Consumer advocates are asking Iowa Insurance Commissioner SusanVoss why she voted against a proposal to relax life insurers'capital and surplus requirements on Jan. 29 and five days laterissued a state regulation reversing her position.

Her departmental bulletin would allow Iowa-based life andproperty-casualty companies more lenient deferred tax assettreatment.

On Jan. 29 the National Association of Insurance Commissionersvoted 16-1, with Ms. Voss with the majority, against a proposal bythe American Council of Life Insurers, Washington, to allow morerelaxed deferred tax asset treatment.

Deferred tax assets are illiquid accounting assets that can beused to offset future tax obligations.

In her new bulletin, Ms. Voss cites a "permitted practices" rulethat gives commissioners discretion to diverge from the accountingpractices and procedures manual of the NAIC.

In response to the query from consumer representatives, Ms. Vosssaid that the bulletin is being revised to reflect the fact that itwill only be on a case by case basis. In addition, she toldconsumer reps that she has asked for a study on credit scoring andwill await recommendations from that study.

Among the new allowances the current bulletin permits is the useof gross deferred tax assets expected to be realized within threeyears rather than one year of the balance sheet date and deferredtax assets in the amount of 15 percent rather than 10 percent ofstatutory capital and surplus.

The bulletin notes that the increase in admitted assets andstatutory surplus resulting from the revised section cannot beconsidered under a company's admitted assets and surplus forpurposes of a regulatory trigger that involves either admittedassets or statutory surplus.

Companies using the new bulletin must file a "detaileddescription on how the DTAs are expected to be realized within thenext three years and the company's total adjusted capital andauthorized control level risk-based capital without using thepermitted practices."

The bulletin also states that it has a Dec. 15 expiration dateat which time the commissioner may renew the guidelines in thebulletin.

In a Feb. 3 query to Ms. Voss, consumer advocates asked why Ms.Voss voted against the action and then turned around and issued thebulletin.

The e-mail from Birny Birnbaum, executive director of the Centerfor Economic Justice, Austin, Texas, states: "Your action weakensthe financial protections for insurance consumers because insurerswill now be able to count a greater share of illiquid assets aspart of admitted assets and statutory capital and deferred taxassets cannot be connected to cash if needed immediately."

Among the other questions he asked are:

o The reason for the action.

o Why the bulletin is retroactive for 2008 experiencereporting.

o What is Ms. Voss' estimate and how the estimate was developedof the impact of this bulletin on the amounts of insurer admittedassets and statutory surplus.

o What analysis was done to make sure consumers would not be putat risk.

NAIC funded consumer representatives have been assailing the useof credit scoring in determining insurance coverage for years.

During a Jan. 27 hearing in Washington, the ACLI had pressed forchanges which included relief on DTAs. The hearing drew testimonyfrom consumer advocates, actuaries, the Affordable Life InsuranceAlliance, Washington, and the National Conference of InsuranceLegislators, Troy, N.Y.

The National Organization of Life and Health Insurance GuarantyAssociations, Herndon, Va., and Pat Baird, ACLI chairman andpresident and CEO of Aegon USA, Cedar Rapids, Iowa, alsotestified.

The NAIC's capital and surplus working group then voted for theproposal, including a compromise on DTAs.

That compromise, developed by Wisconsin Insurance CommissionerSean Dilweg, permits the 15 percent or three-year recognition ofDTAs but puts in guidelines.

Those guidelines include limiting the ability to use thebenefits from the change to issue dividends and not allowing theadditional surplus from the DTA benefit to be used by companies tomeet acceptable risk-based capital requirements. Additionally,companies cannot fall below acceptable RBC levels and continue touse the DTA benefit.

The Iowa bulletin is online at(http://www.iid.state.ia.us/news_media/whatsnew.asp).

This article was updated 11:04 a.m.