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

Her departmental bulletin would allow Iowa-based life and property-casualty companies more lenient deferred tax asset treatment.

On Jan. 29 the National Association of Insurance Commissioners voted 16-1, with Ms. Voss with the majority, against a proposal by the American Council of Life Insurers, Washington, to allow more relaxed deferred tax asset treatment.

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

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

In response to the query from consumer representatives, Ms. Voss said that the bulletin is being revised to reflect the fact that it will only be on a case by case basis. In addition, she told consumer reps that she has asked for a study on credit scoring and will await recommendations from that study.

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

The bulletin notes that the increase in admitted assets and statutory surplus resulting from the revised section cannot be considered under a company's admitted assets and surplus for purposes of a regulatory trigger that involves either admitted assets or statutory surplus.

Companies using the new bulletin must file a "detailed description on how the DTAs are expected to be realized within the next three years and the company's total adjusted capital and authorized control level risk-based capital without using the permitted practices."

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

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

The e-mail from Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, states: "Your action weakens the financial protections for insurance consumers because insurers will now be able to count a greater share of illiquid assets as part of admitted assets and statutory capital and deferred tax assets 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 experience reporting.

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

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

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

During a Jan. 27 hearing in Washington, the ACLI had pressed for changes which included relief on DTAs. The hearing drew testimony from consumer advocates, actuaries, the Affordable Life Insurance Alliance, Washington, and the National Conference of Insurance Legislators, Troy, N.Y.

The National Organization of Life and Health Insurance Guaranty Associations, Herndon, Va., and Pat Baird, ACLI chairman and president and CEO of Aegon USA, Cedar Rapids, Iowa, also testified.

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

That compromise, developed by Wisconsin Insurance Commissioner Sean Dilweg, permits the 15 percent or three-year recognition of DTAs but puts in guidelines.

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

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