Date: January 29, 2009
For more information contact: Jim Guidry, (608) 264-6239 or jim.guidry@wisconsin.gov

New Audit Rules Mean Better Protection for Consumers

Madison, WI—A new year means new requirements for insurers when it comes to their relationship with their independent auditor. On January 1, 2009, new rules became effective that define auditor qualifications and auditor independence.

"Consumer protection is the driving force behind insurance regulation," said Insurance Commissioner Sean Dilweg. "Consumers are the reason behind strict solvency requirements for insurance companies. With these new audit rules, consumers will have greater confidence that insurance companies will have objective and independent audits they can rely on."

The Wisconsin Office of the Commissioner of Insurance (OCI) adopted new audit rules based on a model regulation adopted by the National Association of Insurance Commissioners. The regulation was adopted for Wisconsin insurers with the assistance of an advisory committee that included insurer, consumer and auditor representatives.

Insurers have long been required to have their financial records audited by an independent audit firm. The rule now reduces the period the lead auditor may serve in that capacity to five years; specifies various non-audit services that, if performed by the auditor, would impair the auditor's independence in relation to the insurer; and prohibits partners and senior managers of the audit engagement from serving as a member of the board of directors, or officer, or controller, or similar position of the insurer if employed by the independent accounting firm that audited the insurer during the one-year period which preceded the most current statutory opinion.

The rule also provides that every insurer required to file an annual audited financial report is required to have an audit committee that is directly responsible for the appointment, oversight and compensation of the auditor.

The rule requires that management of insurers with more than $500 million in premium annually file a report with the Commissioner assessing internal controls over financial reporting, including a statement whether the controls are effective to provide reasonable assurance regarding the reliability of the statutory financial statements and disclosure of any unremediated material weaknesses in internal control over financial reporting.

"We all know what happened over the past decade when corporations and their auditors developed relationships that were too close for comfort," said Dilweg. "This rule gives Wisconsin consumers regulatory reassurance that audit opinions are objective and reliable."

Created by the Legislature in 1871, Wisconsin's Office of the Commissioner of Insurance (OCI) was vested with broad powers to ensure that the insurance industry responsibly and adequately met the insurance needs of Wisconsin citizens. Today, OCI's mission is to lead the way in informing and protecting the public and responding to its insurance needs.