HB2763 EnrSUB
House Bill 2763 History
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ENROLLED
COMMITTEE SUBSTITUTE
FOR
H. B. 2763
(By Kominar, Barker, Moore,
Perry, Ashley, Walters and Hartman)
[Passed March 10, 2007; in effect ninety days from passage.]
AN ACT to amend and reenact §33-7-3 of the Code of West Virginia,
1931, as amended; and to amend and reenact §33-33-2 and §33-
33-6 of said code, all relating to financial examinations of
insurers; eliminating the exclusion of certain assets in the
determination of the financial condition of insurers; defining
term; prohibiting use of indemnification agreements by
accountants performing certain audits; and permitting
mediation or arbitration agreements in certain circumstances.
Be it enacted by the Legislature of West Virginia:
That §33-7-3 of the Code of West Virginia, 1931, as amended,
be amended and reenacted; and that §33-33-2 and §33-33-6 of said
code be amended and reenacted, all to read as follows:
ARTICLE 7. ASSETS AND LIABILITIES.
§33-7-3. Assets not allowed.
In addition to assets impliedly excluded by the provisions of section one of this article, the following expressly shall not be
allowed as assets in any determination of the financial condition
of an insurer:
(a) Goodwill, trade names and other like intangible assets.
(b) Advances to officers (other than policy loans) whether
secured or not, and advances to employees, agents and other persons
on personal security only.
(c) Stock of the insurer, owned by it, or any equity therein
or loans secured thereby, or any proportionate interest in the
stock acquired or held through the ownership by the insurer of an
interest in another firm, corporation or business unit.
(d) Furniture, fixtures, furnishings, safes, vehicles,
libraries, stationery, literature and supplies, and except, in the
case of any insurer, personal property the insurer is permitted to
hold pursuant to article eight of this chapter, or which is
acquired through foreclosure of chattel mortgages acquired pursuant
to said article or which is reasonably necessary for the
maintenance and operation of real estate lawfully acquired and held
by the insurer other than real estate used by it for home office,
branch office and similar purposes.
(e) The amount, if any, by which the aggregate book value of
investments as carried in the ledger assets of the insurer exceeds
the aggregate value thereof as determined under this chapter.
ARTICLE 33. ANNUAL AUDITED FINANCIAL REPORT.
§33-33-2. Definitions.
(a) "Accountant" and "independent certified public accountant" means an independent certified public accountant or accounting firm
in good standing with the American Institute of Certified Public
Accountants and in all states in which the accountant is licensed
to practice; for Canadian and British companies, the terms mean a
Canadian-chartered or British-chartered accountant.
(b) "Annual statement" means the annual financial statement
required to be filed by insurers with the commissioner pursuant to
the provisions of this chapter.
(c) "Audited financial report" means and includes those items
specified in section four of this article.
(d) "Indemnification" for the purposes of this article means
an agreement of indemnity or a release from liability where the
intent or effect of the agreement or release is a shifting or a
limitation to any degree of the potential liability to the person
or firm for failure to adhere to applicable auditing or other
professional standards regardless of whether the potential
liability arises from known misrepresentations made by the insurer
or its representatives.
(e) "Insurer" for purposes of this article means any domestic
insurer as defined in section six, article one of this chapter and
includes any domestic stock insurance company, mutual insurance
company, reciprocal insurance company, farmers' mutual fire
insurance company, fraternal benefit society, hospital service
corporation, medical service corporation, health care corporation,
health maintenance organization, captive insurance company or risk
retention group and any licensed foreign or alien insurer defined in article one of this chapter.
(f) "Workpapers" means and includes audit planning
documentation, work programs, analyses, memoranda, letters of
confirmation and representation, abstracts of company documents and
schedules or commentaries prepared or obtained by the independent
certified public accountant in the course of the examination of the
financial statements of an insurer and which support the opinion
thereon.
§33-33-6. Qualifications of independent certified public
accountants.
(a) The commissioner may not recognize any person or firm as
a qualified independent certified public accountant for purposes of
performing the annual audited financial report if the person or
firm:
(1) Is not in good standing with the American Institute of
Certified Public Accountants and in all states in which the
accountant is licensed to practice, or, for a Canadian or British
company, that is not a chartered accountant; or
(2) Has either directly or indirectly entered into an
indemnification with respect to an audit of the insurer.
(b) Except as otherwise provided herein, the commissioner
shall recognize an independent certified public accountant as
qualified as long as he or she conforms to the standards of his or
her profession, as contained in the Code of Professional Ethics of
the American Institute of Certified Public Accountants and the
Rules and Regulations and Code of Ethics and Rules of Professional Conduct of the West Virginia Board of Accountancy.
(c) 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 a
delinquency proceeding is commenced against the insurer under
article ten of this chapter, the mediation or arbitration
provisions shall operate at the option of the receiver.
(d) No partner or other person responsible for rendering a
report may act in that capacity for more than seven consecutive
years. Following a period of service the person shall be
disqualified from acting in that or a similar capacity for the same
company or its insurance subsidiaries or affiliates for a period of
two years. An insurer may make application to the commissioner for
relief from the above rotation requirement on the basis of unusual
circumstances. The commissioner may consider the following factors
in determining if the relief should be granted:
(1) Number of partners, expertise of the partners or the
number of insurance clients in the currently registered firm;
(2) Premium volume of the insurer; or
(3) Number of jurisdictions in which the insurer transacts
business.
(e) The commissioner may not recognize as a qualified
independent certified public accountant, nor accept any annual
audited financial report, prepared in whole or in part by, any
natural person who:
(1) Has been convicted of fraud, bribery, a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
Sections 1961-1968, or any dishonest conduct or practices under
federal or state law;
(2) Has been found to have violated the insurance laws of this
state with respect to any previous reports submitted under this
article; or
(3) Has demonstrated a pattern or practice of failing to
detect or disclose material information in previous reports filed
under the provisions of this article.
(f) The commissioner may hold a hearing to determine whether
a certified public accountant is qualified and considering the
evidence presented, may rule that the accountant is not qualified
for purposes of expressing an opinion on the financial statements
in the audited financial report made pursuant to this article and
require the insurer to replace the accountant with another whose
relationship with the insurer is qualified within the meaning of
this article.