Draft 2010 NAIC Budget Holds Growth to Under 1%

The National Association of Insurance Commissioners introduced at its fall national meeting a draft 2010 budget that projects an increase of less than 1% in total revenues.

The budget proposal forecasts total revenues of $73.6 million, a 0.7% increase, and total expenses of $70.9 million, a 0.8% decrease, from the 2009 budget, leaving $2.7 million in expected net revenue. The 2010 draft reflects a deliberate effort to cut costs in a troubled economy that has not spared NAIC coffers, NAIC President-Elect and West Virginia Insurance Commissioner Jane Cline said in a statement.

"In response, we have worked diligently to reduce costs and seek opportunities for revenue enhancement," Cline said. "However, the 2010 proposed budget does not in any way compromise or diminish our unwavering commitment to serving regulators as they protect consumers and ensure solvency of the industry."

Association officials had predicted an austere budget due to the recession. The NAIC has implemented cutbacks in the current budget year, including a freeze in salary increases through June 30, 2010, no funding of new positions and adjustments to the travel budget (BestWire, Aug. 17, 2009).

The NAIC implemented a total of approximately $2 million in cuts in net spending for the second half of 2009, according to the association's budget summary. Currently, a net operating loss of $176,969 is projected, with a total net revenue margin of $2.8 million driven primarily by positive investment performance.

The liquid reserve ratio is projected to be 57.2% at the end of 2009, rising to 60.3% at the conclusion of 2010. The 2009 budget had forecast a 74.4 liquid reserve ratio, up from 67.6 for the end of 2008.

The 2009 budget included $540,900 for salary, benefits and start-up expenses to establish a full-time International Liaison Director's position in Brussels, Belgium. Financial considerations led the NAIC not to fill the post this year and to reallocate those funds toward shifting its executive offices to Washington, D.C., and building up its staff levels there. That position is not funded in the 2010 budget.

In 2010, the NAIC will cut its number of national meetings from four to three, but NAIC officials said that shift is not expected to result in significant budget savings, because meetings are both an expense and a revenue-generator (BestWire, Aug. 17, 2009).

The NAIC budget includes business and financial-impact statements for three new initiatives:

-- Market Conduct Annual Statements: to replace the current database filing process with a Web-based, front-end application for the collection of 2010 data in 2011 by all states;

-- Application Development and Testing Tools: to expand existing information technology tools for managing the testing and development of NAIC applications and databases; and,

-- Solvency Modernization Webinars: to offer a new education and training course of solvency modernization.

The NAIC will hold a public hearing on Nov. 5. Written comments are due by Oct. 23.