The new budget is in. The National Association of InsuranceCommissioners (NAIC) 2014 proposed budget includes total revenuesof $93.2 million, including $3.8 million in investment income, andtotal expenses of $91.8 million, increases of 3.68 percent and 3.87percent respectively compared to the 2013 budget.

The 2014 budget is expected to exceed 2013's by $7.3million.

The proposed operating-revenue budget is expected to be$89.5 million, 2 percent higher than the 2013 budget.

However, in relation to the 2013 projected totals, the 2014proposal represents an operating-revenue decrease of 1.51percent and an operating-expense increase of 2.67 percent.

Increases relative to the 2013 budget are coming not fromdatabase fees but valuation services.

Database fees are lower than budget by $410,000 due todatabase-fee caps.

The valuation services revenue is higher than budget by $2.52million mostly because of higher than budgeted revenue generated bythe 2012/2013 structured securities project and higher thanexpected Securities Valuation Office (SVO) revenue, the NAIC saidin its proposed budget release.

Database fees are about 29.5 percent of the 2014 budget revenuemix, while valuation services are about 26 percent.

“Professional services” is lower than the prior year due toresolution of legal matters and completion of enhancements to SERFFrequired for the Affordable Care Act (ACA) Plan ManagementSystem.

Revenue from publication and insurance data products is up by$181,499 from the 2013 budget and $133,000 more than the 2013projection due to growth in this area.

“The 2014 proposed budget reflects the NAIC's commitment toprudently manage expenses while investing in important projects toenhance the association's ability to evolve with changes ininsurance regulation,” stated Adam Hamm, NAIC president-elect andNorth Dakota Insurance Commissioner. “The NAIC provides its memberswith the tools and resources necessary to regulate companies in asound and cost-effective manner.”

Proposed expenses increased almost 4 percent compared to 2013and increased a lower amount compared with the 2013 project, theNAIC said.

Salaries, taxes and benefits comprise the largest share of the2014 budget at almost 60 percent of total operating expense.

Travel expenses are expected to be 5.5 percent of thebudget expense in 2014, a number that has been gradually ticking upas the role of international supervisory issues has become morehigh-profile and embedded in regulatory work.

The NAIC says the travel expenses are the same as the 2013budget but 6.6 percent higher than the 2013 projection.

The proposed operating-revenue budget is expected to be$89.5 million, 2 percent higher than the 2013 budget but 1.5percent less than the 2013 projection.

NAIC going after strategic hires,consultants

Total NAIC employees number 465, the largest function area beinginsurance-data products, with 101.5 employees, followed byfinancial-regulatory services and information systems.

Staff headcount additions proposed for 2014 include the additionof two actuaries to support the implementation of principles-basedreserving, an enterprise risk management expert for the NAIC's OwnRisk and Solvency Assessment (ORSA) program and an attorney tosupport the review of foreign-jurisdiction materials for collateralreduction.

In addition, the NAIC is beginning an outreach project involvingthe use of outside consultants starting now, in the fourth quarterof 2013, that will conclude in late 2014 costing $500,000. Theconsultants are being hired to “educate domestic andinternational policymakers about the actual workings of thestate-based regulatory system in the United States by helping theassociation in developing and implementing an educational outreachprogram, both domestically and internationally.

A public hearing will be scheduled in late November. Once theconference call date/time has been finalized (by the end ofOctober), the details will be posted on the NAIC website. Theyearly rite of passage of providing comments on the proposedbudget has a deadline of Nov. 15.