Phase 7 – Draft Examination Report and Management Letter

A.Examination Report

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d.Body of Report

The body of the report shall contain the following:

  • Summary of significant findings of fact (material adverse findings, significant non-compliance findings (such as non-compliance with state law(s), SSAPs, annual financial statement instructions, etc.), material changes in financial statements, update on other significant regulatory information disclosed in the previous examination).
  • Company history. The primary focus should be the examination period (e.g., dividends and capital contributions, mergers and acquisitions), but may include significant historical events (e.g., name changes, transfers of business, significant changes to key company trends and ratios,etc.).
  • Management and control, including corporate governance (which may include a list of directors, senior officers and principal internal committee members, with name, title and location and a review of corporate records). Also, if the insurer is a member of a holding company, include an organization chart, summary of cost-sharing agreements and any regulatory information concerning the parent, subsidiaries and affiliates that could have a significant impact on the solvency of the company. As exam reports should only contain findings of fact, the corporate governance assessment(s) is considered subjective and does not lend itself for inclusion in the report.
  • Territory and plan of operation (jurisdictions in which the company is licensed and transacting business, the products written, etc.).
  • Reinsurance (include an overall description of the company’s ceding and/or assuming reinsurance methodology).
  • Financial statements, as reported and filed by the Company with the State Department of Insurance, are reflected in the following:
  • Statement of assets and liabilities
  • Statement of operations
  • Supporting schedules and exhibits to the extent needed
  • Reconciliation of surplus for the period since the last examination
  • Analysis of changes in financial statements resulting from the examination.
  • Comments on financial statement items (comments concerning non-compliance, adverse findings or material changes to the financial statements, which may include a more in-depth discussion of items covered in “Summary of Significant Findings”).
  • Subsequent events (any significant subsequent event identified by the examiner through the date of the examination report).
  • Summary of recommendations (company improvements in processes, activities and/or controls).
  • Signature page (signatures of Examiner-In-Charge and any other individuals deemed necessary by the state).