The National Association of Insurance Commissioners' (NAIC's) annual budget process is an open and deliberative process among the NAIC members and members of the insurance industry. NAIC budgets have historically offered a high level of disclosure for a nonprofit budget. Throughout the development of the NAIC's budget, there are numerous and detailed reviews by all levels of management, the NAIC Officers, the NAIC Executive (EX) Committee, the Internal Administration (EX1) Subcommittee, and ultimately the full NAIC membership. As stated in Article IV of the NAIC Bylaws, the budget is released to the public for comment before final consideration and adoption.
NAIC 2014 Budget
Members of the NAIC adopted its 2014 operating budget on December 18, 2013, following months of development by NAIC leadership, Executive (EX) Committee, Internal Administration (EX1) Subcommittee, and executive staff.
“The 2014 proposed budget reflects the NAIC’s commitment to prudently manage expenses while investing in important projects to enhance the association’s ability to evolve with changes in insurance regulation,” said Adam Hamm, 2014 NAIC President and North Dakota Insurance Commissioner. “The NAIC provides its members with the tools and resources necessary to regulate companies in a sound and cost effective manner.”
Adam Hamm, 2014 NAIC President, and North Dakota Insurance Commissioner
The NAIC 2014 budget includes total operating revenues of $89.5 million and total operating expenses of $92.0 million, which represents a 2.03% and 4.10% increase, respectively, from the 2013 budget.
There are eight Business and Fiscal Impact Statements (fiscals) included in the 2014 budget:
State Based Systems (SBS) Software Enhancement and Technology Compliance Initiative. This is Phase II of a multi-year project to redesign SBS services by updating the SBS architecture and tool set, providing enhanced performance, stability and scalability.
Integrated Securities Information System (ISIS) Rewrite. This is Phase I of a multi-year initiative to redesign and enhance the existing systems that support the processing of data/information for the Securities Valuation Office, Capital Markets Bureau and Structured Securities Group.
Human Resources Management Information System. This initiative is an upgrade to the current human resources and information system to provide increased functionality and improved performance over the current system.
SERFF Public Access Implementation. This initiative will enable a state to leverage SERFF via the state website to facilitate access to filings the state has identified as subject to public access, thereby reducing the state’s back-office and support costs.
NAIC and States’ Resource for Principle-Based Reserving (PBR) Valuation. This initiative will provide support to states in their implementation of PBR.
NAIC and States’ Resource for Own Risk and Solvency Assessment (ORSA). This initiative will provide support to states in the implementation of the Risk Management and Own Risk and Assessment (RMORSA) Model Act.
Process for Developing and Maintaining the NAIC List of Qualified Jurisdictions. This proposal will provide the support necessary to conduct the reviews required by the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786).
NAIC Educational Outreach. This initiative will educate domestic and international policymakers about the merits and effectiveness of the U.S. state-based insurance regulatory system.
Click HERE to view the NAIC's 2014 budget.
*Please note the 2014 budget is over 200 pages and is set up for duplex printing.
Periodically the Executive (EX) Committee and Internal Administration (EX1) Subcommittee receive funding requests for projects after the annual budget is approved. Generally these projects are of an urgent nature to the NAIC’s annual agenda or its committee structure that were either not known or not solidified at the time the annual budget was prepared. It is highly likely a financial request will be presented in early 2014 for the relocation of the New York City office where the current lease expires at the end of July 2014. The selection of a site was approved during the Joint Executive (EX) Committee and Internal Administration (EX1) Subcommittee conference call held in late November 2013, but it is still early in the process and no decisions have been made regarding related infrastructure costs. Once the relevant financial terms have been finalized, a request will be presented to the Executive (EX) Committee and Internal Administration (EX1) Subcommittee for their consideration.
Should you have any questions about the NAIC budget, please feel free to contact Jim Woody, Chief Financial Officer at (816)783-8015 or Carol Hartley, Senior Controller at (816)783-8038.