Regulators Respond To Legislators SOX Concerns NAIC says SOX best practices wont be incorporated automatically into state laws
By Jim Connolly
Insurance regulators responded to concerns voiced by state legislators in early March that changes to the Model Audit Rule incorporating best practices of the Sarbanes-Oxley Act of 2002 would be incorporated automatically into state laws.
In a letter dated March 29 to the National Conference of Insurance Legislators, Doug Stolte, deputy commissioner of the Virginia State Corporation Commissions bureau of insurance, wrote that it never has been the intent of the National Association of Insurance Commissioners NAIC/AICPA working group to “automatically incorporate” the proposed revisions by reference through the annual statement instructions. The working group, he emphasized, will recommend the proposed revisions be done by statute or regulation due to their significance. “The working group is in no way trying to impinge on any states legislative process by making substantive policy judgments.”
Only a “very limited number of states” have adopted the MAR through annual statement instructions, he wrote. Rather, the overwhelming majority of states have adopted the MAR by statute or regulation and any significant changes would utilize the same statutory or regulatory process, he continued.
In his letter, Stolte stated that “it is critical to realize that virtually every regulatory tool is predicated upon high quality and accurate financial data.
“If an insurer does not possess accurate and reliable financial data, moreover, how can it accurately price its products and manage its business?” the letter asked.
In a March 10 letter, Rep. Craig Eiland, a Texas representative of NCOIL, based in Troy, New York, stated his concern that the changes would be made through the annual statement instructions.
Eiland also said SOX was enacted to protect shareholders of publicly traded companies and its provisions are not designed to address non-public companies which already are regulated by state solvency laws.