Maryland Launches Insurer Governance Program

April 9, 2004

Maryland Insurance Commissioner Alfred W. Redmer, Jr. has initiated a corporate governance oversight program for insurance companies that are incorporated in Maryland. The purpose of the program is to assure that board members are aware of their fiduciary responsibilities and obtain the information and expertise necessary to carry out those responsibilities
“The failure of companies such as Enron and Worldcom, including the criminal indictments of corporate executives,” Redmer said, “has prompted the passage of laws and regulations to strengthen and focus the duties of directors and officers of corporations. However, most of these laws apply only to Securities and Exchange Commission (SEC) regulated public insurance companies. Because many of Maryland’s domestic insurance companies are mutual, non-profit,” or closely held, the rules made under the Sarbanes-Oxley Act, the SEC, and other entities do not apply.”

The Maryland Insurance Administration’s program will focus primarily on small and mid-sized companies that are not subject to SEC laws and regulations, including the Sarbanes-Oxley Act.

The Maryland Insurance Administration will be reviewing the corporate governance controls and procedures of mutual, non-profit, and closely-held domestic insurers to determine whether certain core standards are being met. The commissioner and his staff will then meet with the boards of the domestic companies, beginning with those companies whose practices appear deficient.

“Our goal is not to punish or intimidate companies or board members,” the commissioner said, “but to help them strengthen their internal controls and procedures. I believe that having strong, independent, and knowledgeable directors is one of the best ways to protect policyholders.”

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