The 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, and the Internal Administration (EX1) Subcommittee. As stated in Article IV of the NAIC Bylaws, the budget is released to the public for comment before final consideration and adoption.
NAIC 2019 Budget
The National Association of Insurance Commissioners (NAIC) 2019 budget was approved on Nov. 18, 2018, following a lengthy internal vetting process involving NAIC officers, the NAIC Internal Administration (EX1) Subcommittee, the NAIC Executive (EX) Committee and NAIC staff.
"The 2019 budget outlines resources the NAIC intends to commit to the needs of its current operations in addition to goals set out in the State Ahead strategic plan," said Eric A. Cioppa, 2019 NAIC President and Maine Superintendent of Insurance. "Officers, members and NAIC staff will ensure the best use of its financial resources and continue prudent financial management, while we ramp up efforts to meet the accelerating pace of innovation and change."
The NAIC's 2019 budget includes total revenues (including investment income) of $110.7 million and total expenses of $118.8 million, which represents a 4.1 percent increase and 9.3 percent increase, respectively, from the 2018 budget.
The 2019 budget includes five Fiscal Impact Statements (fiscals):
- Cloud Transition Phase III (Cloud Migration) – As the third phase of the NAIC's move to the Cloud, this fiscal supports the first full year of system migrations. The migration strategy focuses on minimal change to most of the targeted applications, to facilitate moving to the Cloud quickly in order to minimize costs. This phase also continues the culture transformation needed to make the organization more nimble, thereby enabling more frequent and faster delivery of products. In addition, this fiscal provides technical support for cloud projects already in progress.
- State Based Systems (SBS) Transition – As a state back-office system hosted by the NAIC, SBS is designed to allow participating states to gain efficiencies, comply with membership initiatives, and eliminate or reduce state hardware and software costs. Since a rewrite of the base system, completed in early 2016, 20 of the 29 participating states have migrated to the new platform. To complete the migration of the remaining nine states, continue to support the current states, and enable the system to move to the Cloud, additional resources are required.
- Financial Analysis Tools Redesign Phase II – This project will apply the insights gained from the work occurring in Phase I on the Credit Risk Branded dashboard, slated for release in the Property/Casualty Annual Profile Tool in March 2019, in order to redesign the automated analysis and examination tools the NAIC provides to regulators. The redesigned tools will provide significant work efficiencies for regulators and NAIC staff using Financial Data Repository (FDR) data and tools as well as NAIC staff developing and maintaining the various FDR applications.
- Market Analysis Review System (MARS) Redesign – This initiative will modernize the MARS application used by market analysts by combining the two levels of review into a single level designed to provide a more thorough review of a company as well as provide access to all information contained in market information databases. The redesigned system will also provide more visualization of the data through the use of the NAIC's business intelligence tool.
- SVO Designation and Year-End Modifications – The membership recently approved a recommendation to modernize the use of the "Z" symbol, currently utilized as a placeholder when an insurer self-reports an NAIC Designation on its financial statement filings, to serve the broader function of identifying all situations where a security can transition from one reporting or filing status to another. The membership also adopted the expansion of the number of risk-based capital (RBC) factors through the creation of a new field called the NAIC Designation Category, which combines the current NAIC Designation with a modifier field. Both initiatives require modifications to systems used by NAIC staff, regulators, and insurance companies in order to bring the new policies online by year-end 2019.
The NAIC's 2019 budget
*The budget is almost 150 pages and is set up for duplex printing.
NAIC 2018 Budget
The NAIC adopted its 2018 Budget during the Joint Meeting of the Executive and Plenary Committees at the 2017 Fall National Meeting. The budget includes total revenues of $106.3 million and total expenses of $106.4 million.
Periodically the Executive (EX) Committee and the 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. Their impact is fully described as part of the 2018 projections included within the 2019 budget proposal.
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 Thompson, Senior Controller at (816) 783-8038.