NAIC Advances ’05 Budget; Vote Set for Winter Meeting

November 22, 2004

The National Association of Insurance Commissioners (NAIC) last week advanced its proposed 2005 budget during a public hearing and subsequent meeting of the NAIC Internal Administration (EX1) Subcommittee, both conducted via teleconference. The budget now awaits full membership approval when it goes before the NAIC Executive Committee for a vote at the upcoming NAIC Winter National Meeting in New Orleans.

“We are very pleased to present to our members a budget that we strongly feel is both responsible and effective, especially given the initiatives and demands of the NAIC anticipated for 2005,” said NAIC President Diane Koken, who also serves as Pennsylvania Insurance Commissioner. “We appreciate and value the considerable input from consumer advocates and industry representatives, which was key in crafting a document we believe reflects and balances their concerns with the needs of the NAIC membership.”

The 2005 budget proposal includes consolidated revenues of $58.8 million and consolidated expenses of $55.0 million, representing a 2.06 percent increase and 2.83 percent reduction, respectively, from the 2004 budget, and a 1.92 percent increase and .85 percent reduction from 2004 projected levels.

“Significant effort and analysis were performed to identify and eliminate certain services, products and programs that were not essential to the NAIC membership respective to the goals of the association,” said Koken. “These reductions allow us to report that the 2005 consolidated expense budget is now only 2.65 percent higher than the NAIC’s budget in 2002 – three years later; this at a time when regulatory modernization, projects and initiatives, and the states’ reliance on the NAIC are growing at a very fast pace, and more than ever before.”

Participating in the teleconference were officials from the Center for Economic Justice, the Property Casualty Insurers Association of America, the American Insurance Association, the National Association of Mutual Insurance Companies, the American Council of Life Insurers, the National Alliance of Life Companies, and the Life Insurers Council.

In preparing the budget, the NAIC’s target operating reserve level was a key factor—as well as a primary concern for interested parties.

“The increase in the reserve, up to a target reserve of 100 percent, is a prudent reaction to the growing risks and uncertainties facing state insurance regulation and the NAIC’s business and finances,” said Koken. Contributing factors include introduction of federal tools and dual charter legislation in Congress, participation with the U.S. Treasury in the Terrorism Risk Insurance Act, and initial start-up capitalization of the Interstate Compact Commission, among others.

Participants in the hearing were appreciative of the transparency and detail presented within the 2005 budget proposal.

“We have always stressed that transparency is the most critical component of the budget-planning process,” said Catherine J. Weatherford, NAIC Executive Vice President and CEO. “As with previous years, we approach the budget proposal to ensure that every detail of the association’s budget and finances are completely documented and understandable. We know of no other nonprofit entity that publishes the level of disclosure and detail that the NAIC budget provides.”

For questions about the proposed budget, or for a copy of the budget package, please call Brady Kelley, NAIC Chief Financial Officer, at (816) 783-8001. The NAIC Web site at: also provides summary information and details of the 2005 budget proposal.

Topics Legislation

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