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Broker Compenation, Sarbanes-Oxley at Top of NAMIC Agenda for NAIC Winter Meeting

INDIANAPOLIS (Dec. 3, 2004)--The National Association of Mutual Insurance Companies (NAMIC) agenda for the NAIC winter meeting includes testimony on the NAIC's proposed broker compensation model.

NAMIC is also concerned about prematurely embedding certain Sarbanes-Oxley content in state regulation, a proposal to have insurers comprehensively disclose contingent commissions, and the Public Adjuster Licensing Model Act and the Authorization for Criminal History Record Check Model Act.

NAMIC's Director of Legal and Regulatory Affairs Peter Bisbecos will testify at the hearing of the NAIC Executive Task Force on Broker Activities.

There he will assert that the current draft of the NAIC's proposed model law in response to the broker compensation allegations suggests rules too broad and fail to specify a meaningful way in which the disclosure would be made.

NAMIC is also concerned about an incomplete reevaluation of new rules affecting insurers' audit committees and related aspects of corporate governance borrowed from the federal Sarbanes-Oxley Act.

"As far as we're concerned, the subgroup doing reevaluation of the original proposal to embed certain Sarbanes-Oxley content in state regulation hasn't even scratched the surface of the work it should do," said William Boyd, NAMIC's financial regulation manager. "This material from Title III of the federal Sarbanes-Oxley Act of 2002 inappropriately rearranges constitution of insurers' audit committees and doesn't fit the circumstances of individual insurers."

Regulators may choose to move corporate-governance-related material up the NAIC hierarchy at least one step when the NAIC/AICPA Working Group meets Monday, during the NAIC meeting in New Orleans.

"The regulators heard the trade associations say Nov. 23, during a teleconference meeting of the Title III Subgroup, that the re-evaluation isn't ready to be moved from the subgroup," Boyd said.

A proposal to have insurers comprehensively disclose contingent commissions and other, related data will enter the agenda of the NAIC's Blanks Working Group in its meeting Saturday.

NAMIC member companies have categorized the proposal as reaching too far for too much data, adding yet another increment to statutory reporting requirements.

Among those initial reactions to the proposal, companies have said that proprietary information may be involved and that there are reasons to question whether companies doing only personal lines business should be required to comply at all.

"We'll be making comment to try to eliminate or limit the extent of this proposal," said Boyd. "Too much is sought for the purpose intended."

NAMIC also stands ready to comment on the Public Adjuster Licensing Model Act and the Authorization for Criminal History Record Check Model Act, to be discussed by the Producer Licensing Working Group. The Working Group may be ready to finalize the public adjuster model act in New Orleans.

Being more controversial, the Authorization for Criminal History Record Check Model Act - informally known as the fingerprint model act -is probably not ready for final approval.

This Model Act provides for fingerprinting, for purposes of criminal background checks, of producer licensing applicants as well as company officers and directors in some circumstances.

Industry representatives have raised concerns about the scope of the Model and its inclusion of company officers and directors and also about the lack of database that is contemplated by the Model.

The Working Group seems determined to complete the Model Act although it may not be able to finish its work in New Orleans.

The Working Group will also take comments on its Fiduciary Responsibility of Insurance Producers Model Act, which attempts to address the issue of commingling of insurance premiums with other business or personal funds by producers.

The development of the Model Act is unrelated to the current national controversy involving producer and broker compensation. The current draft of the Model Act may present some problems for insurers with captive agent systems, but it is not thought that the draft is in final form.

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