Ft. Lauderdale, Fla.–A resolution vigorously opposing regulators' efforts to impose Sarbanes-Oxley reporting requirements on mutual insurance companies won preliminary approval today from a National Conference of Insurance Legislators committee.
North Dakota State Rep. George Kaiser, R-Bismarck, author of the resolution, said the new requirements, proposed by the National Association of Insurance Commissioners, are an “effort to impose a solution for something for which there is not a problem.”
The measure was passed despite efforts of industry and regulatory representatives to respect the NAIC compromise that has been worked out over the past year that would take some of the sting out of the original reporting proposal.
Neal Alldredge, director of state advocacy for the National Association of Mutual Insurance Companies, maintained the group's status as the sole industry holdout against any compromise.
He called the reporting requirements a terrible proposal and “something that is just plain bad.”
NCOIL's Financial Services and Investment Products Committee passed the resolution unanimously, with members expressing a great deal of anger that NAIC regulators would seek to impose new requirements without a solid idea of the costs involved and without the approval of elected representatives.
Insurance industry representatives for the most part seem to have accepted the fact of the new requirements.
Northwestern Mutual representative Allan Close said his company supported the compromise proposal as a “thoughtful approach to regulation” while State Farm representative James Tuite said his company remains “enthusiastically neutral” about the proposal.
Michigan Deputy Insurance Commissioner Judy Weaver made the case for the NAIC proposal, asserting the compromise represented a year of effort from industry and regulatory representatives.
“We are trying to get a comfort level that we can rely on the financial reports that we get from mutual insurance companies,” she said.
Mr. Alldredge noted, however, that since 1992, only 5 percent of insolvencies came from mutual insurance companies in terms of number of companies.
The main elements of compromise consist of eliminating outside auditor attestation requirements from the internal controls section and raising the threshold premium level to $500 million before companies would be subject to the new requirements.
“If this was really Sarbanes-Oxley, then we would not be opposing this resolution,” said Steve Broadie of the Property Casualty Insurers Association of America.
Lawmakers' objections to the fact that in some states the new rules would be put in place merely by reference to a change in the NAIC Model Audit Rule were met by Ms. Weaver's pledge to encourage every state to engage in some sort of regulatory or legislative approval process before enactment.
Ms. Weaver also said she expects the full NAIC body to vote on final approval at the group's summer meeting in June.
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