Reminder to Missouri Insurers: File Your Corporate Governance Annual Disclosure by June 1April 2019
June 1, 2019 is the first deadline for Missouri insurers to file a corporate governance annual disclosure (CGAD) with the Missouri Department of Insurance.
Who Must File a CGAD?
Each Missouri-domiciled insurer—defined as an entity engaged in the business of insurance, including an insurance company; a health maintenance organization; a prepaid limited healthcare service plan; or a dental, optometric, or similar health service plan—must file. If an insurer is a member of an insurance holding company system, the CGAD should be submitted to the Insurance Department in the lead state of such system, but only as of the earlier of June 1, 2020 or the date of adoption (if any) by the lead state of the NAIC CGAD Model Act and the NAIC CGAD Model Regulations. Currently, it appears that fewer than half of the states have adopted the NAIC CGAD Model Act and that even fewer have adopted the NAIC CGAD Model Regulations.
The new law provides flexibility for a filer to provide corporate governance information at the ultimate controlling-entity level, an intermediate holding company level, or the individual legal entity level. Filers are encouraged to make the disclosures at the level at which (1) the risk appetite is determined; (2) the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors is coordinated and exercised; or (3) legal liability for failure of general corporate governance duties would be placed.
An insurer that is not required by Missouri law to submit a CGAD must nonetheless comply with any request of the Director of the Missouri Department of Insurance to do so.
What Is Required in a CGAD?
A CGAD is a confidential report that summarizes the filer’s corporate governance structure, policies, and practices. The signature of the insurer or insurance group’s chief executive officer (CEO) or corporate secretary must be included with an attestation to the best of that individual’s belief and knowledge that (1) the insurer has implemented the corporate governance practices described in the CGAD; and (2) a copy of the CGAD has been provided to the Board of Directors or appropriate committee thereof. The filer must indicate which of the three criteria above was used to determine the level of reporting. To the extent that information required in a CGAD is substantially similar to information in other documents filed with the Missouri Department of Insurance (e.g., proxy statements filed with annual registration requirements), filers are permitted to reference such other documents in lieu of submitting duplicate information.
What Costs Are Associated with the CGAD?
At this time, there does not appear to be a filing fee associated with the annual submission of the CGAD. However, no regulations regarding the CGAD have been promulgated yet.
The Missouri Department of Insurance has the authority to retain third-party consultants, including attorneys, actuaries, accountants, and other experts, as it deems necessary to assist in reviewing the CGAD and/or a filer’s compliance with the CGAD requirements. The costs of such consultants will be at the filer’s expense.
Last, the penalty for failing to timely file a CGAD without just cause is $1,000 for each day’s delay, up to a total maximum fine of $5,000. The penalties may be reduced if a filer can demonstrate that their imposition would constitute a financial hardship.
The attorneys in our Health Care Practice Group have extensive experience with virtually every business and legal issue confronting the health care industry, including corporate governance annual disclosures. If you have questions about your CGAD filing, please contact Lynn Hinrichs or Jill McFarland.