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New York State Department of Financial Services (DFS) adopted Regulation 118 in 2009 to apply audit and reporting standards for New York authorized insurers. An amendment to Regulation 118, which requires certain insurers to establish an internal audit function, will go into effect on Nov. 20, 2020. The amendment aligns the internal audit function requirements of the NAIC Annual Financial Reporting Model Regulation (Model 205). Insurers with premiums in excess of $500 million and members of a group with more than $1 billion of annual direct written and unaffiliated assumed premiums must comply. Insurers that were exempt under this regulation have one year after the threshold is exceeded to comply with the requirements.

The amendment defines the internal audit function as the role of applying a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, and governance processes to add value, improve a company's operations, and accomplish its objectives.

Amendment Summary

  • The insurer's audit committee will be responsible for overseeing the internal audit function and grant the person or persons performing the function suitable authority and resources to fulfill their responsibilities.
  • The internal audit function can be satisfied at the ultimate group level or intermediate group level if it addresses risk management, control and governance processes of the company.
  • The internal audit function will be organizationally independent, not defer ultimate judgment on audit matters to other persons and appoint an individual to head the internal audit function.
  • Responsibilities include performing general and specific audits, reviewing, testing and employing other techniques deemed necessary to protect assets, evaluate control effectiveness and efficiency and evaluate compliance with policies and regulations.
  • The head of internal audit will have direct and unrestricted access to the insurer's board of directors.
  • The head of the internal audit will report to the audit committee regularly, but at least annually, on the periodic internal audit plan, factors that may adversely impact the internal audit function's independence or effectiveness, material findings from completed internal audits, and the appropriateness of corrective actions implemented by management as a result of internal audit findings.

How We Can Help

Internal audit provides independent and risk-focused insight to help insurance organizations meet their strategic, operational and regulatory goals. With our comprehensive internal audit service offerings, FORVIS can assesses your company's current state and determine a service designed to meet your company's business objectives. We offer risk-focused, value-added insight while delivering word-class service to help your organization meets its strategic and operational goals. Our proven methods drive results and boost collaboration by focusing on four core values: trust, relationships, passion and innovation.


  1. New York State Department of Financial Services Second Amendment to 11 NYCRR Part 89 (Insurance Regulation 118) []

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