Nmac

D. In order to be considered independent for purposes of this section, a member of the audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept any consulting, advisory or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof. However, if law requires board participation by otherwise non-independent members, the law shall prevail and such members may participate in the audit committee and be designated as independent for audit committee purposes, unless they are an officer or employee of the insurer or one of its affiliates. E. If a member of the audit committee ceases to be independent for reasons outside the member’s reasonable control, that person, with notice by the responsible entity to the state, may remain an audit committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one year from the occurrence of the event that caused the member to be no longer independent. F. To exercise the election of the controlling person to designate the audit committee for purposes of this rule, the ultimate controlling person shall provide a written notice to the superintendent. Notification shall be made prior to the issuance of the statutory audit report and include a description of the basis for the election. The election can be changed through notice to the superintendent by the insurer, which shall include a description of the basis for the change. The election shall remain in effect for perpetuity, until rescinded. G. The audit committee shall require the accountant that performs for an insurer any audit required by this rule to report to the audit committee in accordance with the requirements of SAS 61, communication with audit committees, or its replacement, including: (1) all significant accounting policies and material permitted practices; (2) all material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the accountant; and (3) other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences. H. If an insurer is a member of an insurance holding company system, the reports required by Subsection G may be provided to the audit committee on an aggregate basis for insurers in the holding company system, provided that any substantial differences among insurers in the system are identified to the audit committee. 13.2.5 NMAC 7 I. The proportion of independent audit committee members shall meet or exceed the following criteria: Prior Calendar Year Direct Written and Assumed Premiums $0 - $300,000,000 Over $300,000,000 - $500,000,000 Over $500,000,000 No minimum requirements. Majority (50% or more) of members shall be independent. Supermajority of members (75% or more) shall be independent. J. An insurer with direct written and assumed premium, excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than $500,000,000 may make application to the superintendent for a waiver from the requirements of this section based upon hardship. [13.2.5.16 NMAC - N, 1/1/2010; A, 10/01/2020] 13.2.5.17 INTERNAL AUDIT FUNCTION REQUIREMENTS A. Function. An insurer or group of insurers shall establish an internal audit function providing independent, objective and reasonable assurance to the audit committee and insurer management regarding the insurer’s governance, risk management and internal controls. This assurance shall be provided by performing general and specific audits, reviews and tests and by employing other techniques deemed necessary to protect assets, evaluate control effectiveness and efficiency, and evaluate compliance with policies and regualtions. B. Independence. In order to ensure that internal auditors remain objective, the internal audit function must be organizationally independent. Specifically, the internal audit function shall have direct and unrestricted access to the board of directors. Organizational independence does not preclude dual-reporting relationships. C. Reporting. The head of the internal audit function shall report to the audit committee regularly, but no less than annually, on the periodic audit plan, factors that may adversely impact the intenal audit function’s independence or effectiveness, material findings from completed audits and the appropriateness of corrective actions implemented by management as a result of audit findings. D. Additional Requirements. If an insurer is a member of an insurance holding company system or included in a group of insurers, the insurer may satisfy the internal audit function requirements set forth in this section at the ultimate controlling parent level, an intermediate holding company level or the individual legal entity level. E. Exemption. An insurer may be exempt from the requirements of this section only if: (1) the insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium but excluding premiums reinsured with the federal corp insurance coporation and federal flood program, less than $500,000,000); or, (2) if the insurer is a member of a group of insurers that has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with federal crop insurance corporation and federal flood program, less than $1,000,000,000.