1. This section shall not apply to foreign or alien insurers licensed in this state or an insurer that is a SOX-compliant entity or a direct or indirect wholly owned subsidiary of a SOX-compliant entity.

2. The audit committee shall be directly responsible for the appointment, compensation, and oversight of the work of any accountant, including resolution of disagreements between management and the accountant regarding financial reporting, for the purpose of preparing or issuing the audited financial report or related work under sections 375.1025 to 375.1062. Each accountant shall report directly to the audit committee.

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3. The audit committee of an insurer or group of insurers shall be responsible for overseeing the insurer’s internal audit function and granting the person or persons performing the internal audit function suitable authority and resources to fulfill their responsibilities if required by section 375.1058.

4. Each member of the audit committee shall be a member of the board of directors of the insurer or a member of the board of directors of an entity elected under subsection 7 of this section and subdivision (4) of section 375.1025.

5. In order to be considered independent for purposes of this section, a member of the audit committee shall not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept any consulting, advisory, or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof. However, if law requires board participation by otherwise nonindependent members, such law shall prevail and such members may participate in the audit committee and be designated as independent for audit committee purposes, unless they are an officer or employee of the insurer or one of its affiliates.

6. If a member of the audit committee ceases to be independent for reasons outside the member’s reasonable control, that person, with notice by the responsible entity to the state, may remain an audit committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one year from the occurrence of the event that caused the member to be no longer independent.

7. To exercise the election of the controlling person to designate the audit committee for purposes of sections 375.1025 to 375.1062, the ultimate controlling person shall provide written notice to the chief state insurance regulatory officials of the affected insurers. Notification shall be made timely prior to the issuance of the statutory audit report and include a description of the basis for the election. The election can be changed through notice to the director by the insurer, which shall include a description of the basis for the change. The election shall remain in effect for perpetuity, until rescinded.

8. (1) The audit committee shall require the accountant that performs for an insurer any audit required by sections 375.1025 to 375.1062 to timely report to the audit committee in accordance with the requirements of the auditing profession, including:

(a) All significant accounting policies and material permitted practices;

(b) All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the accountant; and

(c) Other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.

(2) If an insurer is a member of an insurance holding company system, the reports required by subdivision (1) of this subsection may be provided to the audit committee on an aggregate basis for insurers in the holding company system; provided that any substantial differences among insurers in the system are identified to the audit committee.

9. The proportion of independent audit committee members shall meet or exceed the following criteria:

(1) If the insurer wrote direct and assumed premiums of zero to three hundred million dollars during the prior calendar year, no minimum requirements are required regarding the number or proportion of audit committee members who shall be independent;

(2) If the insurer wrote direct and assumed premiums of three hundred million to five hundred million dollars during the prior calendar year, at least a majority of the members of the audit committee shall be independent; and

(3) If the insurer wrote direct and assumed premiums of five hundred million dollars or more during the prior calendar year, a supermajority of at least seventy-five percent of the members of the audit committee shall be independent.

10. An insurer with direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than five hundred million dollars may make application to the director for a waiver from the requirements of this section based upon hardship. The insurer shall file, with its annual statement filing, the approval for relief from this section with the states that it is licensed in or doing business in and the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.