NU Online News Service, March 19, 2004, 5:42 p.m. EST, New York – Insurers are objecting to a proposal to incorporate elements of the federal Sarbanes-Oxley Act in a model audit rule for insurance filings.[@@]
Including a requirement based on Sarbanes-Oxley would be costly and unnecessary, insurers said here during the spring meeting of the National Association of Insurance Commissioners, Kansas City, Mo.
But Doug Stolte, chair of the NAIC/American Institute of Certified Public Accountants working group, said adding a provision based on Sarbanes-Oxley would add value to regulatory oversight of insurance companies.
Stolte, a deputy commissioner with the Virginia Bureau of Insurance, said the failure of a property-casualty insurer in his state due to “problematic financial reporting” proves the need for better internal controls.
Some provisions in the current version of the Model Regulation Requiring Annual Audited Financial Reports, or model audit rule, would require an insurance company’s managers to file a report on the company’s internal compliance procedures.
Managers would have to identify the means they used to evaluate the internal controls and report on the effectiveness of the controls. Managers also would have to include an attestation about the internal controls from the independent accountant who audited the company’s financial statements.
An exemption for small companies is in the early stages of discussion, according to Stolte.
For the moment, people are talking about using premium dollars as a yardstick for measuring company size, Stolte said.
Trade groups that oppose the proposal include the American Council of Life Insurers, Washington; the National Alliance of Life Companies, Rosemont, Ill.; the National Association of Mutual Insurance Companies, Indianapolis; and the Property Casualty Insurers Association of America, Des Plaines, Ill.
Bill Boyd, NAMIC’s financial regulation manager, estimates the proposed requirements would increase insurers’ financial reporting costs about 50% to 100%.