NAIC Poised to Hire Outside Contractor to Examine Own Corporate Governance Practices
June 30, 2014 by Tom Harmon
WASHINGTON – A National Association of Insurance Commissioners’ task force has voted to recommend an outside consultant be hired to examine the group’s corporate governance practices.
The NAIC governance review task force made the recommendation in a June 27 vote, which must now meet with NAIC Executive Committee final approval when it meets next in mid-July.
The draft scope of work presented to the panel said the NAIC will “engage a consultant to perform a review of its governing documents, organizational structure, management and decision-making processes and recommend revisions or improvements to comply with best practices for nonprofit corporations and standard-setting organizations and to enhance the NAIC’s ability to support and improve state regulation of insurance.” The consultant would be expected to review the NAIC’s organizational structure, including its Certificate of Incorporation and Bylaws, and to analyze the role and authority of the executive committee, NAIC officers, the chief executive officer and management. The review would also analyze officer elections and committee assignments. A review of standing committee, task force and working group processes would include examinations of organizational priority-setting, the role of committee officers and members and an analysis that may result in recommendations for enhancements of administrative procedures.
NAIC external engagements would also be a subject for review. Efforts in this area would include an analysis of interactions with international groups such as the International Association of Insurance Supervisors, and would discuss how NAIC strategies and message are developed. Also, the consultant would be expected to analyze interactions with federal bodies including Congress, the Federal Reserve and the Department of Treasury.
The draft scope of work stated the engagement is intended to begin in late August, but left the completion date open. Louisiana Insurance Commissioner Jim Donelon told panel members he and others were hoping the consultant might have a final product completed by year’s end and task force chairman and Missouri Insurance Commissioner John Huff said he would not dismiss the possibility but would be watching to see what the consultant applicants would offer.
The NAIC has been working on the issue of transparency since mid-2012 as part of an ad hoc group. Those talks ultimately led to the formation of the task force after Connecticut Insurance Commissioner Thomas Leonardi failed in an attempt during an Executive Committee open session during the NAIC Fall National Meeting to have an outside contractor examine NAIC operational difficulties. The matter was referred back to the ad hoc group, but the recently formed task force inherited the issue.
Before the December meeting, Leonardi wrote a private letter to fellow commissioners in which he asked that an outside consultant investigate the NAIC’s governance; pursue initiatives that included the clarification of the roles and authorities of officers, the executive commissioner and the larger membership in making decisions impacting regulators; and pay attention to how the NAIC appoints representatives to forums such as the International Association of Insurance Supervisors. He also asked that a consultant review the best practices of NAIC elections and clarify the role of the chief executive officer to determine if best practices are being followed (Best’s News Service, Dec. 16, 2013).
(By Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com)
