Industry, Regulators at Odds Over NAIC Corporate Governance Model Law
December 17, 2013 by Thomas Harman
WASHINGTON – Insurance industry trade groups stand firmly against state regulators’ plans for a new corporate governance model law, saying that a guidance manual regulators seek as a basis for making adjustments to regulations is completely unacceptable.
The discussions took place in a corporate governance working group at the National Association of Insurance Commissioners Fall National Meeting in Washington.
The panel has battled for two years over the need for an annual corporate governance filing, instead of one made every three to five years. An initial risk-based capital charge that used credits and debits based on corporate governance was scrapped this spring (Best’s News Service, March 27, 2013). A new industry plan offered by industry officials in August saw some subsequent changes by the panel, including the addition of a guidance manual that regulators can use to make necessary changes to the model law.
Industry officials led by Bob Ridgeway, senior government relations counsel at America’s Health Insurance Plans, said the new draft contains a guidance manual that would allow regulators to make changes to the model law. Industry officials said the guidance manual would be kept at NAIC to serve as a reference for filings. The manual could be changed on an annual basis and the changes would be automatically incorporated into state law (Best’s News Service, Dec. 11, 2013).
Ridgeway said industry and regulators appear to agree on the overall vision for the corporate governance model.
Vermont Insurance Commissioner Susan Donegan said she believes the guidance manual method necessary. State lawmakers who would have to approve any changes to a model law tend to want to make additional changes than what regulators have in mind, she said.
“The manual gives us as legislators a lot more flexibility if we need to add disclosures down the road,” said Steve Johnson, Pennsylvania’s deputy insurance commissioner. Johnson voiced his disappointment that industry drew “a line in the sand” on the use of the guidance manual.
The Property Casualty Insurers Association of America will continue to work toward an appropriate model law with an annual filing, but remains opposed to the guidance manual, said Steve Broadie, vice president, financial policy. He said the industry’s position against the guidance manual is unified.
Undaunted, the panel voted to put the model law proposal and the guidance manual up for comment through Jan. 31, 2014. Industry officials already had an idea of what their comments might be. “I would anticipate the industry comment to be similar to what we already sent them,” said Neil Alldredge, senior vice president, state and policy affairs at the National Association of Mutual Insurance Companies. “When they talk about flexibility, that means adding requirements.”
(By Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com)