Orlando, Fla.–After two years of spirited debate the NationalAssociation of Insurance Commissioners has given its first approvalto a controversial set of new financial reporting requirements fornonpublic insurers patterned after the U.S. Sarbanes-Oxley Act.

Pennsylvania Deputy Commissioner Steve Johnson hailed the actionof the NAIC-AICPA Liaison Committee, comparing it to accreditationas well as standardization of statutory accounting processes asmajor steps in the history of solvency regulation.

But pockets of industry opposition remained strong, demonstratedby the National Association of Mutual Insurance Companies.

NAMIC's senior state advocacy director, Neil Alldredge, saidthat state legislative opposition could ultimately make Monday'saction at the NAIC meeting here a pyrrhic victory for regulatorspushing the measure.

The committee approved amendments to the Model Audit Rule aimedat ensuring that companies' auditors remain independent of theirclients by prohibiting certain consultancy services, as well asensuring that members of the audit committees remain independent ofcompany management.

Mr. Johnson expressed alarm that companies in the age of Enronand WorldCom would not want to take some of the measures called forin the amendments as a matter of corporate prudence.

Most of the controversy surrounding the proposal centered on theinternal controls reporting requirements, which public companieshave found the most onerous in Sarbanes-Oxley since its passage in2002.

In a compromise worked out with industry representatives,companies will no longer have to provide outside attestation of theadequacy of such controls. That change did much to secure most ofthe insurance industry's grudging support.

Steve Broadie, financial regulation manager for the PropertyCasualty Insurers Association of America (PCI), said he hoped thepanel would wait for implementation guidance to be developed beforeit gave its approval.

But, Committee Chairman Doug Stolte, a Virginia deputycommissioner, promised that no “regulatory mischief” would takeplace in the development of the guidance.

The amendments face a long road before they become actualpractice because, in another gesture to industry, the program waswritten to ensure either state legislators or lawmakers mustapprove them before they are in force.

Mr. Alldredge said that fierce and united opposition to therequirements expressed by the National Conference of InsuranceLegislators as recently as last week could make enactmentproblematic in the coming years.

Full NAIC approval could come as early as the summer meetingJune.