KRS 304.3-235: Corporate Governance Annual Disclosure -- Submission to department

or lead state regulator -- Required information and support -- Annual filing of

amended version -- Confidentiality -- Use and sharing of filings and

information -- Parties retained to assist commissioner.

(1) As used in this section:

(a) "Insurance group" means those insurers and affiliates included within an

insurance holding company system as defined in KRS 304.37-010;

(b) "Lead state regulator" means the state insurance regu lator of the state that is

the lead state for an insurance group, as determined by procedures outlined in

the National Association of Insurance Commissioner's Financial Analysis

Handbook, as amended; and

(c) "CGAD" means Corporate Governance Annual Disclosure.

(2) This section shall not be construed to:

(a) Prescribe or impose corporate governance standards or internal procedures

beyond those required under applicable state corporate law; or

(b) Limit the authority of the commissioner or the department, or the rights or

obligations of third parties, under this chapter.

(3) (a) By June 1 of each calendar year, an insurer shall submit a CGAD to the

department, unless the insurer is a member of an insurance group, in which

case either the insurer, or the insura nce group of which the insurer is a

member, shall submit a CGAD to the lead state regulator for the insurance

group.

(b) 1. An insurer or insurance group not required to submit a CGAD under

paragraph (a) of this subsection shall submit a CGAD to the depart ment

if requested by the commissioner, but not more than once per calendar

year.

2. The insurer or insurance group required to provide a CGAD under this

paragraph shall notify the department of the CGAD's proposed

submission date within thirty (30) days of the commissioner's request.

(4) (a) Subject to paragraph (b) of this subsection, an insurer or insurance group shall

have discretion in:

1. Determining the appropriate format of the CGAD; and

2. Communicating the information required by this section in the CGAD.

(b) Notwithstanding paragraph (a) of this subsection, an insurer or insurance

group shall:

1. Provide sufficient material and relevant information in the CGAD to

enable the commissioner to understand the corporate governance

structure, policies, and practices used by the insurer or insurance group;

2. Provide any additional information requested by the commissioner that

the commissioner deems necessary to comply with the requirements of

this section; and

3. Ensure that the CGAD is prepared in compliance with all requirements

of this section.

(5) (a) Each CGAD submitted to the department shall:

1. Contain the signature of the insurer's or insurance group's chief

executive officer or corporate secretary attesting that, to the best of his

or her belief and knowledge, the insurer or insurance group has:

a. Implemented the corporate governance practices disclosed in the

CGAD; and

b. Provided a copy of the CGAD to the insurer's or insurance group's

board of directors or to the appropriate committee of the board;

2. Be as descriptive as possible;

3. Include any attachments or example documents used in the governance

process; and

4. Describe the following:

a. The corporate governance framework and str ucture of the insurer

or insurance group;

b. The policies and practices:

i. Of the insurer's or insurance group's most senior governing

entity and its significant committees; and

ii. For directing the insurer's or insurance group's senior

management; and

c. The processes by which the insurer's or insurance group's board, its

committees, and senior management ensure an appropriate amount

of oversight to the critical risk areas that have an impact on the

insurer's business activities.

(b) 1. An insurer or ins urance group may comply with this subsection by

cross-referencing other existing relevant and applicable documents, if

the documents contain information substantially similar to the

information required by this subsection.

2. For purposes of this paragraph , "other existing relevant and applicable

documents" include but are not limited to:

a. The ORSA Summary Report as defined in KRS 304.3-600;

b. The filings required under KRS 304.37-020;

c. Securities and Exchange Commission proxy statements; and

d. Documents filed in compliance with other state, federal, or

international reporting requirements.

3. An insurer or insurance group that cross -references documents under

this paragraph shall:

a. Clearly identify and reference the specific location of the

documents; and

b. Include the referenced documents as an attachment to the CGAD,

unless the documents have already been filed with, or made

available to, the department.

(6) For purposes of completing the CGAD:

(a) An insurer or insurance group may:

1. Report information at one (1) of the following levels, depending upon

the structure of its corporate governance system:

a. The ultimate controlling parent level;

b. An intermediate holding company level; or

c. The individual legal entity level; and

2. Make disclosures at the level:

a. Used to determine the risk appetite of the insurer or insurance

group;

b. At which the earnings, capital, liquidity, operations, and reputation

of the insurer are collectively overseen and the supervision of

those factors is coordinated and exercised; or

c. At which legal liability for failure of general corporate governance

duties is placed; and

(b) An insurer or insurance group shall:

1. Indicate the reporting level used;

2. If the reporting level was based on the criteria set for th in paragraph

(a)2. of this subsection, indicate the criteria used to determine the

reporting level; and

3. Explain any subsequent changes in reporting level.

(7) An insurer or insurance group shall maintain documentation and support for all

information provided in the CGAD, which shall be made available to the

commissioner upon examination or upon request.

(8) For each year following the initial filing of a CGAD with the department, the

insurer or insurance group shall comply with this section by filing an amended

version of the CGAD previously filed. The amended CGAD shall indicate any

changes that have been made from the previously filed CGAD. If no changes were

made in the information or activities reported by the insurer or insurance group

since the previous filing, the insurer or insurance group shall so indicate.

(9) Subject to subsection (10) of this section:

(a) Filings, documents, and information in the possession or control of the

department that are obtained by, created by, or disclosed to the c ommissioner

or any other person under this section are recognized as being proprietary and

containing trade secrets, and shall be confidential by law and privileged. The

filings, documents, and information shall not be subject to:

1. Disclosure or production by the department under:

a. The Kentucky Open Records Act, KRS 61.870 to 61.884; or

b. A subpoena; or

2. Discovery or admission into evidence in any private civil action; and

(b) The following persons shall not be permitted or required to testify in any

private civil action regarding the filings, documents, or information referenced

in paragraph (a) of this subsection:

1. The commissioner or any person who received filings, documen ts, or

information while acting under the authority of the commissioner; and

2. Any person with whom filings, documents, or information are shared

under subsection (10) of this section.

(10) The filings, documents, and information subject to subsection (9) of this section

may be:

(a) Used by the commissioner in furtherance of any regulatory or legal action

brought against an insurer as part of the commissioner's official duties; and

(b) Shared, upon request, by the commissioner with the following, if the re cipient

agrees in writing to maintain the confidential and privileged status of the

filings, documents, or information and has verified in writing the recipient's

legal authority to do so:

1. Other state, federal, and international financial regulatory age ncies,

including members of any supervisory college as defined in KRS

304.37-010;

2. The National Association of Insurance Commissioners; and

3. Third-party consultants retained under subsection (14) of this section.

(11) (a) The commissioner may receive C GAD filings, related documents, or

governance-related information from the following:

1. Other state, federal, and international financial regulatory agencies,

including members of any supervisory college as defined in KRS

304.37-010; and

2. The National Association of Insurance Commissioners.

(b) Any filing, document, or information received under this subsection, with

notice that the filing, document, or information is confidential or privileged

under the laws of the jurisdiction that is the source of the filing, document, or

information, shall be confidential by law and privileged in accordance with

subsection (9) of this section.

(12) The sharing of documents or information by the commissioner under this section

shall not constitute a delegation of regul atory authority or rulemaking. The

commissioner is solely responsible for the administration, execution, and

enforcement of this subtitle.

(13) A waiver of any applicable privilege or claim of confidentiality in the filings,

documents, or information received or provided under this section shall not occur as

a result of:

(a) Disclosure to the commissioner or any person acting under authority of the

commissioner; or

(b) Sharing as authorized in this section.

(14) (a) The commissioner may retain, at the insur er's or insurance group's expense,

third-party consultants and the National Association of Insurance

Commissioners for the purpose of assisting the commissioner in the

performance of his or her regulatory duties under this section, including but

not limited to understanding the insurer's or insurance group's:

1. Risk management framework;

2. Own Risk and Solvency Assessment (ORSA) and ORSA Summary

Report, as those terms are defined in KRS 304.3-600; and

3. CGAD filing.

(b) As part of the retention process, each party retained by the commissioner shall

agree, in writing, to the following:

1. Adhere to the same confidentiality standards and requirements as the

commissioner;

2. Comply with specific procedures and protocols for maintaining the

confidentiality an d security of information shared with the retained

party;

3. Comply with specific procedures and protocols for sharing by the

National Association of Insurance Commissioners only with other state

regulators from states in which the insurance group has domiciled

insurers. The agreement shall:

a. Specify that the reci pient state agrees to maintain the

confidentiality and privileged status of the information received;

and

b. Provide verification that the recipient state has legal authority to

maintain confidentiality;

4. Recognize that:

a. Ownership of information share d with the retained party shall

remain with the department; and

b. The retained party's use of shared information is subject to the

direction of the commissioner;

5. Verify and give notice to the insurer that the retained party is free of any

conflict of interest;

6. Monitor compliance with applicable confidentiality and conflict of

interest standards in accordance with a system of internal procedures;

7. Not store information shared with the retained party in a permanent

database after the underlying analysis is completed;

8. Provide prompt notice to the commissioner and the insurer or insurance

group of any subpoena or request received by the retained party for the

insurer's or insurance group's filings, documents, or information; and

9. Consent to interve ntion by an insurer in any judicial or administrative

action in which the retained party may be required to disclose

confidential information about the insurer that was shared with the

retained party under this section.