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KANSAS CITY, Mo.-The adoption of future accreditation requirements would become more open and deliberative under proposals from the National Assn. of Insurance Commissioners.

In some cases, requirements would not be adopted until after a three-year comment period.

Risk management and insurance groups offered tentative support for the proposed changes.

The seven-page detailed proposal by the NAIC's Financial Regulation Standards and Accreditation Subcommittee are designed to ensure that program changes are made at a manageable pace, and not the frenetic one of the early 1990s, when the program was introduced, according to regulators and industry observers.

That fast pace was prompted by the NAIC's urgency to raise the level of state solvency regulation and forestall a heightened congressional interest in federal regulation of insurance that followed several insurer insolvencies in the late 1980s.

However, some state legislators, regulators and insurance industry representatives opposed the NAIC's constant imposition of new requirements. Some saw the NAIC as improperly forcing states to quickly adopt new model laws or lose the accredited status of their insurance departments.

That environment prompted several states, such as New York, Texas and Vermont, to attempt legislative restraints on the NAIC's activities. Ultimately, however, every state complied but New York, which lost its accreditation in 1993 after state lawmakers refused to adopt new standards.

Since then, though, the NAIC's accreditation program generally is considered a success.

"Nearly everyone has recognized the benefit of the NAIC's accreditation program, which standardized the process of financial solvency regulation," said Anne Allen, state legislative counsel for the Risk & Insurance Management Society Inc. in New York.

Insurance departments in 49 jurisdictions have adopted the program's minimum financial regulation standards for at least the first five-year period. Apart from New York, only Nevada lacks accreditation.

In addition, nine insurance departments already have received accreditation for a second five-year period.

Now, the NAIC subcommittee has proposed new detailed procedures for updating the accreditation program to make it more open and deliberative.

The proposal, which the full NAIC must approve, would make the accreditation process more open by calling for broad input and comment on new model laws from a wide variety of sources, including regulators, state legislators, governors, consumers and the insurance industry.

The proposal also would require that the NAIC publicize early in the process when it is considering adding new requirements, said Harold T. Duryee, chairman of the NAIC's Financial Regulation Standards and Accreditation Subcommittee and director of the Ohio Insurance Department. Interested parties would be advised of public hearing dates and provided with relevant drafts and other materials, he said.

In addition, the proposal would "considerably" tighten up the process of changing current accreditation standards, Mr. Duryee said.

The proposal describes in extensive detail at what stages in deliberations over new standards approval would be needed from various subgroups, including the relevant subcommittee, the NAIC's 17-member Executive Committee or its total membership.

In some cases, support from 60% of those voting at the NAIC or in subgroups would be required, which would require a change to the NAIC's current bylaws.

Accreditation standards currently can be modified by:

Creation of new models, sections or amendments to expand the existing list of 18 required laws, regulations or "regulatory frameworks."

Addition of specific requirements to an insurance department's regulatory practices and procedures as well as its organizational and personnel practices.

Indirect modification of standards through changes in manuals or books that are incorporated by reference in the standards, such as the NAIC's Financial Condition Examiners Handbook.

The proposal outlines step-by-step procedures that would have to be followed in each of those situations.

For example, the proposal calls for any new measure to be presented for comment for at least three years after the NAIC's full membership considers adopting it as part of the standards an insurance department must adopt for accreditation. States adopting the minimal requirements of the measure in the interim, though, would essentially be guaranteed their action would fully satisfy the future accreditation standard, if the NAIC's total membership ultimately adopts it.

However, the proposal includes a "safety valve" that would allow the Financial Regulation Standards and Accreditation Subcommittee to waive-on a three-fourths majority vote-the outlined procedures if necessary, Mr. Duryee noted.

For indirect changes, a public hearing would be held if the FRSAS considered the changes "significant," according to the proposal.

Indirect changes to accreditation is an issue with the NAIC's current project to rewrite accounting guidelines, known as the codification project. There are questions, for example, about how the proposed reforms would apply to the codification project, according to the American Council of Life Insurance.

Most states have adopted the NAIC's current accounting manual for use in insurer examinations. The ACLI and some other insurer groups are concerned that if the NAIC adopts new accounting guidelines, then those guidelines indirectly will become accreditation standards. That and related issues are being discussed in a series of three public hearings, Mr. Duryee said.

Regardless, he said, the codification issue likely will be resolved before the full NAIC adopts the proposal to update the accreditation process. Mr. Duryee said he would like the NAIC to vote on the accreditation reform in December, after a special Executive Committee meeting.

The accreditation reform proposal is garnering favorable reaction from risk managers as well as insurers, though neither group has taken a formal position on it.

The NAIC accreditation process "really seems to have matured," said Ms. Allen of RIMS. With this proposal, the NAIC would be moving "in a more positive direction," including bringing in comment from outsiders sooner than before, she said.

"Overall, I think the Alliance of American Insurers would be supportive of the procedures," said Lenore S. Marema, vp-legislative and regulatory affairs for the Schaumburg, Ill.-based group.

The NAIC's Financial Regulation Standards and Accreditation Subcommittee is inviting comment on its proposal. Written comments should be sent to the NAIC's support and services office in Kansas City, Mo., by Sept. 1.

Those who want to make verbal comments to the subcommittee during the NAIC's fall national meeting, Sept. 20-24 in Washington, also may request a time slot.