INDIANAPOLIS (Nov. 22, 2005)—Speaking to an international group of mutual insurers, the president of the National Association of Mutual Insurance Companies (NAMIC) expressed concern that the U.S. public policy focus on improving corporate control and accountability “may come at the expense of corporate performance and economic enterprise.”
Charles M. Chamness told delegates to the International Cooperative and Mutual Insurance Federation (ICMIF), in Singapore on Thursday that NAMIC supports corporate governance reforms that “increase the confidence of the investing public in the operation of capital markets.” Chamness noted that mutual companies, because they lack shareholders, should not automatically be required to conform to identical governance standards.
Chamness offered that some applications of the federal Sarbanes-Oxley Act to non-public insurance companies are appropriate. He said his member companies favor efforts to establish higher standards for board-auditor communication and auditor independence, as well as improved solvency regulation that better protects the interests of policyholders.
Chamness cautioned that policymakers should not overlook the impact of additional regulation on consumers, in addition to impacts on business. “This was our concern when NAMIC undertook a cost-benefit analysis of the proposal to mandate SOX-like internal controls on non-public companies, something the NAIC itself declined to do,” he said.
The NAMIC study found that mutuals accounted for only five percent of insurer insolvencies since 1992, while writing 33 percent of the premium in the property/casualty market.
Under the original NAIC initiative, proposed internal control requirements modeled after Sarbanes-Oxley would have cost mutual policyholders $300 million in the first year, or eight dollars for every dollar of maximum potential benefit. The original proposal was removed from consideration earlier this month.
“The dollar cost to consumers, coupled with the attention top management would be required to devote to the establishment and implementation of sophisticated internal controls, would have been an impediment to the conduct of the actual business and economic value of insurance,” Chamness said.
Chamness noted that governance has been an important issue in many jurisdictions around the world. He also demonstrated that American courts were just as likely to affect corporate governance as were lawmakers and regulators.
Founded in 1922, the ICMIF has 142 members in 67 countries, representing more than 400 insurance companies worldwide. An important common bond uniting members is that they put the interests of policyholders before those of shareholders and work to ensure that they provide the best possible range of affordable products for their insured. Federation members collectively represent seven percent of the world’s premium income.
The Federation adopted its present name in 1972 and was officially recognized by the United Nations Conference on Trade and Development in 1977. Members range in size from the world’s third largest insurer to small insurance offices. The biennial International Conference has been held since 1930.
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