PROPOSED RULEMAKING
INSURANCE DEPARTMENT
[31 PA. CODE CH. 147]
Annual Audited Insurers' Financial Report Required
[34 Pa.B. 844] The Insurance Department (Department) proposes to amend Chapter 147 (relating to annual audited insurers' financial report required) to read as set forth in Annex A. The rulemaking is proposed under the authority of sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412) relating to the general rulemaking authority of the Department; sections 320, 630, 1007 and 2452 of The Insurance Company Law of 1921 (40 P. S. §§ 443, 764a, 967 and 991.2452) relating to the authority of the Insurance Commissioner to require insurance companies, associations, exchanges, fraternal benefit societies and preferred provider organizations to file statements concerning their affairs and financial condition; sections 205 and 206 of The Pennsylvania Fair Plan Act (40 P. S. §§ 1600.205 and 1600.206); section 731 of the Medical Care Availability and Reduction of Error (MCARE) Act (40 P. S. § 1303.731); 40 Pa.C.S. §§ 6125, 6331 and 6701 (relating to reports and examinations; reports and examinations; and regulation); sections 11 and 14 of the HMO Act (40 P. S. §§ 1561 and 1564); sections 7 and 25 of the Continuing-Care Provider Registration and Disclosure Act (40 P. S. §§ 3207 and 3225) which, respectively, relate to the specific regulatory and rulemaking authority of the Department regarding financial reporting by the Pennsylvania Fair Plan, the Pennsylvania Professional Liability Joint Underwriting Association, hospital plan corporations, professional health service corporations, beneficial associations, health maintenance organizations and continuing care providers.
Purpose
The purpose of this proposed rulemaking is to update Chapter 147, commonly referred to as the CPA Audit Rule. Chapter 147 requires insurers to have annual audits of their year-end financial statements performed by independent certified public accountants (CPA). The annual audited financial reports are required to be filed with the Department by June 1 of each year. Chapter 147 was adopted in 1979 and is based on a model regulation developed by the National Association of Insurance Commissioners (NAIC). The model is included in the NAIC Financial Regulation Standards and Accreditation Program (NAIC Program), which was established in 1989 to set minimum standards for state regulation of the financial solvency of the insurance industry. The Department has been accredited by the NAIC for compliance with the standards since 1994. Chapter 147 was last amended in 1995 to bring it into compliance with changes to the NAIC model. The NAIC model was again revised in 2002 to address concerns about the use of indemnification clauses in the engagement of CPAs for the annual audits. In 2003, an additional revision was made to specifically require CPAs to adhere to applicable NAIC instructions and procedures in conducting audits. The updates in this proposed rulemaking include the 2002 and 2003 revisions to the NAIC model, as well as other revisions to improve the clarity of Chapter 147, particularly with respect to its applicability to continuing care providers.
Significant Provisions
Section 147.2 (relating to definitions) is being amended to add definitions of ''domestic insurer'' and ''foreign insurer'' to clarify the meaning of these terms for purposes of the chapter. In addition, the definition of ''independent certified public accountant'' and § 147.13(i) (relating to effective date and exemption) are being amended to clarify the current reference to ''Canadian and British companies.'' The definition of ''insurer'' is being updated to reflect statutory changes relating to the types of entities regulated by the Department; add preferred provider organizations, employers' mutual liability insurance associations and the Pennsylvania Professional Liability Joint Underwriting Association; and delete the general reference to other entities acting as insurers. These changes are needed to clearly apply Chapter 147 to all types of insurers.
Sections 147.3(a) and (d) and 147.4(b)(2) (relating to filing and extensions for filing of annual audited financial report; and contents of annual audited financial report) and § 147.13(f)(1) are being amended to recognize movement toward electronic filings with the Department and the NAIC. A related amendment to § 147.11(c) (relating to definitions, availability and maintenance of independent certified public accountant workpapers) refers to the Department's ability to make and retain electronic copies of audit workpapers when conducting onsite financial examinations of insurers. In addition, § 147.4(d) is being amended to clarify what is required when errors are discovered after an annual audited financial report has been filed. Finally, § 147.4(e) is being added to outline the requirements for nonprofit and for-profit continuing care providers under generally accepted accounting principles.
Other amendments to clarify requirements relating to continuing care providers include the addition of § 147.5(d) (relating to designation of independent certified public accountant), the expansion of § 147.7(c) (relating to consolidated or combined audits), the addition of § 147.8(c) (relating to scope of audit and report of independent certified public accountant) and amendments to § 147.9(a) (relating to notification of adverse financial condition). These amendments are needed to recognize the differences in accounting and financial reporting requirements for insurers and continuing care providers.
Section 147.6 (relating to qualifications of independent certified public accountant) is being amended to include provisions consistent with the 2002 revisions to the NAIC model. The amendments prohibit a CPA from being recognized by the Department as qualified to conduct audits if the CPA's engagement with the insurer includes an agreement of indemnity, or other release from liability, that would shift, transfer or limit the CPA's potential liability for failure to adhere to applicable auditing or professional standards based on a defense that misrepresentations were made by the insurer. Also consistent with the changes made to the NAIC model is a related amendment to add § 147.6(g) permitting an insurer and a CPA to agree to have disputes resolved by mediation or arbitration, except that the agreement may be disavowed in a receivership proceeding. These amendments to the NAIC model were supported by the insurance industry and are being considered for inclusion in the NAIC Program. The new provisions are similar to United States Securities and Exchange Commission requirements that already apply to publicly held stock insurers. Therefore, the amendments to § 147.6 will establish consistent requirements for all types of insurers. Finally, a reference to the Public Company Accounting Oversight Board (Board) has been added to § 146.6(a)(2). The Board was created by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies.
Section 147.8 is being amended to strengthen requirements relating to the procedures followed by CPAs in conducting audits. The amendments are consistent with revisions made in 2003 to the NAIC model. These changes require a CPA to follow or consider NAIC instructions and procedures relating to the scope of an audit and data testing procedures. The amendments are needed to assure that consistent, up-to-date procedures are followed in the conduct of audits.
Section 147.10(a) (relating to report on significant deficiencies in internal controls) is being amended to clarify the time frame for providing the Department with reports describing any significant deficiencies in an insurer's internal control structure. The reports are required to be filed ''concurrently with the filing of the annual audited financial reports'' as stated in the beginning of subsection (a). The amendment clarifies the requirement by deleting the last sentence of subsection (a), which refers to a 60-day time frame.
Section 147.11(b) is being amended to delete the requirement that the engagement letter include the CPA's agreement to make workpapers available to the Department as required under § 147.11. This requirement is not needed in addition to the requirement in § 147.15(4) (relating to letter of qualifications of independent certified public accountant) that the CPA's consent to comply with § 147.11 be included in the letter of qualifications furnished to the insurer. Requiring the CPA's consent to these requirements in the letter of qualifications is consistent with the NAIC model.
Section 147.13 is being amended to update references to other sections in the chapter to reflect the impact of the proposed amendments. In addition, § 147.13(e) is being amended to replace ''not transacting the business of insurance outside of this Commonwealth'' with the clearer phrase ''not insuring or reinsuring risks located outside of this Commonwealth'' and to reflect the new definitions for ''domestic insurer'' and ''foreign insurer.'' Section 147.13(i) and (j) is being deleted. These subsections established time frames for achieving compliance with the chapter when it was amended in 1995 and are no longer needed.
External Comments
In drafting this proposed rulemaking, the Department requested comments from The Insurance Federation of Pennsylvania, Inc., The Pennsylvania Association of Mutual Insurance Companies, the Managed Care Association of Pennsylvania, the Pennsylvania Fraternal Congress and consultants to the fraternal industry, the Pennsylvania Association of Nonprofit Homes for the Aging, the Pennsylvania Institute of Certified Public Accountants, Highmark, Inc., Capital Blue Cross, Independence Blue Cross and Blue Cross of Northeastern Pennsylvania. The comments received in response to the Department's request were considered in the development of this proposed rulemaking.
Affected Parties
The chapter applies to all types of insurers and continuing care providers licensed to transact business in this Commonwealth and the CPAs retained by these entities to conduct audits of their annual financial statements.
Fiscal Impact
State Government
The proposed rulemaking will clarify and strengthen existing regulatory requirements. There will be no increase in cost to the Department as a result of this proposed rulemaking.
General Public
The proposed rulemaking has no fiscal impact on the general public.
Political Subdivisions
There will be no fiscal impact on political subdivisions as a result of the proposed rulemaking.
Private Sector
The strengthened requirements in this proposed rulemaking are consistent with NAIC standards and will impose no significant costs on insurers and continuing care providers in obtaining annual audits of their financial statements.
Paperwork
The proposed rulemaking will not impose additional paperwork on the Department and affected parties. The rulemaking may reduce paperwork to the extent that it provides for the filing of documents in electronic form.
Effectiveness/Sunset Date
The proposed rulemaking will become effective upon final-form publication in the Pennsylvania Bulletin. The Department continues to monitor the effectiveness of regulations on a triennial basis; therefore, no sunset date has been assigned.
Contact Person
Questions or comments regarding the proposed rulemaking should be addressed in writing to Peter J. Salvatore, Regulatory Coordinator, Insurance Department, 1326 Strawberry Square, Harrisburg, PA 17120, fax (717) 772-1969, psalvatore@state.pa.us within 30 days following the publication of this notice in the Pennsylvania Bulletin.
Under the Regulatory Review Act (71 P. S. §§ 745.1--745.15), the Department is required to write to all commentators requesting whether or not they wish to receive a copy of the final-form rulemaking. To better serve stakeholders, the Department has made a determination that all commentators will receive a copy of the final-form rulemaking when it is made available to the Independent Regulatory Review Commission (IRRC) and the legislative standing committees.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on February 2, 2004, the Department submitted a copy of this proposed rulemaking and a copy of a Regulatory Analysis Form to IRRC and to the Chairpersons of the Senate Banking and Insurance Committee and the House Insurance Committee. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey any comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections shall specify the regulatory review criteria which have not been met. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the rulemaking, by the Department, the General Assembly and the Governor of comments, recommendations or objections raised.
M. DIANE KOKEN,
Insurance CommissionerFiscal Note: 11-217. No fiscal impact; (8) recommends adoption.
(Editor's Note: For a document related to this proposal, see 34 Pa.B. 850.)
Annex A
TITLE 31. INSURANCE
PART VIII. MISCELLANEOUS PROVISIONS
CHAPTER 147. ANNUAL AUDITED INSURERS' FINANCIAL REPORT REQUIRED § 147.2. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
* * * * * Domestic insurer--An insurer incorporated or organized under the laws of the Commonwealth.
Foreign insurer--An insurer not incorporated or organized under the laws of the Commonwealth.
Independent certified public accountant--
* * * * * (ii) For [Canadian and British companies, a Canadian-chartered or British-chartered] insurers organized in Canada or the United Kingdom of Great Britain and Northern Ireland, a chartered accountant.
Insurer--
(i) The term includes any of the following licensed to transact business in this Commonwealth:
* * * * * (D) [A hospital plan corporation] A nonprofit health plan corporation, whether operating a hospital plan or a professional health services plan, or both.
(E) [A professional health services plan corporation] An employers' mutual liability insurance association.
* * * * * (H) [Another person, corporation, company, partnership, association or other entity acting as an insurer] A preferred provider organization.
(I) A joint underwriting association under section 731 of the Medical Care Availability and Reduction of Error (MCARE) Act (40 P. S. § 1303.731).
* * * * * § 147.3. Filing and extensions for filing of annual audited financial report.
(a) Every insurer, unless exempted by the Commissioner under § 147.13 (relating to effective date and exemption), shall have an annual audit performed by an independent certified public accountant and shall file [with] as instructed by the Commissioner an audited financial report for that year on or before June 1 for the year ending December 31 immediately preceding unless an extension is granted under subsection (b). The Commissioner may require an insurer to file an audited financial report earlier than June 1 by providing 90 days' advance notice to the insurer. The Commissioner may require audited financial reports and related information required under this chapter to be filed with the Department and the National Association of Insurance Commissioners in a form of electronic transmission acceptable to the Commissioner.
* * * * * (d) Audited financial reports filed [with] as instructed by the Commissioner will be open to the public for examination and inspection.
§ 147.4. Contents of annual audited financial report.
* * * * * (b) The annual audited financial report shall, at a minimum, include the following:
* * * * * (2) Notes to financial statements. These notes shall be those required by the appropriate National Association of Insurance Commissioners Annual Statement Instructions and Accounting Practices and Procedures Manual. The notes shall include a reconciliation of differences, if any, between the audited statutory financial statements and the annual statements filed with the Department, with a written description of the nature of these differences, particularly with respect to surplus or stockholder equity and the results of operations. The insurer shall file an amendment to its annual statement with the Department, the National Association of Insurance Commissioners and other states in which the insurer is licensed, to reflect differences between the audited statutory financial statement and the annual statement filed with the Department within 60 days of the filing date of the audited financial report. The Commissioner may require amendments to financial statements to be filed with the Department and the National Association of Insurance Commissioners [on diskettes or other electronic information storage devices] in a form of electronic transmission acceptable to the Commissioner.
* * * * * (d) If an error is discovered after a report is filed, the independent certified public accountant shall withdraw the report and issue a corrected report to the insurer and to the Department within 30 days of the date the independent certified public accountant becomes aware of the discovery of the error. To the extent that the error requires an amendment to the insurer's annual financial statement filed with the Department, the insurer shall file, within 60 days of the date the corrected report is issued, an amendment [under subsection (b)(2)] to its annual statement with the Department, the National Association of Insurance Commissioners and other states in which the insurer is licensed, to reflect differences between the corrected audited statutory financial statement and the annual statement filed with the Department and including reconciling notes as required by the appropriate National Association of Insurance Commissioners Annual Statement Instructions and Accounting Practices and Procedures Manual. The Commissioner may require amendments to financial statements to be filed with the Department and the National Association of Insurance Commissioners in a form of electronic transmission acceptable to the Commissioner.
(e) Subsections (a)--(d) do not apply to continuing care providers. The annual audited financial report for a continuing care provider shall comply with the following:
(1) The annual audited financial report for a nonprofit continuing care provider shall reflect its financial condition as of the end of its most recent fiscal year and the results of its activities, cash flows and changes in net assets for the fiscal year then ended in conformity with generally accepted accounting principles. The annual audited financial report shall, at a minimum, include the following:
(i) Financial statements that present in a comparable manner, as of the end of the current and the preceding fiscal year, or the period of time that the continuing care provider has been in existence, whichever is shorter, the financial condition of the continuing care provider, including balance sheet, statements of activities, cash flows, changes in net assets and notes to financial statements.
(ii) Report of an independent certified public accountant prepared in compliance with this chapter, including notification of adverse financial condition, report on significant deficiencies in internal controls and letter of qualifications of the independent certified public accountant.
(2) The annual audited financial report for a for-profit continuing care provider shall reflect its financial condition as of the end of its most recent fiscal year and the results of its operations, cash flows and changes in shareholder's equity for the year then ended in conformity with generally accepted accounting principles. The annual audited financial report shall, at a minimum, include the following:
(i) Financial statements that present in a comparable manner, as of the end of the current and the preceding fiscal year, or the period of time that the continuing care provider has been in existence, whichever is shorter, the financial condition of the continuing care provider, including balance sheet, statements of net income, cash flows, shareholder's equity and comprehensive income, and notes to financial statements.
(ii) Report of an independent certified public accountant prepared in compliance with this chapter, including notification of adverse financial condition, report on significant deficiencies in internal controls and letter of qualifications of the independent certified public accountant.
(3) If an error is discovered after an annual audited financial report is filed, the independent certified public accountant shall withdraw the report and issue a corrected report within 30 days of the date the independent certified public accountant becomes aware of the discovery of the error.
§ 147.5. Designation of independent certified public accountant.
* * * * * (d) Subsection (b) does not apply to continuing care providers. A continuing care provider shall obtain a letter from its independent certified public accountant and file a copy with the Commissioner, stating that the independent certified public accountant is aware of the provisions of the Commonwealth's statutes and regulations that relate to accounting and financial matters applicable to continuing care providers and affirming that the independent certified public accountant will express an opinion on the financial statements in terms of their conformity with generally acceptable accounting principles.
§ 147.6. Qualifications of independent certified public accountant.
(a) The Commissioner will not recognize a person or firm as a qualified independent certified public accountant [who is not licensed, or a firm which is not registered, to practice and is not in good standing under the laws of the Commonwealth or of a state with licensing requirements similar to the Commonwealth or who is not in good standing with the American Institute of Certified Public Accountants, Inc., and in good standing in all states in which the accountant is licensed or the firm is registered to practice, or, for a Canadian or British company, who is not a chartered accountant.] under any of the following conditions:
(1) The person is not licensed, or the firm is not registered, to practice and is not in good standing under the laws of the Commonwealth or of a state with licensing requirements similar to the Commonwealth.
(2) The person or firm is not in good standing with the American Institute of Certified Public Accountants, Inc. and, if applicable, the Public Company Accounting Oversight Board.
(3) The person or firm is not in good standing in all states in which the person is licensed, or the firm is registered, to practice.
(4) The person or firm has entered into an agreement of indemnity, or other release from liability, that would shift, transfer, or limit in any manner the potential liability of the person or firm for failure, whether by omission or commission, to adhere to applicable auditing or professional standards, whether or not the failure would result in whole or in part from misrepresentations made by the insurer or its representatives.
(b) For an insurer organized in Canada or the United Kingdom of Great Britain and Northern Ireland, the Commissioner will not recognize a person or firm as a qualified independent public accountant under any of the following conditions:
(1) The person or firm is not a chartered accountant.
(2) The person or firm has entered into an agreement of indemnity, or other release from liability, that would shift, transfer, or limit in any manner the potential liability of the person or firm for failure, whether by omission or commission, to adhere to applicable auditing or professional standards, whether or not the failure would result in whole or in part from misrepresentations made by the insurer or its representatives.
(c) Except as otherwise provided in this section, the Commissioner will recognize an independent certified public accountant [will be recognized] as independent and qualified who conforms to the standards of the profession as contained in the ''Code of Professional Ethics of the American Institute of Certified Public Accountants, Inc.'' and The C.P.A. Law (63 P. S. §§ 9.1--9.16b) or similar laws.
[(c)] (d) * * *
* * * * * [(d)] (e) * * *
* * * * * [(e)] (f) * * *
(g) A qualified independent certified public accountant may enter into an agreement with an insurer to have disputes relating to an audit resolved by mediation or arbitration. In the event of a receivership proceeding commenced against the insurer under Article V of The Insurance Department Act (40 P. S. §§ 221.1--221.63), the mediation or arbitration agreement may be disavowed by the statutory receiver.
[(f)] (h) * * *
[(g)] (i) Within 60 days of receipt of notice from the Commissioner of a finding under subsection [(f)] (h) that an audit contains a material departure from generally accepted auditing standards, the insurer for which the audit was performed shall register with the Commissioner the name and address of a qualified independent certified public accountant retained by the insurer to perform an audit in compliance with this chapter for the year for which the finding was made. The audited financial report for the year for which the finding was made shall be filed within a time period to be determined by the Commissioner.
§ 147.7. Consolidated or combined audits.
* * * * * (c) [This section] Subsection (a) does not apply to continuing care providers. A continuing care provider may make written application to the Commissioner for approval to file consolidated or combined financial reports in lieu of separate annual audited financial reports if the continuing care provider is part of a group of affiliated entities. A columnar consolidating or combining worksheet, setting forth the amounts shown for each individual entity on the consolidated or combined audited financial report and including explanations of consolidating and eliminating entries, shall be filed with the report. Consolidated or combined audited financial reports shall be prepared as set forth in § 147.4(e) (relating to contents of annual audited financial report).
§ 147.8. Scope of audit and report of independent certified public accountant.
(a) The annual financial statements filed by an insurer with the Department shall be audited by an independent certified public accountant. The audit of the financial statements of the insurer shall be conducted in accordance with generally accepted auditing standards. [Consideration should also be given to other procedures illustrated in the Financial Condition Examiner's Handbook contained in the examiners handbook adopted by the National Association of Insurance Commissioners as the independent certified public accountant deems necessary. The Commissioner may from time to time prescribe that additional auditing procedures be observed by the independent certified public accountant in the audit of the financial statements of insurers under this chapter.]
(b) The scope of the audit and data testing procedures shall be conducted as required by the appropriate Annual Statement Instructions adopted by the National Association of Insurance Commissioners. Consideration shall also be given to other procedures in the Financial Condition Examiner's Handbook adopted by the National Association of Insurance Commissioners.
(c) Subsection (b) does not apply to continuing care providers.
(d) The Commissioner may from time to time prescribe that additional auditing procedures be observed by the independent certified public accountant in the audit of the financial statements of insurers under this chapter.
§ 147.9. Notification of adverse financial condition.
(a) An insurer required to furnish the annual audited financial report shall require the independent certified public accountant to report, in writing, within 5 business days to the board of directors or audit committee of the insurer, [a determination by that independent certified public accountant that the insurer has materially misstated its financial condition as reported to the Commissioner as of the balance sheet date currently under examination or of a determination that the insurer does not meet its capital and surplus requirement calculated in accordance with Pennsylvania insurance statutes as of that date.] any of the following:
(1) A determination by the independent certified public accountant that the insurer has materially misstated its financial condition as reported to the Commissioner as of the balance sheet date currently being audited.
(2) A determination by the independent certified public accountant that the insurer does not meet its capital and surplus requirement, or that the continuing care provider does not meet its liquid reserve requirement, under laws and regulations relating to the insurer or continuing care provider as of the balance sheet date currently being audited.
* * * * * § 147.10. Report on significant deficiencies in internal controls.
(a) Concurrently with the filing of the annual audited financial reports, each insurer shall furnish the Commissioner with a written report prepared by the independent certified public accountant describing significant deficiencies in the insurer's internal control structure noted by the independent certified public accountant during the audit. The Statement of Auditing Standard No. 60, Communication of Internal Control Structure Matters Noted in an Audit (AU Section 325 of the Professional Standards of the American Institute of Certified Public Accountants, Inc.) requires an independent certified public accountant to communicate significant deficiencies, known as ''reportable conditions,'' noted during a financial statement audit to the appropriate parties within an entity. A report should not be issued if the independent certified public accountant does not identify significant deficiencies. [If significant deficiencies are noted, the written report shall be filed annually by the insurer with the Department within 60 days after the filing of the annual audited financial report.]
* * * * * § 147.11. Definitions, availability and maintenance of independent certified public accountant workpapers.
* * * * * (b) Every insurer required to file an annual audited financial report under this chapter shall require [within the engagement letter the agreement of] the independent certified public accountant to make available, through the insurer, for review by Department examiners workpapers prepared in the conduct of the audit, as well as communications related to the audit between the independent certified public accountant and the insurer, including the engagement letter, at the offices of the insurer, at the offices of the independent certified public accountant, at the offices of the Department or at another reasonable place designated by the Commissioner. The insurer shall require that the independent certified public accountant retain the audit workpapers and communications for at least 7 years after the period reported on and agree to make a partner or manager available to the Department upon reasonable request.
(c) In the conduct of the periodic review by Department examiners described in subsection (b), electronic copies or photocopies of pertinent audit workpapers may be made and retained by the Department.
* * * * * § 147.13. Effective date and exemption.
* * * * * (b) For those insurers retaining an independent certified public accountant on November 11, 1995, the 7-year period of service referred to in § 147.6[(c)](d) (relating to qualifications of independent certified public accountant) begins when the independent certified public accountant or other person responsible for rendering the annual audited financial report was first retained or assigned that responsibility. The requirement that an insurer retain the services of a new independent certified public accountant in order to comply with the 7-year rotation provision in § 147.6[(c)](d) shall become effective November 11, 1997.
(c) Foreign [or alien] insurers having direct premiums written in this Commonwealth less than $1 million in a calendar year and having fewer than 1,000 policyholders or certificateholders of directly written policies in this Commonwealth at the end of that calendar year shall be exempt from this chapter for that year unless the Commissioner makes a specific finding that compliance is necessary for the Commissioner to carry out statutory responsibilities. Foreign insurers having assumed premiums pursuant to contracts or treaties of reinsurance, or both, of $1 million or more are not exempt.
* * * * * (e) [Insurers domiciled in this Commonwealth and not transacting the business of insurance outside] Domestic insurers not insuring or reinsuring risks located outside of this Commonwealth having total admitted assets less than $10 million and either direct premium written of less than $1 million in a calendar year or fewer than 1,000 policyholders or certificateholders of directly written policies at the end of that calendar year are exempt from this chapter for that year, unless the Commissioner makes a specific finding that compliance is necessary for the Commissioner to carry out statutory responsibilities. Insurers having total admitted assets greater than $10 million or assumed premiums pursuant to contracts or treaties of reinsurance, or both, of $1 million or more are not exempt.
(f) Foreign [or alien] insurers filing annual audited financial reports in another state, pursuant to that state's requirements for annual audited financial reports whose requirements have been found by the Commissioner to be substantially similar to the requirements of this chapter, are exempt from this chapter if the insurer meets the following conditions:
(1) A copy of the annual audited financial report, report of evaluation of accounting procedures and system of internal controls, report on significant deficiencies in internal controls, and the independent certified public accountant's letter of qualifications which are filed with the other state are filed [with] as instructed by the Commissioner in accordance with the filing dates specified in this chapter. Canadian insurers may submit independent certified public accountant's reports as filed with the Canadian Dominion Department of Insurance.
* * * * * (i) [Domestic insurers retaining an independent certified public accountant on November 11, 1995, shall comply with this chapter for the year ending December 31, 1995, and each year thereafter unless the Commissioner permits otherwise.
(j) Foreign insurers shall comply with this chapter for the year ending December 31, 1995, and each year thereafter, unless the Commissioner permits otherwise.
(k)] In the case of [Canadian and British] insurers organized in Canada or the United Kingdom of Great Britain and Northern Ireland, the annual audited financial report is defined as the annual statement of total business on the form filed by the insurers with their domiciliary supervision authority, audited by an independent chartered accountant. For these insurers, the letter required in § 147.15 (relating to letter of qualifications of independent certified public accountant) shall state that the independent certified public accountant is aware of the requirements relating to the annual audited financial report filed with the Commissioner under § 147.3 (relating to filing and extensions for filing of annual audited financial reports) and shall affirm that the opinion expressed is in conformity with those requirements.
[Pa.B. Doc. No. 04-236. Filed for public inspection February 13, 2004, 9:00 a.m.]
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