The new budget is in. The National Association of Insurance Commissioners (NAIC) 2014 proposed budget includes total revenues of $93.2 million, including $3.8 million in investment income, and total expenses of $91.8 million, increases of 3.68 percent and 3.87 percent respectively compared to the 2013 budget.
The 2014 budget is expected to exceed 2013’s by $7.3 million.
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 2014 proposal represents an operating-revenue decrease of 1.51 percent and an operating-expense increase of 2.67 percent.
Increases relative to the 2013 budget are coming not from database fees but valuation services.
Database fees are lower than budget by $410,000 due to database-fee caps.
The valuation services revenue is higher than budget by $2.52 million mostly because of higher than budgeted revenue generated by the 2012/2013 structured securities project and higher than expected Securities Valuation Office (SVO) revenue, the NAIC said in its proposed budget release.
Database fees are about 29.5 percent of the 2014 budget revenue mix, while valuation services are about 26 percent.
"Professional services” is lower than the prior year due to resolution of legal matters and completion of enhancements to SERFF required for the Affordable Care Act (ACA) Plan Management System.
Revenue from publication and insurance data products is up by $181,499 from the 2013 budget and $133,000 more than the 2013 projection due to growth in this area.
“The 2014 proposed budget reflects the NAIC’s commitment to prudently manage expenses while investing in important projects to enhance the association’s ability to evolve with changes in insurance regulation,” stated Adam Hamm, NAIC president-elect and North Dakota Insurance Commissioner. “The NAIC provides its members with the tools and resources necessary to regulate companies in a sound and cost-effective manner.”
Proposed expenses increased almost 4 percent compared to 2013 and increased a lower amount compared with the 2013 project, the NAIC said.
Salaries, taxes and benefits comprise the largest share of the 2014 budget at almost 60 percent of total operating expense.
Travel expenses are expected to be 5.5 percent of the budget expense in 2014, a number that has been gradually ticking up as the role of international supervisory issues has become more high-profile and embedded in regulatory work.
The NAIC says the travel expenses are the same as the 2013 budget 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 1.5 percent less than the 2013 projection.
NAIC going after strategic hires, consultants
Total NAIC employees number 465, the largest function area being insurance-data products, with 101.5 employees, followed by financial-regulatory services and information systems.
Staff headcount additions proposed for 2014 include the addition of two actuaries to support the implementation of principles-based reserving, an enterprise risk management expert for the NAIC’s Own Risk and Solvency Assessment (ORSA) program and an attorney to support the review of foreign-jurisdiction materials for collateral reduction.
In addition, the NAIC is beginning an outreach project involving the use of outside consultants starting now, in the fourth quarter of 2013, that will conclude in late 2014 costing $500,000. The consultants are being hired to “educate domestic and international policymakers about the actual workings of the state-based regulatory system in the United States by helping the association in developing and implementing an educational outreach program, both domestically and internationally.
A public hearing will be scheduled in late November. Once the conference call date/time has been finalized (by the end of October), the details will be posted on the NAIC website. The yearly rite of passage of providing comments on the proposed budget has a deadline of Nov. 15.