The president of the National Association of Mutual Insurance Companies told an international industry group that the focus on improving U.S. corporate controls and accountability could hurt business efforts.
It "may come at the expense of corporate performance and economic enterprise," Charles M. Chamness told delegates to the International Cooperative and Mutual Insurance Federation (ICMIF) yesterday in Singapore, according to a news release from his organization.
While he said that NAMIC supports corporate governance reforms that "increase the confidence of the investing public in the operation of capital markets," he argued that mutual companies, because they lack shareholders, should not automatically be required to conform to identical governance standards.
NAMIC has been fighting to limit proposals by the National Association of Insurance Commissioners to require mutual companies to adopt reporting regulations similar to the federal Sarbanes-Oxley Act requirements for traded companies.
However, Mr. Chamness said that some applications of Sarbanes-Oxley to non-public insurance companies are appropriate. He said his member companies favor efforts to establish higher standards for board-auditor communication and auditor independence, as well as improved solvency regulation that better protects the interests of policyholders.
The NAMIC president cautioned that policymakers should not overlook the impact of additional regulation on consumers, in addition to impacts on business.
He said this was NAMIC's concern when the organization undertook a cost-benefit analysis of the proposal to mandate SOX-like internal controls on non-public companies.
He said the NAIC had declined to do such an analysis and the NAMIC study found that mutuals accounted for only five percent of insurer insolvencies since 1992, while writing 33 percent of the premium in the property-casualty market.
Under the original NAIC initiative, proposed internal control requirements modeled after Sarbanes-Oxley would have cost mutual policyholders $300 million in the first year, or eight dollars for every dollar of maximum potential benefit. The original proposal was removed from consideration earlier this month.
"The dollar cost to consumers, coupled with the attention top management would be required to devote to the establishment and implementation of sophisticated internal controls, would have been an impediment to the conduct of the actual business and economic value of insurance," Mr. Chamness said.
He noted that governance has been an important issue in many jurisdictions around the world. He also demonstrated that American courts were just as likely to affect corporate governance as were lawmakers and regulators.
The ICMIF, which Mr. Chamness addressed, has 142 members in 67 countries, representing more than 400 insurance companies worldwide. Federation members collectively represent 7 percent of the world's premium income. ICMIF says its members range in size from the world's third largest insurer to small insurance offices.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.