A. 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 pursuant to this Rule. Each accountant shall report directly to the Audit Committee.

B. 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 pursuant to Sections 14(E) and 3(C).

C. In order to be considered independent for purposes of this section, a member of the Audit Committee may 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 the law requires board participation by otherwise non-independent members, that 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.

D. 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 Commissioner, may remain an Audit Committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one (1) year from the occurrence of the event that caused the member to no longer be independent. The responsible entity is the entity whose board of directors established the audit committee.

E. To exercise the election of the controlling person to designate the Audit Committee for purposes of this Rule, the ultimate controlling person shall provide written notice to the commissioners of the domiciliary states of the affected insurers. Notification shall be timely made 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 Commissioner by the insurer, which shall include a description of the basis for the change. The election shall remain in effect until rescinded.

G. The proportion of independent Audit Committee members shall meet or exceed the following criteria based on prior calendar year direct written and assumed premiums, which shall be the combined total of direct premiums and assumed premiums from non-affiliates for the reporting entities:

H. The Commissioner has authority afforded by state law to require the entity's board to enact improvements to the independence of the Audit Committee membership if the insurer is in a RBC action level event, meets one or more of the standards of an insurer deemed to be in hazardous financial condition, or otherwise exhibits qualities of a troubled insurer.

I. Excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, an insurer with direct written and assumed premium of less than $500,000,000 may make application to the Commissioner for a waiver from the Section 14 requirements based upon hardship. If the waiver is approved, the insurer shall file, with its annual statement filing, the approval for relief from Section 14 with the states in which it is licensed or doing business and the NAIC. If the nondomestic states accept electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.