Sec. 12.5. (a) A domestic insurer that is required to file an annual audited financial report under this chapter that has annual direct written and assumed premiums (excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program) of at least five hundred million dollars ($500,000,000) shall prepare a report of the domestic insurer's or group of insurers' management's internal control over financial reporting as of the immediately preceding December 31. The report shall be filed with the commissioner along with the communication of internal control related matters noted in an audit.

(b) The commissioner may require a domestic insurer that is:

(1) not described in subsection (a); and

(2) in a RBC level event described in IC 27-1-36 or considered by the commissioner to be in hazardous financial condition (as defined in rules adopted under IC 27-1-3-7);

to file a report of management's internal control over financial reporting.

(c) If:

(1) a domestic insurer or group of insurers is:

(A) directly subject to Section 404;

(B) part of an insurance holding company system whose parent is directly subject to Section 404;

(C) not directly subject to Section 404, but is a SOX compliant entity; or

(D) part of an insurance holding company system whose parent is not directly subject to Section 404, but is a SOX compliant entity; and

(2) the domestic insurer's or group of insurers' internal controls over financial reporting that have a material impact on the preparation of the domestic insurer's or group of insurers' annual audited financial statements are included in the Section 404 report;

the domestic insurer or group of insurers may satisfy the requirement of this section to file a report of management's internal control over financial reporting by including with the domestic insurer's or group of insurers' Section 404 report an addendum described in subsection (d).

(d) An addendum described in subsection (c) must be a positive statement by the domestic insurer's or group of insurers' management that no internal controls over financial reporting that have a material impact on the preparation of the domestic insurer's or group of insurers' annual audited financial statements exist, other than the internal controls that are included in the Section 404 report.

(e) If:

(1) a domestic insurer or group of insurers is described in subsection (c)(1); and

(2) the domestic insurer's or group of insurers' internal controls over financial reporting that have a material impact on the preparation of the domestic insurer's or group of insurers' annual audited financial statements are not all included in the Section 404 report;

the domestic insurer or group of insurers shall file a report of management's internal control over financial reporting as required by this section for the internal controls that have a material impact and are not included in the Section 404 report.

(f) A domestic insurer's or group of insurers' report of management's internal control over financial reporting required by this section must include the following:

(1) A statement that management is responsible for establishment and maintenance of adequate internal control over financial reporting.

(2) A statement that management has established internal control over financial reporting and an assertion of whether, to the best of management's knowledge and belief after diligent inquiry, management's internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles.

(3) A statement that briefly describes the approach or processes by which management evaluated the effectiveness of management's internal control over financial reporting.

(4) A statement that briefly describes the scope of work that is included in the report and whether any of management's internal controls over financial reporting were excluded.

(5) Disclosure of any unremediated material weaknesses in the management's internal control over financial reporting identified by management as of the immediately preceding December 31. The management may not conclude that the internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of annual audited financial statements in accordance with statutory accounting principles if one (1) or more unremediated material weaknesses exist in the management's internal control over financial reporting.

(6) A statement regarding the inherent limitations of the management's internal control over financial reporting.

(7) Signatures of the chief executive officer and the chief financial officer, or equivalent position, of the domestic insurer or group of insurers.

(g) A domestic insurer's or group of insurers' management shall document and make available upon financial condition examination the basis on which the management's assertions described in subsection (f) are made. The management's assertions may be based, in part, upon the management's review, monitoring, and testing of internal controls over financial reporting that are undertaken in the normal course of the management's activities. The management may determine the nature of the internal control framework used and the nature and extent of documentation to make the management's assertion in a cost effective manner, including assembly of or reference to existing documentation.

(h) A report of management's internal control over financial reporting required by this section, and any supporting documentation provided during the course of a financial condition examination, is confidential.

As added by P.L.251-1995, SEC.12. Amended by P.L.146-2015, SEC.18.