INDIANAPOLIS (June 2, 2005)— The case against a regulator initiative to apply Sarbanes-Oxley type requirements to non-public insurers continues to grow stronger with the release by the National Association of Mutual Insurance Companies (NAMIC) today of a detailed report that argues forcefully against the proposed initiative. In an effort to more effectively address the stated purpose of the regulator initiative, the report also outlines a series of steps that regulators should take to improve state solvency regulation.
Authored by economist Sophie M. Korczyk, Ph.D., the NAMIC Issue Analysis is entitled “It’s Time to Admit that SOX Doesn’t Fit: The Case Against Applying Sarbanes-Oxley Act Governance Standards to Non-Public Insurance Companies.” It urges regulators to summarily reject proposals to impose SOX-like requirements on non-public insurers based on several key findings:
“Applying elements of the Sarbanes-Oxley Act, particularly Section 404, to non-public insurance companies is unnecessary, overly burdensome, and counterproductive,” the NAMIC paper concludes.
While noting that “insurers, consumers, and regulators have a shared interest in securing insurance company solvency,” the paper criticizes regulators for “beginning deliberation with an ill-fitting set of requirements that will result in substantial new costs for insurance policyholders.” Instead, the paper sets forth a three-step evaluation process “to explore how the current system of solvency regulation might be improved.” The process would include:
“Until this evaluation is complete, state regulators and legislators should reject proposals to apply investor-oriented protections to non-public companies,” the paper concludes, leaving insurers “free to adopt provisions of the Act voluntarily, as indeed many have.”
“NAMIC members have proclaimed loudly and often that they oppose the costly mandatory imposition of public company regulation on non-public insurance companies, especially without thoughtful consideration of other public policy options,” said Roger H. Schmelzer, NAMIC senior vice president of state and regulatory affairs. He said the paper gives voice to such member concerns and is intended to provide the “social, political and economic context” for policymakers to factor into their deliberations.
“This is a critical time for state regulation,” Schmelzer said, echoing one of the arguments in the paper. “It is important for regulators to add credibility to solvency oversight rather than adopt requirements that are certain to raise consumer costs for uncertain benefits.”
The NAMIC Issue Analysis, “It’s Time to Admit that SOX Doesn’t Fit: The Case Against Applying Sarbanes-Oxley Act Governance Standards to Non-Public Insurance Companies,” will be e-mailed this week to insurance regulators and state legislative insurance chairs in all 50 states.
The paper can be downloaded from NAMIC’s website, NAMIC Online.
Posted: Thursday, June 02, 2005 12:00:00 AM. Modified: Thursday, June 09, 2005 10:57:38 AM.
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