Nebraska Department of Insurance

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MEMORANDUM

TO: All Nebraska Domestic Insurance Companies

FROM: David L. Krumm, Chief Examiner

DATE: December 13, 2002

RE: On-site Financial Examinations

The Nebraska Department of Insurance conducts on-site financial examinations of all domestic insurance companies on a periodic basis. Because of the advancements in technology, we are making substantial changes in our examination procedures. We now have the capability to complete all examinations in electronic format.

Our existing process requires the examiner to go to the jobsite and request documentation that supports the Annual Statement line items. Hardcopy data must be scanned into the computer application that manages the examination process. Scanning takes a considerable amount of time. After reviewing the existing examination process, we believe that we can eliminate some of the examination time if your company provides the necessary documentation in electronic format in advance of the examiners' arrival at your company.

As part of the examination effort, the examiners employ electronic data processing (EDP) audit software to perform audit work on specific items. In order to perform these EDP applications, the examiners request data files in an electronic format. Each company should be prepared to supply necessary data files. The data files are, for the most part, files that support the values recorded in the Annual Statement and its related documents. Previously, certain file requests needed to be reconstructed by the company's data processing department at great expense in terms of processing time and audit delay. For these files to be readily available, each company should save and store all electronic data files that support or were used in preparation of annual statement values, and related documents, for each year-end.

DOCUMENTATION TO BE SAVED AND MAINTAINED ELECTRONICALLY

Certain documentation is requested by the examination staff at each and every financial examination. We are requesting that the insurance companies annually save such documentation electronically. Please view this list as a minimum requirement for data files under the provisions of Nebraska Revised Statute §44-106.

1. Accounts and Records
2. Articles of Incorporation
3. Bylaws
4. Management Representations of Commitments and Contingent Liabilities
5. Corporate Minutes
6. Internal Auditors Reports
7. Territory and Plan of Operation
8. Holding Company Filings
9. Documentation necessary to support annual statement assets and liabilities.
   1. All written premium transactions for the year.
   2. All transactions associated with reserves and paid contract claims including, for life and health companies, the development of Exhibit 5 & 8 for the year.
   3. All transactions associated with premium and agents' balances for the year.
   4. Data files, which support values and transactions, reported in the investment schedules of the Annual Statement.
   5. All data files which support the reinsurance balances reflected in the Annual Statement for the year.
   6. Trial balances and adjustments for the year.

If you have any questions regarding this memo please contact:

James G. Nixon
jnixon@doi.state.ne.us
(402) 471-2201
fax (402) 471-4610