Massachusetts To Make Insurers Boards More Accountable
Insurers board of directors must play a greater role in a team effort to make sure insurance companies are financially strong, says Massachusetts Insurance Commissioner Julianne Bowler.
Bowler outlined a new program being developed by the Massachusetts department during a legal seminar on insurance regulation sponsored by the Association of the Bar of the City of New York.
Corporate governance was a department concern long before highly visible companies such as Enron became the “poster child for bad corporate behavior,” Bowler said.
In Massachusetts, four companies have recently been placed in receivership with two hitting the guaranty funds for $90 million, one now writing business again and one in runoff, she continued.
During a review of how companies are being managed, it became apparent that many board members did not understand the insurance business, Bowler said.
Many “lack basic knowledge of products, risks and statutory accounting,” she added. For instance, she said some directors did not understand the business differences between personal and commercial insurance lines. And others could not say whether a current IT system would support a new product, Bowler said.
In some cases, directors either “completely acquiesced to management or asked perfunctory questions,” she said, adding that directors are not focusing enough on statutory accounting and they should be since that is the system that triggers regulatory action.