New Study Measures Costs, Potential Benefits
INDIANAPOLIS (June 8, 2005)—Adding Sarbanes-Oxley Section 404 content to state insurance regulation would cost almost eight times the maximum potential benefit to mutual insurance companies if all insolvencies were eliminated, according to a study released today by the National Association of Mutual Insurance Companies (NAMIC). A.Thomas Finnell, Jr., CPA of Finnell & Company, PLLC, conducted the study for NAMIC.
A survey of NAMIC member companies revealed that first year implementation of the National Association of Insurance Commissioners (NAIC) proposal would be about $300 million for all mutual property/casualty insurers, an amount equal to the costs of more than the most recent 20 years of mutual insolvencies.
“All parties share an interest in promoting insurance company solvency,” Chamness wrote, adding that the proposal pending before the NAIC is “unnecessary, ill-advised and horrendously expensive.”
Also included in the analysis are National Conference of Insurance Guaranty Fund (NCIGF) statistics showing that the share of total insolvency costs attributable to mutual companies has been only five percent of the industry since 1991, despite representing more than 33 percent of the total property-casualty premium.
NAMIC expressed doubt that imposition of Section 404 by the NAIC would be able to eliminate insolvencies, noting that “nearly all failures result from insufficient financial reserves or inadequate rates, not misreported financial statements.” The summary was sent today to state insurance regulators, state legislators and governors.
The entire NAMIC analysis will be presented to the Title IV subgroup on Monday during the upcoming NAIC meeting in Boston. It is available at NAMIC Online.