NAIC Audit Rule Work Proceeds

By Jim Connolly

NU Online News Service, Aug. 23, 4:15 p.m. EDT?Work on integrating elements of the Sarbanes-Oxley Act of 2002 into a model regulation for state insurance regulation continued this week with a discussion over what services an auditor can perform for a client in addition to an audit.[@@]

Regulators said that they need a model regulation requiring annual audited financial reports to help them regulate more effectively. Such a regulation would include provisions in SOX.

Public insurance companies currently comply with these regulations for generally accepted accounting principles, or GAAP. If the model is adopted, both public and non-public insurers would be required to adhere to these provisions for statutory accounting filings.

The issue has drawn the attention of a number of trade groups including the American Insurance Association, the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America, and the American Council of Life Insurers.

During the discussion, which is one piece of the work of several teams of regulators and interested parties, the issue of an exemption for smaller companies was raised.

At different places in the model, the current draft exempts companies with less than $25 million in direct written and assumed premiums.

Companies feel the exemption is important because the pool of auditors is limited and it will become more difficult for small insurers to get auditors to perform other services, said Bill Boyd, financial regulation manager with the National Association of Mutual Insurance Companies, Indianapolis.

Insurers would like to see an exemption that would be greater than $25 million, said Steve Broadie, assistant vice president-financial, with the PCI, Des Plaines, Ill.

Under discussion, Mr. Broadie said, is requirement of a one-year ?cool-off period' before an auditor could take a job with a client.

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NAIC Audit Rule Work Proceeds

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