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Compliance: Insurance Regulations and the MAR
The concept of company audits and the vocabulary of ‘compliance’ aren’t new, but since Sarbanes-Oxley came on the scene in 2002, they have changed dramatically and have become a topic of concern for all public companies.
In 2006 in the world of insurance, compliance regulations took effect. The National Association of Insurance Commissioners (NAIC) amended its Model Audit Rule (MAR) regulation requiring annual audited financial statements to include Sarbanes-Oxley Act requirements. Sarbanes-Oxley rules are specific to public companies.
Insurance companies now will need to identify and test key controls for financial reporting and report annually on their effectiveness in achieving compliance. The new regulatory language requires insurance companies to set up an audit committee and audit committee members may need to be independent from management. The scheduled effective date for the change is January 1, 2010.
Insurers will need to file a management report of internal accounting procedures that must be signed by the company’s chief financial officer. Every company will also be required to have an audit committee.
MAR requires “The maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets.” Assets include everything that a company owns or holds in custody, so the requirement impacts everything from cash to investments to furniture and equipment.
