the Commissioner to act as the supervisor but allows the Commissioner to otherwise acknowledge another official as the supervisor where the internationally active insurance group meets the specified criteria. GS 58-19-5 is amended to define internationally active insurance group as an insurance holding company system that includes a registered insurer and that meets all of the following: (1) the insurance holding company system writes premiums in at least three countries; (2) the percentage of gross premiums of the insurance holding company system written outside the US is at least 10% of the insurance holding company system's total gross written premiums; and (3) based on a three-year rolling average, the total assets of the insurance holding company system are at least $50 billion or the total gross written premiums of the insurance holding company system are at least $10 billion. 

Sets out factors that the Commissioner must consider when determining that the Commissioner is the appropriate supervisor for an internationally active insurance group that conducts substantial insurance operations concentrated in this state or acknowledges that an official from another jurisdiction is the appropriate supervisor. Allows a regulatory official identified as the supervisor to determine that it is appropriate to acknowledge another regulatory official to serve as the supervisor and sets out requirements for acknowledging such a change. 

Provides that when another regulatory official is acting as the supervisor of an internationally active insurance group, the Commissioner must acknowledge that official as the supervisor, but requires the Commissioner to make a determination or acknowledgment as to the supervisor when there is a material change in the internationally active insurance group that results in either the internationally active insurance group's insurers domiciled in this State holding the largest share of the group's premiums, assets, or liabilities, or this State being the place of domicile of the top-tiered insurers in the insurance holding company system of the internationally active insurance group.

Authorizes the Commissioner to collect information from any registered insurer in order to determine whether the Commissioner may act as the supervisor of an internationally active insurance group or if the Commissioner may acknowledge another regulatory official to act as the supervisor. Sets out notification requirements to be met before issuing a determination that an internationally active insurance group is subject to supervision by the Commissioner. 

Sets out activities the Commissioner may undertake in acting as the supervisor for an internationally active insurance group.

Provides that if the Commissioner acknowledges that another regulatory official from a jurisdiction that is not accredited by the NAIC is the supervisor, the Commissioner may reasonably cooperate with supervision undertaken by the supervisor, if: (1) the Commissioner's cooperation is in compliance with state laws and (2) the regulatory official acknowledged as the supervisor recognizes and cooperates with the Commissioner's activities as a supervisor for other internationally active insurance groups. 

Makes conforming changes to GS 58-19-40.

Part II.

Enacts GS 58-10-246 requiring an insurer or group of insurers to establish an internal audit function providing independent, objective, and reasonable assurance to the audit committee and insurer management regarding the insurer's governance, risk management, and internal controls. Sets out actions that provide such assurance. Requires that the internal audit function be organizationally independent (as defined in the statute). Requires a report at least annually by the head of the internal audit function to the audit committee on the specified issues. This statute does not apply if: the insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $500 million and (2) if the insurer is a member of a group of insurers, the group has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $1 billion. Makes conforming changes to GS 58-10-245.

Amends GS 58-10-190 to provide that 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, any internal audit function of the insurer or group of insurers, and external audits of financial statements of the insurer or group of insurers. Also amends the statute to add and define the term internal audit function.

Amends GS 58-10-260 by adding that the requirements of new GS 50-10-246 become effective January 1, 2020. Insurers exempt from GS 58-10-246 that no longer meet the exemption threshold have one calendar year after the year the threshold is exceeded to comply with the statute. 

Part III.

Adds new Part 11, Corporate Governance Annual Disclosure, in Article 10 of GS Chapter 58, providing as follows. 

Sets out the purpose of the part and establishes that it applies to all insurers domiciled in this state.  Requires an insurer, or the insurance group of which the insurer is a member, to annually by June 1 submit to the Commissioner a CGAD (Corporate Governance Annual Disclosure) that contains the information described in new GS 58-10-775, including the insurer's corporate governance structure, policies, and practices. Sets out signatures and attestations that must appear on the CGAD. Allows an insurer to provide information on corporate governance at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level, depending on how the insurer has structured its system. Encourages the insurer to make the CGAD disclosures at the specified levels. Requires an amended version of the initially filed CGAD each year, with changes indicated; must indicate if no change has been made.

Gives the insurer discretion over the responses to the CGAD inquiries, so long as the CGAD contains the material information necessary to give the Commissioner an understanding of the insurer's or insurance group's corporate governance structure, policies, and practices. Allows the Commissioner to request additional information. 

Requires the CGAD to describe the insurer's corporate governance framework and structure, including consideration of the specified topics. Requires the insurer to describe the policies and practices of the most senior governing entity and its significant committees, including a discussion of the five specified factors. Requires the insurer to describe the polices and practices for directing senior management, including a description of the four specified topics. Requires a description of the process by which the board of directors, committees, and senior management ensure the appropriate amount of oversight to the critical risk area impacting business activities, including a discussion of the three specified issues. 

Recognizes documents, materials, or other information, including the CGAD, in the possession or control of the Department that are obtained by, created by, or disclosed to the Commissioner or any other person under this new Part, as proprietary and containing trade secrets; makes the information confidential and privileged, not considered to be a public record, not subject to subpoena, and not subject to discovery or admissible in evidence in any private civil action. Sets out conditions under which the Commissioner may share documents, materials, or other CGAD-related information, and receive documents, materials, or other CGAD-related information from regulatory officials of other state, federal, and international financial regulatory agencies. 

Allows the Commissioner to retain at the insurer's expense third-party consultants and experts not otherwise a part of the Commissioner's staff as may be reasonably necessary to assist the Commissioner in reviewing the CGAD-related information or the insurer's compliance with this Part; makes NCAIC and third-party consultants subject to the same confidentiality requirements as the Commissioner. Sets out provisions that must be included in a written agreement with the NAIC or a third-party consultant concerning sharing and use of information.

Failure to timely file the CGAD is punishable by a penalty of $100 for each day's delay, not to exceed a total of $1,000.

Includes a severability clause.

Effective January 1, 2020, with the first CGAD filing to be made by June 1, 2020.

Part IV.

Amends GS 58-58-50 by amending the definition of company as it is used in the Standard Valuation Law to specify that it includes a fraternal benefit society. 

Amends GS 58-7-21, concerning credit allowed a domestic ceding insurer, by amending the factors that may be considered as the Commissioner assigns a rating to each certified reinsurer by making an addition to the table used to calculate the maximum financial strength rating that a certified reinsuer may be assigned.