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.

Rep. Oxley chairs the House Financial Services Committee and is the named co-sponsor of the Sarbanes-Oxley Act that imposed new disclosure requirements on publicly-traded companies in the post-Enron era. Rep. Baker heads up the Capital Markets Subcommittee.

In her response, Ms. Koken replied that NAIC members have already addressed concerns expressed by the two lawmakers. She 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 Rep. 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 authority it would entail.

Industry trade associations–most notably the National Association Of Mutual Insurance Companies–have vigorously fought imposition of SOX rules on non-public insurers, such as internal control auditing of mutual companies, which many public companies have found burdensome.

Bob Detlefsen, NAMIC public policy director, expressed concern that in their letter Reps. Baker and 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," noted Mr. Detlefsen.

Meanwhile, insurance industry representatives and regulators are still attempting to come to some meeting of the minds on extending Sarbanes-Oxley measures to non-public insurers.

William Boyd, financial regulation manager for the Indianapolis-based NAMIC, said carrier representatives expect to submit a new proposal for the internal control auditing portion of the measure sometime this week.

The so-called Title IV regulator group looking at that issue was expected to discuss it at a mini-NAIC meeting in Kansas City at the end of October, but the matter could be postponed, Mr. Boyd noted.

Reps. Oxley, Baker question the need and cost of forcing mutual carriers to meet SOX disclosure standards