The National Association of Insurance Commissioners Financial Condition Committee yesterday approved measures requiring that mutual companies be subject to new Sarbanes-Oxley reporting requirements.
The planned amendments to the Model Audit Rule would set new reporting requirements on internal controls, as well as new rules on the number of independent directors a mutual company must have on its board.
Most of the insurance industry, with the exception of the National Association of Mutual Insurance Companies, has supported a model reached after two years of compromise efforts with the regulators.
Steve Broadie, financial regulation manager of the Property Casualty Insurers Association of America, said the final proposal strikes the right balance between the needs of regulators and the industry.
The vote yesterday set the stage for final approval at next month's NAIC summer meeting and caps a two-year debate over regulator efforts to impose the new rules.
Earlier this month, the panel came close to approving the package at a public hearing in Atlanta, but held off, pending a few changes, which they approved in conference telephone call today.
Among the changes the committee approved yesterday were liberalization of the independent director requirement for an insurer's audit committee, along with a one-year postponement of the effective date, to 2011.
Mr. Broadie said the increase to $300 million of the annual premium threshold requirement makes the independent director rule less likely to affect carriers owned by private investors.
He contended that no package should be approved until implementation guidance has been written and approved. But Virginia's deputy insurance commissioner, Doug Stolte, has repeatedly said he would not follow that course and has promised no back-door regulation through the guide.
After NAIC approval, the measures must gain approval in the state legislatures. The National Conference of Insurance Legislators remains opposed, however.
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