20 : 06 : 60 : 06 . Description of senior management. The insurer or insurance group shall describe the policies and practices for directing senior management in its corporate governance annual disclosure, including:

1. (1) Suitability standards and any other processes or practices that determine whether officers and key persons in control functions have the appropriate background, experience, and integrity to fulfill their prospective roles, such as:

   1. (a) Identification of the specific positions for which suitability standards have been developed and a description of the standards employed; and
   2. (b) Any changes in suitability standards and procedures to monitor and evaluate such changes regarding suitability for specific positions;

2. (2) The insurer's or insurance group's code of business conduct and ethics, which may include:

   1. (a) Compliance with laws, rules, and regulations; and
   2. (b) Proactive reporting of any illegal or unethical behavior;

3. (3) The insurer's or insurance group's processes for performance evaluation, compensation, and corrective action to ensure effective senior management throughout the organization, including a description of the general objectives of significant compensation programs and what the programs are designed to reward. The description must include sufficient detail to allow the director to understand how the organization ensures that compensation programs neither encourage nor reward excessive risk taking. Elements to be discussed may include:

   1. (a) The board's role in overseeing management compensation programs and practices;
   2. (b) The various elements of compensation awarded in the insurer’s or insurance group's compensation programs and how the insurer or insurance group determines and calculates the amount of each element of compensation paid;
   3. (c) How compensation programs are related to both company and individual performance over time;
   4. (d) Whether compensation programs include risk adjustments and how those adjustments are incorporated into the programs for employees at different levels;
   5. (e) Any claw back provisions built into the programs to recover awards or payments if the performance measures upon which they are based are restated or otherwise adjusted; and
   6. (f) Any other factors relevant in understanding how the insurer or insurance group monitors its compensation policies to determine whether its risk management objectives are met by incentivizing its employees; and
4. (4) The insurer's or insurance group's plan for chief executive officer and senior management succession.

Source: 46 SDR 147 , effective July 2, 2020 .

General Authority: SDCL 58-5-166.

Law Implemented: SDCL 58-5-166 .