Pennsylvania Joins 25 Other States in Adopting a Corporate Governance Annual Disclosure (Cgad) Filing Requirement: What you Should Know & be Doing now to Prepare for This Filing

Pennsylvania Joins 25 Other States in Adopting a Corporate Governance Annual Disclosure (Cgad) Filing Requirement: What you Should Know & be Doing now to Prepare for This Filing

On October 24, 2018, Pennsylvania CGAD legislation (SB 1205) was signed into law.  Pennsylvania now joins 25 other states in enacting a CGAD filing requirement based on the NAIC Corporate Governance Annual Disclosure Model Act that would require insurers/insurer groups to make an annual filing on their corporate governance framework, policies and practices.  While the first PA CGAD filing is not due until June 1, 2020, the time to prepare for this filing is now.  Below are a few reminders of what you need to know about a CGAD filing, including Pennsylvania-specific provisions impacting your CGAD filing, and what you should be doing now.

What You Should Know

1.  Applicability:  There are no exemptions from the CGAD filing requirement -- CGAD applies to all insurers – regardless of size and type -- even small insurers, fraternals and standalone mutuals that may be exempt from other requirements (like Enterprise Risk Reporting and the internal audit function requirements).

2.  A CGAD Filing is Not a “Respond-to-a-Questionnaire” Filing:  Unlike other filing requirements (e.g. Forms B, D & F) that provide a specific form/format for providing required information, the CGAD is intended to be a “tell-your-story-in-your-words” filing where you provide detailed narrative and documentation under four key topical areas:

  • Governance framework & structure.
  • Policies & practices of the Board & Board committees.
  • Policies & practices for directing senior management.
  • Oversight of critical risk areas.

Nonetheless, in response to concerns expressed by the Pennsylvania insurance industry, SB 1205 provides for the PA Insurance Department to include a sample template for a CGAD on its internet website.

3.  A CGAD Filing is Not a “One Size Fits All” Filing & is More Than Just Providing Copies of/Information From Your Governance Documents:  The CGAD must also report on actual practices and your rationale for and the suitability of those practices for your operations (a governance framework, practices and policies that may be appropriate and suitable for one insurer/insurer group based upon its operations and risks may not be for another).

4.  Regulator Review of the CGAD - Important PA-Specific Provisions:

  • SB 1205 provides that the PA Insurance Department will consider premium volume, licensing status in other states and corporate complexity and scale when evaluating the comprehensiveness of the CGAD of a specific insurer/insurance group.
  • SB 1205 provides that, before retaining third-party consultants (at the expense of the insurer/insurance group),  the PA Insurance Department will consider the complexity of the corporate governance structure of the insurer/insurance group and whether subject matter expertise to effectively review the CGAD is available within the Department.

What You Should Be Doing Now

Learn about all that you must report on in the CGAD filing & ask the following questions:

  • Could you currently provide rational, logical and meaningful information on all of the CGAD inquiries?
  • Is your governance structure appropriate for your needs and objectives?
  • Do your governance documents accurately say what you want them to say?
  • Are your actual practices in accordance with your governance documents?
  • Are your governance structure, documents, policies and practices effective and suitable for your operations and risks?

Change takes time!  If you have not recently analyzed the appropriateness and effectiveness of your governance structure and practices, the time to do so is now and not when the filing deadline is imminent.

For questions on the PA CGAD requirement or assistance in analyzing your governance structure and practices, feel free to contact Fran Roggenbaum at 717.257.7526 /

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