Iowa’s mutual insurance companies are closely following a proposed change in audit rules that would subject them to some of the same Sarbanes-Oxley type requirements that their publicly owned counterparts must follow.

The proposal by the National Association of Insurance Commissioners, which represents insurance regulators in all 50 states, has met with opposition from industry groups such as the National Association of Mutual Insurance Companies, which say the regulations would be particularly burdensome to mutuals.

First-year compliance costs to meet the new audit rules would exceed $300 million, an amount equal to the cost of all mutual companies’ insolvencies since 1992, according to a cost-benefit study conducted for the NAMIC by Finnell & Co. PLLC, an insurance consulting group based in McLean, Va.

The rules, however, will likely apply to just the largest 10 percent of mutual insurance companies in Iowa, said Insurance Commissioner Susan Voss, and wouldn’t go into effect until 2009 or 2010. Several Central Iowa insurers, including Des Moines-based American Republic Insurance Co. and West Des Moines-based Homesteaders Life Co., would be affected under that scenario.

“In this case, the concern is the high cost,” said Glen Hare, chief financial officer of Homesteaders, which specializes in policies it markets through funeral homes to fund prearranged burial agreements. “This law was originally intended to improve investor confidence, and that’s not an issue with non-public companies,” he said. “Our concern is our policyholders, and we already have a lot of measures that deal with protections.”

American Republic CFO Sarah Roy said that her company has already incorporated some Sarbanes-Oxley practices into its corporate governance policies.

Additionally, “we have been expressing a request that the appropriate regulatory bodies step back and really exercise some selectivity as to where these rules make sense for insurance company regulation, and where they may be excessive,” she said.

Last year, public companies with revenues under $1 billion saw their average audit fees increase 96 percent to $1 million, compared with $532,000 in 2003.

Voss said an NAIC working group is considering alternatives to costly annual audit requirements, such as a periodic audit that coincides with a mutual insurance company’s three- or five-year audit cycle. Additionally, the NAIC working group is currently discussing raising compliance thresholds, which at $100 million or more in annual premiums, would mean that just 11 of Iowa’s 125 mutual insurance companies would be subject to the new rules.