The apparent opposition of two key federal lawmakers to extending Sarbanes-Oxley corporate disclosure rules to non-public insurance companies has not deterred the National Association of Insurance Commissioners from pursuing that goal, it was learned.
That position was made clear in a Sept. 21 letter, written by NAIC President Diane Koken, the Pennsylvania insurance commissioner, in a response to the two congressmen. The letter was given to National Underwriter by an industry source.
Reps. Michael Oxley, R-Ohio, and Richard Baker, R.-La., in an Aug. 9 letter to Ms. Koken had urged the NAIC to seriously consider the ramifications of imposing Sarbanes-Oxley reporting requirements on non-public companies.
"If the NAIC intends to extend SOX provisions beyond publicly traded companies, we strongly suggest state insurance regulators carefully examine what additional protections policyholders will be afforded by extending new and substantial requirements to mutual, reciprocal and privately held companies, and how to best balance those protections with the costs involved," they wrote.
Mr. Oxley chairs the House Financial Services Committee and Mr. Baker the Capital Markets Subcommittee, the key insurance industry group.
Ms. Koken replied that the NAIC regulators have already addressed concerns expressed by the two lawmakers, and said the final product will be a "reasonable, balanced approach to improving the accuracy and reliability of insurer financial statements and I look forward to working with all parties to reach that goal."
The exchange of letters comes in the wake of increasing tension between Mr. Oxley and NAIC officials over drafting of the State Modernization and Regulatory Transparency (SMART) Act, which the NAIC opposes because of the preemption of state laws it would entail.
Industry trade associations, most notably the National Association Of Mutual Insurance Companies, have vigorously fought imposition of SOX rules such as internal controls auditing on mutual companies that many public companies have found burdensome.
Bob Detlefsen, NAMIC public policy director, expressed concern that in their letter Mr. Baker and Mr. Oxley implied they only became aware of the effort recently.
"They seem kind of dismayed that the NAIC continues to go its own way on insurance regulatory reform without consulting or even informing the committee," he said.
In addition, the Oxley-Baker letter stresses that the Sarbanes-Oxley measures were meant to provide transparency for the investor and not the policyholder.
"And this is what we have been saying all along," Mr. Detlefsen said.
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