A leading insurance regulator is asking state legislators for help with adding tougher internal control and financial reporting requirements to state insurance accounting rules.[@@]
Douglas Stolte, chairman of the National Association of Insurance Commissioners/American Institute of Certified Public Accountants working group at the NAIC, Kansas City, Mo., talked about the panel’s efforts earlier this week in Newport, R.I., at the summer meeting of the National Conference of Insurance Legislators, Troy, N.Y.
The working group has been drafting revisions to the NAIC’s influential Model Audit Rule.
Working group members have drafted additions based on internal control and financial reporting provisions in the Sarbanes-Oxley Act of 2002, which governs publicly traded companies in all industries.
Regulators copied the SOX provisions because the provisions promote the use of “the best practices regulators believed should apply to all insurers for auditor independence, corporate responsibility and internal controls over financial reporting,” Stolte, who is the deputy insurance commissioner in Virginia, said at the NCOIL meeting, according to a written version of his presentation.
The proposed changes would give management ownership and responsibility for internal controls, Stolte said.
Opponents to the changes object to the projected cost of compliance and say insurers already face “extensive reporting and regulatory requirements,” Stolte said.
Stolte said making the changes is important because the effectiveness of regulators’ monitoring abilities depends on high-quality financial information filed by insurers.
Few policyholders are aware of the risk that insurers may fail to pay claims, and many guaranty funds impose dollar limits per claimant, Stolte said.