Withdrawal of a proposal on Saturday, during a meeting of the NAIC Blanks Working Group, to have the National Association of Insurance Commissioners (NAIC) Annual Statement reflect Sections 406 and 407 of the Sarbanes-Oxley (SOX) Act, drew applause from the National Association of Mutual Insurance Companies (NAMIC). Virginia Deputy Commissioner Doug Stolte, proposal sponsor, asked for its withdrawal.
Separate from another proposal before the NAIC/AICPA Working Group that would have mutual insurers reportedly hewing to a number of Sarbanes-Oxley’s prescriptions for the audit process, the
Stolte proposal that was sidelined on Saturday would have caused all insurers to report:
· Whether senior officers have a code of ethics and amendments or waivers thereof.
· Whether there is a financial expert serving on the insurer’s audit committee and who that person is.
· Whether that person is independent of management.
“This latest proposal should properly wait for disposition of the other proposal now pending before the NAIC/AICPA Working Group to modify the NAIC Model Audit Rule to include Sarbanes-Oxley elements,” said William Boyd, NAMIC financial regulation manager. “Additionally, the proposal withdrawn on Saturday would appear to need some revision as to whether individual companies or groups are doing the reporting.”
The NAIC currently has under way consideration of a number of measures to “raise the bar” on solvency regulation in the wake of public-company scandals outside of the insurance industry. The Sarbanes-Oxley Act includes content on public companies’ audit committees and their independence. The withdrawn blanks item draws on the Act’s Sections 406 and 407.
“A revised blanks item for this kind of reporting will probably reappear at a later time, perhaps after resolution of a number of issues about the major proposal for amendment of the Model Audit Rule to incorporate Sarbanes-Oxley content,” said Boyd.
The Blanks Working Group meeting was also the first under which new procedure operates for consideration and inception of new or changed annual-statement reporting. Rather than accumulating large numbers of blanks items for once-a-year disposition, the new process allows items be considered quarterly ? with some changes beginning mid-year.
“Insurers’ quarterly reporting will be made somewhat more difficult due to more mid-year changes,” added Boyd. “However, at least the changes won’t all fall on companies for the new year.”
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