- Corporate Governance Annual Disclosure Act
- December 28, 2015 | Author: Sunny Mayhall Mayhall
- Law Firm: Breazeale, Sachse & Wilson, L.L.P. - Baton Rouge Office
On January 1, 2016, Act 304 takes effect. Entitled the Louisiana Corporate Governance Annual Disclosure Act, it requires all insurers, including HMOs, domiciled in the state to submit an extensive disclosure report to the Louisiana Department of Insurance (“Department”) by June 1 of each calendar year. The deadline for the first Corporate Governance Annual Disclosure report (the “CGAD”) under the new law is fast approaching.
Louisiana’s Corporate Governance Annual Disclosure Act is part of a process initiated by the National Association of Insurance Commissioners (“NAIC”). In 2014, the NAIC adopted the Corporate Governance Annual Disclosure Model Act and supporting Model Regulation. The Model Act and Regulation have been disseminated to state insurance departments, and legislatures across the country have begun adopting various forms of the Model Act and Regulation. Louisiana’s Act 304 is substantially similar to the NAIC Model Act.
According to Act 304, the purpose of the CGAD is to give the Department a complete understanding of an insurer’s corporate governance structure, policies, and practices. Regulation 104, Louisiana’s supporting regulation, outlines the information that must be in an insurer’s CGAD. It includes the following:
- The Board and the various committees ultimately responsible for overseeing the insurer;
- The duties of the Board and each of its significant committees and how they are governed;
- The Board's leadership structure, including a discussion of the roles of Chief Executive Officer and Chairman of the Board;
- How the qualifications, expertise and experience of each Board member meet the needs of the insurer;
- How an appropriate amount of independence is maintained on the Board and its significant committees;
- How the insurer identifies, nominates and elects members to the Board and its committees, including whether a nomination committee is in place and whether a Board diversity policy is in place;
- The processes in place for the Board to evaluate its performance and the performance of its committees;
- Any processes or practices to determine whether officers and key persons in control functions have the appropriate background and experience to fulfill their roles, including whether suitability standards have been developed and the insurer's code of business conduct and ethics;
- The insurer's processes for performance evaluation, compensation and corrective action to ensure effective Senior Management throughout the organization;
- The insurer's plans for CEO and Senior Management succession;
- The processes by which the Board, its committees and Senior Management ensure an appropriate amount of oversight to the critical risk areas impacting the insurer's business activities.
The Department has stated that it does not plan to generate a CGAD report form.