S.F. 349 Section 1. NEW SECTION . 521H.1 Purpose and scope. 1 1. The purpose of this chapter is to do all of the 2 following: 3 a. Provide the commissioner with a summary of an insurer’s 4 or insurance group’s corporate governance structure, policies, 5 and practices to permit the commissioner to gain and maintain 6 an understanding of the insurer’s or insurance group’s 7 corporate governance framework. 8 b. Outline the requirements for an insurer or insurance 9 group to complete a corporate governance annual disclosure for 10 submission to the commissioner. 11 c. Provide for the confidential treatment of the corporate 12 governance annual disclosure and related information that 13 contains confidential and sensitive information related to 14 an insurer’s or insurance group’s internal operations and 15 proprietary and trade secret information which, if made 16 public, could potentially cause the insurer or insurance group 17 competitive harm or disadvantage. 18 2. Nothing in this chapter shall be construed to prescribe 19 or impose corporate governance standards or internal procedures 20 beyond those which are required under applicable state 21 corporate law. In addition, nothing in this chapter shall be 22 construed to limit the commissioner’s authority under chapter 23 507, or the rights or obligations of third parties thereunder. 24 3. The requirements of this chapter shall apply to all 25 insurers domiciled in this state. 26 Sec. 2. NEW SECTION . 521H.2 Definitions. 27 1. “Commissioner” means the commissioner of insurance. 28 2. “Corporate governance annual disclosure” or “disclosure” 29 means a confidential report filed by an insurer or insurance 30 group pursuant to the requirements of this chapter. 31 3. “Insurance group” means those insurers and affiliates 32 included within an insurance holding company system. 33 4. “Insurance holding company system” means the same as 34 defined in section 521A.1. 35 -1- LSB 1288SV (2) 86 av/nh 1/ 13

S.F. 349 5. “Insurer” means the same as defined in section 521A.1. 1 Sec. 3. NEW SECTION . 521H.3 Corporate governance annual 2 disclosure requirement. 3 1. An insurer, or the insurance group of which the insurer 4 is a member, shall, no later than June 1 of each calendar 5 year, submit to the commissioner a corporate governance annual 6 disclosure that contains the information described in section 7 521H.5. Notwithstanding any request from the commissioner 8 made pursuant to subsection 2, if an insurer is a member of 9 an insurance group, the insurer shall submit the disclosure 10 required by this section to the commissioner of insurance of 11 the lead state of the insurance group of which the insurer is 12 a member, in accordance with the laws of the lead state, as 13 determined by procedures contained in the financial analysis 14 handbook adopted by the national association of insurance 15 commissioners. 16 2. An insurer or insurance group that is not required to 17 submit a corporate governance annual disclosure under this 18 section shall do so upon the commissioner’s request. 19 3. Review of the corporate governance annual disclosure and 20 any additional requests for information shall be made through 21 the lead state as determined by procedures contained in the 22 financial analysis handbook adopted by the national association 23 of insurance commissioners. 24 4. Insurers or insurance groups that provide information 25 substantially similar to the information required by this 26 chapter in other documents provided to the commissioner, 27 including proxy statements filed in conjunction with the form B 28 insurance holding company system annual registration statement 29 requirements as provided in section 521A.4, or other state or 30 federal filings provided to the commissioner, are not required 31 to duplicate that information in the corporate governance 32 annual disclosure, but shall cross reference the document in 33 which the information is included. 34 Sec. 4. NEW SECTION . 521H.4 Rules. 35 -2- LSB 1288SV (2) 86 av/nh 2/ 13

S.F. 349 The commissioner shall adopt rules pursuant to chapter 17A 1 to administer this chapter. 2 Sec. 5. NEW SECTION . 521H.5 Contents of corporate 3 governance annual disclosure. 4 1. An insurer, or the insurance group of which the insurer 5 is a member, shall have discretion over the responses to 6 corporate governance annual disclosure inquiries, provided 7 the corporate governance annual disclosure contains the 8 material information necessary to permit the commissioner to 9 gain an understanding of the insurer’s or insurance group’s 10 corporate governance structure, policies, and practices. The 11 commissioner may request additional information that the 12 commissioner deems material and necessary to provide a clear 13 understanding of the insurer’s or insurance group’s corporate 14 governance policies, reporting or information systems, or the 15 controls implementing such policies or systems. 16 2. The corporate governance annual disclosure shall be 17 prepared consistent with rules adopted by the commissioner 18 pursuant to chapter 17A. Documentation and supporting 19 information prepared pursuant to this chapter and related rules 20 shall be maintained and made available upon examination by or 21 upon request of the commissioner. 22 3. The corporate governance annual disclosure shall include 23 the signature of the insurer’s or insurance group’s chief 24 executive officer or corporate secretary, attesting that to the 25 best of that individual’s belief and knowledge the insurer or 26 the insurance group has implemented the corporate governance 27 practices described in the disclosure and that a copy of the 28 disclosure has been provided to the insurer’s or the insurance 29 group’s board of directors or the appropriate committee of the 30 board. 31 4. a. For purposes of completing a corporate governance 32 annual disclosure, an insurer or insurance group may report 33 information regarding corporate governance at the ultimate 34 controlling parent level, at an intermediate holding company 35 -3- LSB 1288SV (2) 86 av/nh 3/ 13

S.F. 349 level, or at the individual legal entity level, depending upon 1 how the insurer or insurance group has structured its system 2 of corporate governance. 3 b. An insurer or insurance group is encouraged to report 4 information in the corporate governance annual disclosure at 5 the level at which the insurer’s or insurance group’s risk 6 tolerance is determined; at the level at which the earnings, 7 capital, liquidity, operations, and reputation of the insurer 8 or insurance group are overseen collectively and the level 9 at which the supervision of these factors is coordinated and 10 exercised; or at the level at which legal liability for failure 11 of general corporate governance duties would be placed. If an 12 insurer or insurance group determines the level of reporting 13 based upon the criteria set forth in this paragraph, the 14 insurer or insurance group shall indicate which of the three 15 criteria was used to determine the level of reporting and 16 explain any subsequent changes that are made in the level of 17 reporting. 18 Sec. 6. NEW SECTION . 521H.6 Confidentiality. 19 1. Documents, materials, or other information, including 20 a corporate governance annual disclosure, in the possession 21 or control of the insurance division of the department of 22 commerce, that is obtained by, created by, or disclosed to the 23 commissioner or to any other person pursuant to this chapter, 24 is recognized in this state as being proprietary and containing 25 trade secrets. All such documents, materials, or other 26 information, including the disclosure, shall be confidential 27 and privileged, shall not be subject to chapter 22, shall 28 be considered confidential under chapter 507, shall not be 29 subject to subpoena, and shall not be subject to discovery 30 or admissible in evidence in any private civil action. 31 However, the commissioner is authorized to use such documents, 32 materials, or other information, including the disclosure, in 33 the furtherance of any regulatory or legal action brought as a 34 part of the commissioner’s official duties. The commissioner 35 -4- LSB 1288SV (2) 86 av/nh 4/ 13

S.F. 349 shall not otherwise make the documents, materials, or other 1 information, including the disclosure, public without the 2 prior written consent of the insurer or insurance group that 3 provided the documents, materials, or other information, 4 including the disclosure. Nothing in this section shall 5 be construed to require written consent of the insurer or 6 insurance group before the commissioner may share or receive 7 confidential documents, materials, or other information related 8 to governance of an insurer or insurance group pursuant to 9 subsection 3 to assist in the performance of the commissioner’s 10 regular duties. 11 2. The commissioner or any other person who received 12 documents, materials, or other information related to corporate 13 governance, through examination or otherwise, while acting 14 under the authority of the commissioner or with whom such 15 documents, materials, or other information is shared pursuant 16 to this chapter, shall not be permitted or required to testify 17 in any private civil action concerning any confidential 18 documents, materials, or information, including disclosures, 19 subject to subsection 1. 20 3. In order to assist in the performance of the 21 commissioner’s regulatory duties, the commissioner may do any 22 of the following: 23 a. Upon request, share documents, materials, or corporate 24 governance annual disclosure-related information, including 25 the confidential and privileged documents, materials, or 26 information subject to subsection 1, and including proprietary 27 and trade secret documents, materials, or information, 28 with other state, federal, or international financial 29 regulatory agencies, including members of any supervisory 30 college as defined in section 521A.1, with the national 31 association of insurance commissioners, or with any third-party 32 consultants designated by the commissioner pursuant to 33 subsection 4, provided that the recipient agrees in writing 34 to maintain the confidentiality and privileged status of the 35 -5- LSB 1288SV (2) 86 av/nh 5/ 13

S.F. 349 documents, materials, or other corporate governance annual 1 disclosure-related information and verifies in writing the 2 legal authority to maintain such confidentiality and privilege. 3 b. Receive documents, materials, or other corporate 4 governance annual disclosure-related information, including 5 otherwise confidential and privileged documents, materials, 6 or information, and proprietary and trade secret documents, 7 materials, and information, from regulatory officials of 8 other state, federal, or international regulatory agencies, 9 including members of any supervisory college as defined in 10 section 521A.1, and from the national association of insurance 11 commissioners, and shall maintain as confidential or privileged 12 any documents, materials, or information received with notice 13 or the understanding that the documents, materials, or other 14 information received is confidential and privileged under the 15 laws of the jurisdiction that is the source of the documents, 16 materials, or information. 17 4. In order to assist in the performance of the 18 commissioner’s regulatory duties under this chapter the 19 commissioner may retain, at the insurer’s or insurance 20 group’s expense, third-party consultants, including attorneys, 21 actuaries, accountants, and other experts not otherwise a part 22 of the commissioner’s staff, as may be reasonably necessary to 23 assist the commissioner in reviewing a disclosure and related 24 information submitted under this chapter or ensuring compliance 25 of an insurer or insurance group with the requirements of this 26 chapter. 27 a. Any persons retained under this subsection shall be under 28 the direction and control of the commissioner and shall act in 29 a purely advisory capacity. 30 b. As part of the retention process, a third-party 31 consultant shall verify to the commissioner, with notice to 32 the insurer, that the third-party consultant is free of any 33 conflict of interest and that the third-party consultant 34 has internal procedures in place to monitor compliance 35 -6- LSB 1288SV (2) 86 av/nh 6/ 13

S.F. 349 if a conflict arises and to ensure compliance with the 1 confidentiality standards and requirements of this chapter. 2 5. A written agreement entered into by the commissioner 3 with the national association of insurance commissioners or 4 with a third-party consultant governing the sharing and use of 5 information provided pursuant to this chapter shall expressly 6 require the written consent of the insurer prior to making 7 public information provided under this chapter and shall 8 contain a provision that does each of the following: 9 a. Expressly provides that the national association of 10 insurance commissioners and any third-party consultants 11 retained are subject to the same confidentiality standards 12 and requirements governing the sharing and use of information 13 provided pursuant to this chapter as the commissioner. 14 b. Specifies procedures and protocols regarding the 15 confidentiality and security of information related to a 16 corporate governance annual disclosure that is shared with 17 the national association of insurance commissioners or with a 18 third-party consultant pursuant to this chapter and specifies 19 procedures and protocols for sharing information by the 20 national association of insurance commissioners only with other 21 state insurance regulators from states in which an insurance 22 group has domiciled insurers. The agreement shall require 23 that the recipient of such information must agree in writing 24 to maintain the confidentiality and privileged status of the 25 documents, materials, or other information related to the 26 corporate governance annual disclosure and verify in writing 27 the legal authority to maintain confidentiality and privilege. 28 c. Specifies that ownership of information shared with 29 the national association of insurance commissioners or with 30 a third-party consultant pursuant to this chapter remains 31 with the commissioner and that use of the information by 32 the national association of insurance commissioners or by a 33 third-party consultant is subject to the direction of the 34 commissioner. 35 -7- LSB 1288SV (2) 86 av/nh 7/ 13

S.F. 349 d. Prohibits the national association of insurance 1 commissioners or a third-party consultant from storing the 2 information shared pursuant to this chapter in a permanent 3 database after the underlying analysis is completed. 4 e. Requires the national association of insurance 5 commissioners or a third-party consultant to give prompt notice 6 to the commissioner and to an insurer or insurance group whose 7 confidential information is in the possession of the national 8 association of insurance commissioners or a third-party 9 consultant pursuant to this chapter, that the information is 10 subject to a request or subpoena to the national association 11 of insurance commissioners or the third-party consultant for 12 disclosure or production. 13 f. Requires the national association of insurance 14 commissioners or a third-party consultant to consent to 15 intervention by an insurer or insurance group in any judicial 16 or administrative action in which the national association of 17 insurance commissioners or the third-party consultant may be 18 required to disclose confidential information about the insurer 19 or insurance group that was shared with the association or 20 consultant pursuant to this chapter. 21 6. The sharing of documents, materials, or information by 22 the commissioner pursuant to this chapter shall not constitute 23 a delegation of regulatory authority or rulemaking, and the 24 commissioner is solely responsible for the administration, 25 execution, and enforcement of the provisions of this chapter. 26 7. No waiver of any applicable privilege or claim of 27 confidentiality in the documents, proprietary and trade 28 secret materials, or other corporate governance annual 29 disclosure-related information shall occur as a result of the 30 disclosure of such documents, materials, or information to the 31 commissioner under this section or as a result of sharing those 32 documents, materials, or information as authorized in this 33 chapter. 34 Sec. 7. NEW SECTION . 521H.7 Penalties. 35 -8- LSB 1288SV (2) 86 av/nh 8/ 13

S.F. 349 1. If an insurer or insurance group fails, without just 1 cause, to timely file a corporate governance annual disclosure 2 as required in this chapter, the commissioner shall, after 3 notice and hearing, impose a penalty of five hundred dollars 4 for each day’s delay. The penalty shall be collected by the 5 commissioner and paid to the treasurer of state for deposit 6 as provided in section 505.7. The maximum penalty which may 7 be imposed under this section for any single failure is five 8 thousand dollars. 9 2. The commissioner may reduce the penalty to be imposed if 10 the insurer or insurance group demonstrates to the commissioner 11 that imposition of the penalty would constitute a financial 12 hardship to the insurer or insurance group. 13 Sec. 8. NEW SECTION . 521H.8 Severability. 14 If any provision of this chapter other than section 15 521H.6, or the application of this chapter to any person or 16 circumstance, is held invalid, such holding shall not affect 17 the provisions or applications of this chapter which can be 18 given effect without the invalid provision or application, and 19 to that end the provisions of this chapter, with the exception 20 of section 521H.6, are severable. 21 Sec. 9. APPLICABILITY. The provisions of this Act are 22 applicable beginning January 1, 2016, and the first filings of 23 corporate governance annual disclosures shall be made pursuant 24 to chapter 521H, as enacted in this Act, in 2016. 25 EXPLANATION 26 The inclusion of this explanation does not constitute agreement with 27 the explanation’s substance by the members of the general assembly. 28 This bill creates new Code chapter 521H which requires 29 certain insurers domiciled in the state, or the insurance group 30 of which such an insurer is a member, to file a corporate 31 governance annual disclosure with the commissioner of 32 insurance. The purpose of the new Code chapter’s requirements 33 is to provide the commissioner with a yearly summary of an 34 insurer’s or insurance group’s governance structure, policies, 35 -9- LSB 1288SV (2) 86 av/nh 9/ 13

S.F. 349 and practices to permit the commissioner to understand the 1 insurer’s or insurance group’s corporate governance framework. 2 Beginning in 2016, an insurer or insurance group is 3 required to submit by June 1, annually, a corporate governance 4 annual disclosure to the commissioner that contains material 5 information necessary to permit the commissioner to gain an 6 understanding of the insurer’s or insurance group’s corporate 7 governance structure, policies, and practices. The disclosure 8 must be signed by the insurer’s or insurance group’s chief 9 executive officer or secretary attesting that the corporate 10 practices described in the disclosure have been implemented 11 and that a copy of the disclosure has been provided to the 12 insurer’s or insurance group’s board of directors or the 13 appropriate committee of the board. If an insurer is a member 14 of an insurance group, the insurer shall submit the disclosure 15 to the commissioner of insurance of the lead state of the 16 insurance group as determined by procedures contained in the 17 financial analysis handbook adopted by the national association 18 of insurance commissioners. 19 For purposes of the disclosure, the insurer or insurance 20 group may report information regarding corporate governance 21 at the ultimate parent controlling level, an intermediate 22 holding company level, or at the individual legal entity 23 level depending on how its system of corporate governance is 24 structured. The insurer or insurance group is encouraged to 25 make its disclosure at the level at which its risk tolerance 26 is determined; at the level at which its earnings, capital, 27 liquidity, operations, and reputation are overseen collectively 28 and the level at which the supervision of these factors is 29 coordinated and exercised; or at the level at which legal 30 liability for failure of general corporate governance duties 31 would be placed, and to indicate which of these factors 32 were used to determine the level of reporting, including any 33 subsequent changes. 34 The commissioner is directed to adopt rules to administer 35 -10- LSB 1288SV (2) 86 av/nh 10/ 13

S.F. 349 new Code chapter 521H. 1 Documents, materials, or other information, including a 2 corporate governance annual disclosure, in the possession or 3 control of the insurance division of the department of commerce 4 or any other person pursuant to the bill that is obtained by, 5 created by, or disclosed to the commissioner or to any other 6 person pursuant to the bill, is recognized as being proprietary 7 and containing trade secrets. Such documents, materials, or 8 other information, including the disclosure, is confidential, 9 is not subject to Code chapter 22 (open records), shall be 10 considered confidential under Code chapter 507 (examination of 11 insurance companies), shall not be subject to subpoena, and 12 shall not be subject to discovery or admissible in evidence in 13 any private civil action. The commissioner is authorized to 14 use such information in the furtherance of any regulatory or 15 legal action brought as part of the commissioner’s official 16 duties. The commissioner shall not otherwise make such 17 information public without the prior written consent of 18 the insurer or insurance group. The commissioner or any 19 other person with access to such information shall not be 20 permitted or required to testify in any civil action concerning 21 confidential information. 22 In performing regulatory duties, the commissioner may 23 share confidential and privileged information with specified 24 regulatory and other entities including certain third-party 25 consultants, and may receive such information from specified 26 regulatory and other entities. 27 In order to assist in the performance of the commissioner’s 28 regulatory duties, the commissioner may retain, at the 29 insurer’s or insurance group’s expense, third-party 30 consultants, including attorneys, actuaries, accountants, and 31 other experts not otherwise part of the commissioner’s staff, 32 as necessary to assist in reviewing a disclosure and related 33 information or ensuring compliance with the requirements of 34 the new Code chapter. Third-party consultants retained are 35 -11- LSB 1288SV (2) 86 av/nh 11/ 13

S.F. 349 under the direction and control of the commissioner and act 1 in an advisory capacity only. Such third-party consultants 2 must verify that they are free of any conflict of interest 3 and that they have internal procedures in place to monitor 4 compliance if there is a conflict and to ensure compliance with 5 the confidentiality standards and requirements of the new Code 6 chapter. 7 A written agreement entered into by the commissioner with 8 the national association of insurance commissioners or with 9 a third-party consultant that governs the sharing and use of 10 information provided pursuant to new Code chapter 521H shall 11 expressly require the written consent of the insurer prior to 12 making information provided under the new Code chapter public. 13 The agreement must specify that those parties are subject to 14 the same confidentiality standards and requirements governing 15 the sharing and use of information as the commissioner; specify 16 procedures and protocols for the confidentiality and security 17 of information shared and require that the recipient of such 18 information agree in writing to maintain the confidentiality 19 and privileged status of the information and verify the 20 legal authority to do so; specify that ownership of shared 21 information remains with the commissioner, who directs its 22 use; prohibit storage of the information in a permanent 23 database after analysis is complete; require prompt notice to 24 the commissioner and to an insurer or insurance group if the 25 insurer’s or insurance group’s information is subject to a 26 request or subpoena for disclosure or production; and require 27 that an insurer or insurance group be allowed to intervene in 28 any judicial or administrative action in which the national 29 association of insurance commissioners or a third-party 30 consultant may be required to disclose confidential information 31 that was shared pursuant to the new Code chapter. 32 The sharing of information pursuant to new Code chapter 521H 33 does not constitute a delegation of regulatory authority or 34 rulemaking by the commissioner, or a waiver of any applicable 35 -12- LSB 1288SV (2) 86 av/nh 12/ 13

S.F. 349 privilege or claim of confidentiality. 1 If an insurer or insurance group fails, without just cause 2 to timely file a corporate governance annual disclosure as 3 required in new Code chapter 521H, the commissioner shall, 4 after notice and hearing, impose a penalty of $500 for each 5 day’s delay, up to a maximum penalty of $5,000 for any single 6 failure to file. The penalties collected by the commissioner 7 are to be paid to the treasurer of state for deposit in the 8 department of commerce revolving fund as provided in Code 9 section 505.7. The commissioner may reduce the penalty if the 10 insurer or insurance group demonstrates that imposition of the 11 penalty would constitute a financial hardship to the insurer 12 or insurance group. 13 The provisions of the new Code chapter are severable, 14 with the exception of Code section 521H.6, relating to 15 confidentiality, in the event that application of the Code 16 chapter to any person or circumstance is held to be invalid. 17 New Code chapter 521H is applicable beginning on January 1, 18 2016. 19 -13- LSB 1288SV (2) 86 av/nh 13/ 13