INDIANAPOLIS (July 25, 2005)—A proposal by banking regulators to spare more institutions from the costs and burdens of certain Sarbanes-Oxley Act requirements requires the NAIC to re-think its own proposed internal control regulations, a spokesperson for the National Association of Mutual Insurance Companies (NAMIC) has declared.
The FDIC announced Tuesday that it intends to double the threshold for banks’ compliance with requirements for management assertions on internal control and accompanying attestation by auditors as well as other elements of Sarbanes-Oxley. The FDIC exemption, currently $500 million in assets, would be raised to $1 billion after an amendment of banking regulations that adopt content similar to that in the federal statute.
“The Federal Deposit Insurance Corporation (FDIC) has acknowledged that Sarbanes-Oxley is not practical for all the organizations it regulates. The number of banks that will be subject to SOX-like requirements will be fewer. This is an important action to which insurance regulators should be attuned,” said Roger Schmelzer, NAMIC’s senior vice president of state and regulatory affairs.
Schmelzer said the FDIC move intensifies attention on pending NAIC efforts to subject non-public insurers with premium revenues greater than $25 million to the expensive Sarbanes-Oxley measures contained in the Act’s Section 404. Insurance regulators not only are trying to apply the wrong requirements to non-public insurers—mandating shareholder protections for insurance policyholders already safeguarded by an extensive system of solvency law and professional solvency regulators—their proposed application is too wide in scope.
While the FDIC amendment would not eliminate the application of SOX to banks, Schmelzer credited banking regulators with taking a “common-sense approach to applying burdensome regulation.”
“It remains to be seen how effective the elaborate internal controls actually are. It is critical to understand that some regulators have identified the point at which they can be impractical,” Schmelzer said. He said that although the banking exemption is based on assets, “the comparison is fair: banking regulators are lifting the burden while insurance regulators want to increase it.”
NAMIC, in comments made to the NAIC committees proposing to apply Sarbanes-Oxley requirements to most non-public insurers, showed that mutual insurers cause far fewer insolvencies than do investor-owned insurers on both a proportional and absolute basis and that Sarbanes-Oxley requirements aren’t appropriate.
Posted: Monday, July 25, 2005 12:00:00 AM. Modified: Monday, September 12, 2005 3:52:08 PM.
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