NAIC Proposed 2015 Budget Seeks 1.26% Bump in Revenue to $90.6 Million
October 10, 2014 by Thomas Harman
WASHINGTON – The National Association of Insurance Commissioners’ 2015 proposed budget seeks slightly higher revenue and operating expenses than the 2014 budget passed last year.
The proposal seeks total operating revenue of $90.6 million and operating expenses of $96.1 million, increases of 1.26% and 3.35% respectively over the 2014 budget, according to the budget executive summary. However, the 2015 proposal for operating revenue is about 1.1% less than the projected 2014 total and the 2015 proposal for operating expenses is about 3.68% more than the projected 2014 total. The NAIC budgets for $3.6 million in investment income in 2015.
Projected expenses for 2014 are expected to come in about $300,000 lower than budgeted, according to the proposal, due in part to reductions in salaries and benefits due to open budgeted positions. NAIC travel expense, which has been an item of concern to some in the insurance industry, is projected to be under budget for 2014 by $359,000 due to fewer than anticipated numbers of trips taken. But the 2015 budget returns the number to $5.29 million, the increase attributed to the need to fund an additional regulator from each member to attend each national meeting.
The 2015 budget plan includes funding for seven new or enhanced NAIC business initiatives, including one that would modify the NAIC’s revenue structure by reducing or eliminating certain fees or assessments. The budget executive summary points out the need to do so because the NAIC’s liquid operating ratio in December 2013 was 106% and is expected to be 102.1% at year’s end. Both are well short of the NAIC’s 80% to 91% goal.
These planned revenue modifications would include elimination of the $790,000 Securities Valuation Office assessment that has been in every NAIC budget since 2004, the executive summary said. Last year, this assessment was applied to 386 insurance companies with total investments in non-government securities that have preferred stock of at least $1 billion. Also, the proposal seeks a 5% cut in database filing fees for both company and group caps, a reduction of $1.34 million, compared with the 2015 baseline. Revenues for publications are proposed to be cut by $953,264 compared with the 2015 baseline by providing all consumer guides and low-volume publications at no charge online. Moving to an electronic model will save an additional $105,379, the executive summary said. And member assessments are proposed to be cut by 5% with a $125,000 cap set.
Overall, the 2014 projection for operating revenues is expected to exceed the 2014 budget by $2.2 million. The leading driver behind the increase during the year is in transaction costs via the System for Electronic Rate and Form Filing and the State Based System resulting in $898 million in expenditures beyond the original budget. Approximately $467,000 in revenue increases over the 2014 budget number was attributed to higher than expected database fees because of higher insurance premium growth.
“We’re proud that our 2015 proposed budget demonstrates the NAIC’s continued focus on carefully managing our revenue and expenses while balancing investment in key initiatives that enhance our ability to support our members,” said NAIC President-elect Monica Lindeen, who is also Montana Commissioner of Securities and Insurance.
The public can send in comments on the NAIC 2015 budget proposal through Nov. 4, with a public hearing set for Nov. 12.
(By Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com)
