S.F. _____ H.F. _____ 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 1288XD (4) 86 av/nh 1/ 13

S.F. _____ H.F. _____ 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 3, 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 1288XD (4) 86 av/nh 2/ 13

S.F. _____ H.F. _____ 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. Notwithstanding subsection 1, the corporate governance 17 annual disclosure shall be prepared consistent with rules 18 adopted by the commissioner pursuant to chapter 17A. 19 Documentation and supporting information prepared pursuant 20 to this chapter and related rules shall be maintained and 21 made available upon examination by or upon request of the 22 commissioner. 23 3. The corporate governance annual disclosure shall include 24 the signature of the insurer’s or insurance group’s chief 25 executive officer or corporate secretary, attesting that to the 26 best of that individual’s belief and knowledge the insurer or 27 the insurance group has implemented the corporate governance 28 practices described in the disclosure and that a copy of the 29 disclosure has been provided to the insurer’s or the insurance 30 group’s board of directors or the appropriate committee of the 31 board. 32 4. a. For purposes of completing a corporate governance 33 annual disclosure, an insurer or insurance group may report 34 information regarding corporate governance at the ultimate 35 -3- LSB 1288XD (4) 86 av/nh 3/ 13

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

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

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

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

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

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

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

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

S.F. _____ H.F. _____ the new Code chapter. Third-party consultants retained are 1 under the direction and control of the commissioner and act 2 in an advisory capacity only. Such third-party consultants 3 must verify that they are free of any conflict of interest 4 and that they have internal procedures in place to monitor 5 compliance if there is a conflict and to ensure compliance with 6 the confidentiality standards and requirements of the new Code 7 chapter. 8 In performing regulatory duties, the commissioner is 9 required to enter into a written agreement with the national 10 association of insurance commissioners or with a third-party 11 consultant that governs the sharing and use of information 12 provided pursuant to new Code chapter 521H. The agreement 13 must specify that those parties are subject to the same 14 confidentiality standards and requirements governing the 15 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 1288XD (4) 86 av/nh 12/ 13

S.F. _____ H.F. _____ 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 1288XD (4) 86 av/nh 13/ 13