PCI said the NAIC, by ignoring industry calls to restrain increases, was creating "significant" budget growth "during this period of unprecedented tough financial times being faced by insurers."

Last month, during a conference call on the NAIC's 2009 Budget Proposal, Deirdre Manna, PCI's vice president for industry, regulatory and political affairs, had called on the regulator association to revise its spending plan and set it for flat growth to reflect "the current economic environment in which we all now operate," PCI reported.

"The insurance industry pays, directly or indirectly, significantly more than half of the NAIC budget," Ms Manna noted in a statement after the budget was passed. "This was an opportunity for state regulators to send a message by way of reducing NAIC expenses and revenues. This major shift would have been recognized and well-received by Congress and state legislatures."

In another NAIC budget matter, PCI said it requested the removal of $200,000 earmarked for a National Catastrophe Model System Proof of Concept Study. The group said it estimates that costs for the system would involve many millions of dollars, and the maintenance and upkeep would be millions more.

"The development of a multistate, multi-peril model could cost much more than the initial Proof-Of-Concept estimate of $200,000--and that is the main issue," said Ms. Manna.

She added that PCI believes "to start down this path is to promise that the NAIC will spend millions of dollars in the future rather than stopping growth and reigning in expenses. We felt that regulatory resources would be better spent by focusing on the review or examination of the existing private-sector models, which have been highly refined over many years of research and development."

NAIC said the funding request of $200,000 represents its best estimates of costs associated with engaging catastrophe modeling experts and outside legal counsel to support this analysis. It said any ultimate recommendation to seek more funding for development of a national catastrophe model must be accompanied by a comprehensive business and fiscal impact proposal to fully quantify and justify the project,

PCI also criticized the addition of a full-time employee to support the NAIC's work with the International Association of Insurance Supervisors (IAIS). There is already a full-time employee in Brussels, Belgium, and the need for another full-time employee is not consistent with the need to restrain budget growth in troubled economic times, according to PCI.

NAIC responded that "with the global financial crisis affecting so many sectors, regions and countries, the timing couldn't be better to deploy an NAIC staff position in Brussels, Belgium."

The 2009 budget proposes revenues and expenses of $73.1 million and $70.7 million, respectively, forecasting revenue growth of 7.1 percent. The NAIC's expense budget is projected to grow by 6.3 percent.

The NAIC, in a statement after passage of the budget on Sunday at its winter meeting in Grapevine, Texas, said: "We have prepared a strong and transparent budget for 2009, one demonstrating our focus to serve members in their protection of consumers and ensuring strict solvency of the insurance industry."

Among the new budget initiatives are spending for an employee and consultants working on NAIC's State Producer Licensing Reengineering project.

Money will also go to fund the Market Conduct Annual Statement proposal to prepare and support the existing MCAS process--updating it to collect 2008 data filed in 2009.

The outlay will also enable the collection of data submitted by states to the NAIC, as well as automation of data for limited analysis and the creation of national ratios and averages by the NAIC.