NU Online News Service, April 2, 2004, 4:02 p.m. EST – Regulators want insurers to certify that their internal financial reporting controls are effective.[@@]
Doug Stolte, Virginia’s deputy insurance commissioner and chair of the NAIC/AICPA working group, is emphasizing the importance of the Model Regulation Requiring Annual Audited Financial Reports in creating tools for good regulation of insurers.
The model is a product of the National Association of Insurance Commissioners, Kansas City, Mo.
The model would require non-public and mutual insurers as well as public companies to comply with the Sarbanes-Oxley Act of 2002. Public companies already have to comply with the law.
The model would require reports from individual entities within an insurance holding company. Providing that extra information will help protect consumers, Stolte says.
The NAIC will be developing a new model draft dealing with reporting issues during its summer meeting, Stolte says.
Both insurers and regulators talk about the cost of certification.
Insurers say the cost of an audit on internal financial reporting controls would be excessive and would ultimately be passed on to consumers.
Stolte, on the other hand, says requiring auditors to sign off on internal controls would prevent insolvencies and help insurers save money on assessments from guaranty funds.
There will also be an exemption for small companies, Stolte says.
If adopted, the model would not take effect until 2006, Stolte adds.
But Rowan Bell, a representative for the Blue Cross and Blue Shield Association, Chicago, says an entity auditing requirement will be more expensive than regulators might think.
A single Blue Cross company with operations in several states could own more than 20 entities that would be subject to the requirement, Bell says.