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NAMIC Official To Regulators: Sarbanes-Oxley Will Not Stop Insolvencies

INDIANAPOLIS (June 16, 2004)-A key NAIC committee considering proposed corporate governance amendments to the Model Audit Rule heard a NAMIC spokesman assert that the idea is "a lot more expense with dubious prospect for stopping insolvencies."

"Let me suggest to you that insurance solvency regulation with Sarbanes-Oxley elements won't stop insolvencies," said NAMIC Financial Regulation Manager William Boyd to the National Association of Insurance Commissioners/American Institute of Certified Public Accountants (NAIC/AICPA) Working Group meeting in San Francisco.

The Working Group met during the NAIC's summer national meeting and heard a legion of remonstrators criticize proposed amendments to the NAIC's Model Audit Rule that emulate elements of the Sarbanes-Oxley Act of 2002.

Reiterating NAMIC's position that states are already powerfully equipped to regulate insurers' promises to policyholders, Boyd asked regulators "By what process did you decide that existing solvency surveillance is inadequate or substandard in relation to that for companies that are public?"

Questioning the cost-benefit of the proposal, Boyd said, "We suspect that the costs of this proposal will be substantially greater than the [guaranty fund] assessments it might prevent."

Common in most other comments heard Monday were similar sentiments as to why state regulation must add another, very expensive layer of processes when no evidence of need had accompanied the proposal.

Boyd was pleased that regulators will form a task force that includes NAMIC and other industry representatives to discuss the future of applying Sarbanes-Oxley to solvency regulation, noting that "this will be the opportunity for regulators to explain where existing solvency regulation is lacking and exactly how a new, costly layer of requirements will produce value for consumers."

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For further information contact:
Robert Detlefsen at rdetlefsen@namic.org
or (317) 875-5250