§ 3316. Corporate governance; disclosure
(a) Purpose. The purpose of this section is to:
(1) provide the Commissioner a summary of an insurer or insurance group’s corporate governance
structure, policies, and practices so the Commissioner may gain and maintain an understanding
of the insurer’s corporate governance framework;
(2) outline the requirements for completing a corporate governance annual disclosure with
the Commissioner; and
(3) provide for the confidential treatment of the corporate governance annual disclosure
and related information that contains confidential and sensitive information related
to an insurer or insurance group’s internal operations and proprietary and trade secret
information that, if made public, could potentially cause the insurer or insurance
group competitive harm or disadvantage.
(b) Scope. This section shall not be construed to prescribe or impose corporate governance standards
and internal procedures beyond that which is required under applicable State corporate
law. Nor shall it be construed to limit the Commissioner’s authority, or the rights
or obligations of third parties, under section 13 of this title.
(c) Application. The requirements of this section shall apply to all insurers domiciled in Vermont.
(d) Definitions. As used in this section:
(1) “Corporate Governance Annual Disclosure” or “CGAD” means a confidential report on
corporate governance filed by the insurer or insurance group as required by this section.
(2) “Insurance group” means those insurers and affiliates included within an insurance
holding company system as defined in subdivision 3681(6) of this title.
(3) “Insurer” means an insurance company that offers any of the types of insurance itemized
under subsection 3301(a) of this chapter, except that it shall not include agencies,
authorities, or instrumentalities of the United States, its possessions and territories,
the Commonwealth of Puerto Rico, the District of Columbia, or a state or political
subdivision of a state. It shall also mean an insurance group.
(4) “ORSA Summary Report” means a report as defined in subdivision 3582(6) of this chapter.
(e) Disclosure.
(1) On or before June 1 of each year, beginning in the year 2016, an insurer shall submit
to the Commissioner a CGAD, which contains the information described in subdivision
(g)(2) of this section. Notwithstanding a request from the Commissioner made under
subdivision (3) of this subsection, if the insurer is a member of an insurance group,
the insurer shall submit the report required by this subsection 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 National Association of Insurance Commissioners (NAIC).
(2) The CGAD shall include a signature of the insurer’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 thereof.
(3) An insurer not required to submit a CGAD under this section shall do so upon the Commissioner’s
request.
(4) For purposes of completing the CGAD, the insurer may provide information regarding
corporate governance at the ultimate controlling parent level, an intermediate holding
company level, or the individual legal entity level, depending upon how the insurer
has structured its system of corporate governance. The insurer is encouraged to make
the CGAD disclosures at the level at which: the insurer’s risk appetite is determined;
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 legal liability for failure of general corporate governance duties would be placed.
If the insurer determines the level of reporting based on these criteria, it shall
indicate which of the three 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 shall be made through
the lead state as determined by the procedures within the most recent Handbook referenced
in subdivision (1) of this subsection.
(6) Insurers providing information substantially similar to the information required by
this section in other documents provided to the Commissioner, including proxy statements
filed in conjunction with Form B requirements, or other state or federal filings provided
to the Commissioner, shall not be required to duplicate that information in the CGAD,
but shall only be required to cross reference the document in which the information
is included.
(f) Rules. The Commissioner may adopt rules and issue orders necessary to carry out the provisions
of this section.
(g)(1) CGAD contents. An insurer has discretion over the responses to CGAD inquiries, provided CGAD contains
the material information necessary to permit the Commissioner to gain an understanding
of the insurer’s corporate governance structure, policies, and practices. The Commissioner
may request additional information he or she deems material and necessary to provide
the Commissioner with a clear understanding of the corporate governance policies,
and the reporting or information system or controls implementing those policies.
(2) Notwithstanding subdivision (1) of this subsection, CGAD shall be prepared consistent
with CGAD rules adopted by the Commissioner. Rules adopted by the Commissioner under
this subdivision shall be consistent with the NAIC Model Regulation on CGAD. Documentation
and supporting information shall be maintained and made available upon examination
or upon request of the Commissioner.
(h) Confidentiality.
(1) Documents, materials, or other information, including CGAD, in the possession or control
of the Department obtained or created by, or disclosed to the Commissioner or any
other person under this section, are recognized by this State as being proprietary
and to contain trade secrets. All such documents, materials, or other information
are confidential and privileged, and are exempt from public inspection and copying
under the Public Records Act. In addition, they are not subject to subpoena nor discovery,
nor admissible in evidence in any private civil action. However, the Commissioner
is authorized to use the documents, materials, or other information in furtherance
of any regulatory or legal action brought as a part of the Commissioner’s official
duties. The Commissioner shall not otherwise make the documents, materials, or other
information public without the prior written consent of the insurer. Nothing in this
subsection shall be construed to require written consent of the insurer before the
Commissioner may share or receive confidential documents, materials, or other CGAD-related
information pursuant to subdivision (3) of this subsection for the purpose of assisting
in the performance of the Commissioner’s regular duties.
(2) Neither the Commissioner nor any person who receives documents, materials, or other
CGAD-related information, through examination or otherwise, while acting under the
authority of the Commissioner, or with whom such documents, materials, or other information
are shared pursuant to this section, is permitted or required to testify in any private
civil action concerning any confidential documents, materials, or information subject
to subdivision (1) of this subsection.
(3) In order to assist in the performance of the Commissioner’s regulatory duties, the
Commissioner may:
(A) Upon request, share documents, materials, or other CGAD-related information including
confidential and privileged documents, materials, or information subject to subdivision
(1) of this subsection including proprietary and trade secret documents and materials
with other state, federal, and international financial regulatory agencies, including
members of any supervisory college as defined in subsection 3695(c) of this chapter,
the NAIC, and with third-party consultants pursuant to subsection (i) of this section,
provided the recipient agrees in writing to maintain the confidentiality and privileged
status of the CGAD-related documents, materials, or other information and verifies
in writing the legal authority to maintain confidentiality.
(B) 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 as defined in subsection 3695(c) of this chapter, and from the
NAIC, and 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, materials,
or information.
(4) The sharing of information and documents by the Commissioner pursuant to this section
does not constitute a delegation of regulatory authority or rulemaking, and the Commissioner
is solely responsible for the administration, execution, and enforcement of the provisions
of this section.
(5) A waiver of any applicable privilege or claim of confidentiality in the documents,
proprietary and trade-secret materials, or other CGAD-related information shall not
occur as a result of disclosure of such CGAD-related information or documents to the
Commissioner under this section or as a result of sharing as authorized under this
section.
(i) NAIC and third-party consultants.
(1) The Commissioner may retain, at the insurer’s expense, third-party consultants, including
attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioner’s
staff he or she deems reasonably necessary to assist with the review of the CGAD and
related information or with the insurer’s compliance with this section.
(2) A person retained under this subsection is under the direction and control of the
Commissioner 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 Commissioner.
(4) As part of the retention process, a third-party consultant shall verify to the Commissioner,
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 section.
(5) A written agreement with the NAIC or a third-party consultant governing the sharing
and use of information provided under this section shall contain the following provisions
and expressly require the written consent of the insurer prior to making public such
information:
(A) Specific procedures and protocols for maintaining the confidentiality and security
of CGAD-related information shared with the NAIC or a third-party consultant pursuant
to this subdivision (5).
(B) Procedures and protocols for sharing by the NAIC only with other state regulators
from states in which an insurance group has domiciled insurers. The agreement shall
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 that use of such
information by the NAIC or a third-party consultant is subject to the direction of
the Commissioner.
(D) A provision prohibiting the NAIC and third-party consultants from storing the information
in a permanent database after the underlying analysis is completed.
(E) A provision requiring the NAIC and third-party consultants to provide prompt notice
to the Commissioner and to the insurer regarding any subpoena, request for disclosure,
or request for production of the insurer’s CGAD-related information.
(F) A requirement that the NAIC and third-party consultants 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 third-party consultant pursuant to this section.
(j) Sanctions. An insurer failing, without just cause, to timely file the CGAD as required by this
section shall be required, after notice and hearing, to pay a penalty of $10,000.00
for each day’s delay, to be recovered by the Commissioner, and the penalty so recovered
shall be paid into the General Fund of this State. The maximum penalty under this
section is $1,000,000.00. The Commissioner may reduce the penalty if the insurer demonstrates
to the Commissioner that the imposition of the penalty would constitute a financial
hardship to the insurer.
(k) Severability clause. If any provision of this section other than subsection (h), or the application thereof
to any person or circumstance, is held invalid, such determination shall not affect
the provisions or applications of this section that can be given effect without the
invalid provision or application, and to that end the provisions of this section,
with the exception of subsection (h), are severable. (Added 2015, No. 10, § 1, eff. May 1, 2015.)