Effective January 1, 2010, the National Association of Insurance Commissioners (NAIC) adopted the Annual Financial Reporting Model Regulations (Model Audit Rule), which among other requirements, substantially expanded the role of board of director audit committees in the oversight of insurance company financial reporting, auditor qualifications and independence, corporate governance and internal control reporting. The Model Audit Rule represented a long-in-process regulatory shift toward best practice auditing standards modeled in large part after the practices mandated for U.S. public companies under the Sarbanes-Oxley Act of 2002 (SOX). The various states, Texas included, have in recent years adopted their own versions of the Model Audit Rule. To the boards of insurers included within a publicly traded holding company structure, many of the Model Audit Rule provisions are already institutionalized within their internal accounting and reporting procedures. To board members of privately held or non-public insurers, the Model Audit Rule requirements represent a significantly enhanced regulatory and reporting framework with attendant compliance obligations for all but the smallest of companies. More than a few years following adoption, many insurers are still working to adapt to and implement the Model Audit Rule requirements. This comparison chart illustrates the similarities and, in some cases, differences, between the audit committee responsibilities for insurer boards under the Model Audit Rule, the Texas regulatory adoption of the Model Audit Rule generally implemented through Texas Administrative Code Title 28, Rule 7.88 (Texas Rule), SOX and the New York Stock Exchange Listed Company Manual.
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