The financial services industry is certainly in the forefront of significant activity at the state and federal levels, with insurance regulators, industry associations, Congress, and consumer groups all reacting to a combination of economic conditions, bailout funds, and uncertainty. While much of the current activity is tied to and is, in part, indicative of reaction to the financial crisis, recent steps taken a few years ago laid the groundwork for further solidifying financial solvency and transparency standards for the insurance industry through the adoption of revisions to the Annual Financial Reporting Model Regulation, or Model Audit Rule (MAR), by the NAIC in late 2006. Various financial goals, including the expected greater transparency and heightened internal audit controls within insurance companies, are expected to be realized with the full implementation of the revised Model’s requirements across the states. For those states which had not adopted these, or similar, revisions at the end of 2008, current state activity, whether legislative or regulatory, appears to be directed at adoption by the remaining states this year. Thus, for the reporting year 2010, insurance companies, generally identified as private insurers, will be required to comply with the Model’s revisions as adopted by the states based on the applicable regulatory structure including various premium thresholds and timeframes.
Areas that the 2006 revisions focused on included company audit committee requirements, auditor participation timeframes and services, reporting requirements for insurers with a minimum direct or presumed direct written premium of $500 million or more to now include company assessments of internal control over financial reporting, and corporate governance. While it is expected that there will be implementation adjustments required for initial compliance, the Model Audit Rule’s requirements will affect future years and the manner in which insurers continue to execute on their financial reporting and related activities. An avenue of guidance or assistance currently available to insurers in understanding required steps and expected outcomes is the use of the Implementation Guide for the Annual Financial Reporting Model Regulation adopted by the NAIC’s Working Group and Financial Condition (E) Committee. Regardless of the tools relied on to effect compliance with the revisions ultimately adopted by each of the states, what is important to consider is the upcoming and anticipated deadline for additional and changed financial reporting.
Editor’s Recommendation
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