26-3-316. Internal audit function requirements.

(a) An insurer is exempt from the requirements of this section if:

(i) The insurer has annual direct written and unaffiliated assumed premiums, including international direct and assumed premiums, but excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than five hundred million dollars ($500,000,000.00); and

(ii) If the insurer is a member of a group of insurers, the group has annual direct written and unaffiliated assumed premiums, including international direct and assumed premiums, but excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than one billion dollars ($1,000,000,000.00).

(b) Each insurer or group of insurers shall establish an internal audit function providing independent oversight regarding the insurer's governance, risk management and internal controls. This oversight 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 regulations.

(c) The internal audit function shall be organizationally independent. Specifically, the internal audit function shall not defer ultimate judgment on audit matters to others and shall appoint an individual to head the internal audit function who shall have direct and unrestricted access to the board of directors. Organizational independence does not preclude dual reporting relationships.

(d) The head of the internal audit function shall report to the audit committee regularly, but not less than annually, on the periodic audit plan, factors that may adversely impact the internal 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.

(e) 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.