“State legislators are right to challenge an NAIC initiative that would impose sweeping federal requirements designed to protect stockholders on privately held insurance companies,” according to an official of the nation’s largest property/casualty trade association.
Roger H. Schmelzer, Senior VP of State and Regulatory Affairs at the National Association of Mutual Insurance Companies (NAMIC), said that his organization strongly supports NCOIL’s opposition to an NAIC proposal to extend elements similar to those contained in the federal Sarbanes-Oxley (SOX) corporate governance law to non-public insurers.
NAMIC’s announcement noted that the “letter was authorized by NCOIL’s Executive Committee at its meeting last week in Hilton Head, S.C., and presented to the NAIC on Saturday by NCOIL President, Texas State Rep. Craig Eiland.”
“NCOIL is taking the right position on behalf of insurance buyers who will bear the substantially increased cost of compliance,” Schmelzer stated. “Regulators are trying to improve solvency regulation with a tool intended to increase confidence in the public capital markets.”
He agreed with NCOIL’s assertion that insurance companies are already subject to rigorous financial regulation to protect consumers from insolvencies and questioned the benefit of overlaying SOX on state regulation at significant cost. “We too are unconvinced a problem exists that application of Sarbanes-Oxley could solve that isn’t covered by state laws now in place,” Schmelzer continued.
He noted that NAMIC members have also expressed serious reservations over the use of the NAIC Model Audit Rule as the vehicle for enacting corporate governance and financial control laws modeled after Sarbanes-Oxley. Amendments being considered to the NAIC Model Audit Rule would become law in most states automatically upon approval by the NAIC and would not be subject to legislative debate or vote.
“These issues were the subject of intense public attention and debate by the United States Congress, the membership of which is accountable to voters ” Schmelzer pointed out, contrasting congressional enactment of Sarbanes-Oxley to the process of NAIC quarterly meetings, working groups, sub-groups and interim task force meetings involving insurance regulators and industry representatives.
“The NAIC is a private organization lacking standing and process to make policies with wide-reaching consequence. That is the function of a legislative body,” Schmelzer asserted. “Trying to wedge investor protections into the solvency regulation of non-public insurance companies is a misunderstanding of the intent of SOX by the NAIC. This error should not be compounded by slipping it into law using a process intended to enact only the most detailed aspects of insurance regulation.”
Topics Legislation
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