Summary of the CGAD Model Act & Regulation

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In 2014, the Corporate Governance Annual Disclosure Model Act (#305) (the Act) and the Corporate Governance Annual Disclosure Model Regulation (#306) (the Regulation) were adopted by the National Association of Insurance Commissioners. Both adoptions require insurance companies to analyze their corporate governance and disclose certain information related to their corporate governance.

The Act’s purpose is to provide information on an insurance company’s corporate governance structure, policies and practices. The Act also describes disclosure requirements the insurance company must address, but it doesn’t provide a template or any examples. The effective date of the Act is January 1 following the state adoption (see a state listing following the article). The first Corporate Governance Annual Disclosure (CGAD) filing deadline will be June 1 following the date of the state adoption. The CGAD is the report filed by the insurance company, which is made in accordance with the Act’s requirements. The CGAD requires a signature from the chief executive officer (CEO) or corporate secretary attesting to the best of that individual’s belief and knowledge that the insurer has implemented the corporate governance practices and a copy of the disclosure has been provided to the insurance company’s governing body. The corporate governance structure can be reported at the parent level, holding company level or individual legal entity level, depending on how the insurer or group has structured its corporate governance system. The Act requires the insurance company to identify what criteria was used to make the determination for the reporting level. The state’s department of insurance understands the importance of the information and trade secrets associated with the information; therefore, the Act identifies the information within the CGAD to be privileged and confidential by law. The information shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any private civil action.

The Regulation’s purpose is to state the filing procedures and the required contents of the CGAD. The Regulation states the insurance company “shall be as descriptive as possible in completing the CGAD, with inclusion of attachments or example documents that are used in the governance process.” The Regulation then provides details of three key topics to be included in the CGAD:

  1. Board Structure: Documentation around the board structure and various committees responsible for oversight must be disclosed. This should include descriptions around the duties of the board and significant committees, along with the roles of the CEO (or equivalent) and board chairman. Each board member’s qualifications, expertise and experience should be included to help identify how the member is meeting the insurance company’s needs. The board’s independence should be addressed in the filing. Board attendance must be disclosed. A discussion around board member nominations must be included in the CGAD, addressing whether there’s a nomination committee, term limits, election and re-election process and policy on board diversity. Finally, disclosure on the process for evaluating the board’s performance must be included.
  2. Senior Management: The policies and practices for evaluating and directing senior management should be provided. These disclosures should include senior management background information, the qualifications for each position and any changes in the team. Detail on the compensation programs will need to be disclosed, which includes what the board’s role is in monitoring the compensation programs, how compensation is calculated for each program, how the program relates to company performance and individual performance, how risk adjustments are incorporated if they’re applicable and the clawback provisions associated with the programs. The code of business conduct and ethics also will need to be included in the CGAD.
  3. Oversight of Critical Risk Areas: The CGAD requires disclosure of how the board, its committees and senior management ensure an appropriate amount of oversight is given to critical risk areas that affect the insurer’s business activities. This includes how oversight and management responsibilities are delegated to the board, committees and senior management, including how the board ensures the insurance company is in line with the strategic plan, business risks and how senior management is addressing these items. Finally, a description of the critical risk areas and responsible parties for reporting on these areas needs to be disclosed as part of the CGAD. There should be enough information regarding the critical risk areas disclosed so the insurance commissioner has a reasonable understanding of how the risks are being reported and addressed.

If any of these disclosure requirements are addressed in other filings, such as proxy statements or Own Risk and Solvency Assessment reports, the insurance company may reference these filings rather than create a new report to disclose this information. After filing the CGAD in the initial year, subsequent years will just need to address updates. If there are no updates, the insurance company should disclose there are no updates for the current year.

The state will assess insurance companies on whether the disclosure requirements above have all been included in the CGAD report based on the Financial Analysis Handbook. The analyst also will look for information missing from the disclosure based on what the analyst knows about the insurance company.

To learn more about this topic, contact your trusted BKD advisor.

State Listing


The 19 states adopting the Act as of September 28, 2017, include:

  1. California
  2. Connecticut
  3. Delaware
  4. Florida
  5. Idaho
  6. Indiana
  7. Iowa
  8. Kansas
  9. Louisiana
  10. Maine
  11. Montana
  12. Nebraska
  13. Nevada
  14. New Hampshire
  15. Ohio
  16. Oregon
  17. Rhode Island
  18. Vermont
  19. Virginia

The 11 states adopting the Regulation as of September 28, 2017, include:

  1. California
  2. Connecticut
  3. Florida
  4. Indiana
  5. Iowa
  6. Louisiana
  7. Nebraska
  8. Ohio
  9. Rhode Island
  10. Vermont
  11. Virginia

The three states with pending action on adoption of the Regulation as of September 28, 2017, include:

  1. Idaho
  2. Montana
  3. Nevada
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