NAIC’s Fiscal Management is Under Attack, Calls Are to Tighten Belt

The National Association of Insurance Commissioners (NAIC) is hearing widespread criticism from insurers, saying its revenues, expenses and surpluses are "on an upward glide path without end" and calling on the organization to tighten its belts amid the ongoing fiscal and credit crisis.  
  
In written comments on the NAIC's proposed $73.1 million 2009 budget, major insurance trade organizations also said it should reduce some assessments and fees on companies. As insurers and state governments are forced to cut costs, so should the NAIC, they said.  
  
"The time has never been better for state regulators to send a message by way of reducing, even in a modest amount, their NAIC expenses and revenues," wrote Deidre Manna, vice president of industry, regulatory and political affairs for the Property Casualty Insurers Association of America.  
  
The NAIC's proposed budget includes projected increases of 6.0% in expenses and 7.1% in revenues. It establishes a goal of a 74.4% liquid reserve ratio, up from 67.6% for the end of 2008.  
  
NAIC President-Elect Roger Sevigny has defended the proposed budget as "strong and transparent.  
  
Wayne Mehlman, insurance regulation counsel for the American Council of Life Insurers, objected to the NAIC's budgeting of $2.6 million in net income for 2009, nearly four times the 2008 forecast, on top of the $57.4 million in projected accumulated surplus for 2008.  
  
"As in past proposed budgets, revenues and expenses, as well as accumulated surpluses, unfortunately appear to be on an upward glidepath without end," Mehlman said.  
  
Brady Kelley, the NAIC's chief financial and business strategy officer, has defended as "conservative" the NAIC's liquid reserve ratio, saying it provides an important measure of fiscal stability to the association.  
  
Manna took aim at a 22.7% spending increase for travel, including a nearly four-fold increase in the allocation for commissioner and staff travel. "Again, during these troubled economic times, companies, trade associations and state governments are reviewing expenses including travel and scaling back," she said.  
  
The NAIC's $540,900 appropriation for starting up and staffing a full-time staff position in Brussels, Belgium would be "expensive beyond justification," said Bill Boyd, financial regulation manager for the National Association of Mutual Insurance Companies.  
  
The position of international liaison director would work with the organization's recently established International Insurance Relations Leadership Group and other entities to assert the NAIC's goals and positions with the International Association of Insurance Supervisors, an organization representing insurance regulators in 190 global jurisdictions. The NAIC currently has one staffer on loan to the IAIS at its headquarters in Basel, Switzerland, under a two-year contract.  
  
Boyd questioned whether such a staffer would be experienced and competent to present the NAIC's positions before international bodies and the European Union, particularly without a detailed job description. "The NAIC cannot be ubiquitous in the international scene," he said.  
  
The NAIC will hold a public budget hearing Nov. 5, via teleconference. The association will vote on the budget at its Dec 5-8 winter meeting in Grapevine, Texas.