staff, new programs and maintenance and enhancement of its expanded information systems (Figure 6). 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Millions $20.0 $15.0 $10.0 $5.0 NAIC BUDGET 1981 - 1991 $0.0 1981 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 1988 1989 1990 | 1991. Source: NAIC Figure 6 - NAIC Budget - 1981 - 1991 To talk about all of the NAIC's activities in depth would take several days, but it is useful to outline several of those activities in greater detail. The NAIC has amassed the most extensive financial database available on insurance companies accessible to state insurance departments through an advanced computer information network. The NAIC database contains five years of detailed annual and quarterly financial information on-line for approximately 5,400 insurance companies, in addition to data maintained off-line to the mid-1970s. The current database, systems and technology reflect a four-year $17.6 million investment to provide state regulators and NAIC staff with a "state-of-the-art" information facility. Fifty-five people are involved in maintaining and upgrading this system on an ongoing basis. The processing of annual statement data alone for 5,000 plus companies is a massive effort as each filing runs a gauntlet of 13,000 cross-check edits and careful review by a team of data quality specialists. Development of the database is closely integrated with the NAIC's development of the annual statement blank and accounting rules as well as the related specifications for diskette filings, which now comprise 90 percent of all filings. The NAIC database serves as the core of the solvency surveillance and other analysis activities of state insurance regulators and the NAIC. State regulators and NAIC staff access the database through a variety of sophisticated application systems which allow them to access data on specific companies, generate "canned" reports on a group of companies, or generate custom reports to suit their specific needs. Every state department has at least one personal computer, provided by the NAIC, plugged into the NAIC network and 19 states have host-to-host connections allowing them to tie in other terminals. More than 500 insurance department users have direct access to the NAIC system and the number continues to grow. Correspondingly, usage of the system has skyrocketed 12,620 reports were generated in 1990, five times as many as in 1989. This national insurance database also has been provided to the GAO, federal agencies, academics, rating organizations and various other users. In addition, the information contained in the database is made available to the public in a variety of statistical reports and special studies. The NAIC maintains a number of other databases which state regulators and NAIC staff utilize for financial analysis and other regulatory functions. The Alien Reporting Information System (ARIS) provides financial reports that show reinsurance ceded to alien insurers, along with identifying any invalid federal employer identification numbers (FEINs), alien numbers or company locations. The on-line Valuation of Securities (VOS) system provides a complete VOS manual listing of securities held by insurers, along with historical data beginning with 1989, for financial review purposes. This database also contains individual portfolios of the 275 subscribing companies that maintain their stock/bond portfolio on the NAIC computer system. The Omnibus Budget Reconciliation Act (OBRA) reporting system permits states to satisfy Medicare supplement insurance reporting requirements. Companies that write Medicare supplement insurance are instructed to send a completed OBRA reporting form to the NAIC. The NAIC then produces the required reports on behalf of each state and files them with the Health Care Financing Administration (HCFA). The NAIC maintains other special databases containing information on regulatory actions against insurers and agents, the Regulatory Information Retrieval System (RIRS), and information on entities of regulatory concern, the Special Activities Database (SAD). RIRS, in existence since 1983, and SAD, initiated in 1990, greatly enhance regulators' ability to share information on individuals or companies possibly involved in illegal or questionable activities and prevent their infiltration into new areas. The RIRS database contains information on more than 49,000 agents and companies against which some regulatory action has been taken. More than 1,600 entities already are entered on the SAD database which received 5,000 state inquiries in the last half of 1990. State regulators and NAIC staff also use an electronic mail system on the NAIC's computer network to communicate rapidly and coordinate with each other on examinations, regulatory actions, troubled companies, entities of regulatory concern and a variety of other matters. In addition to maintaining databases and systems, NAIC staff frequently provide consulting services to state insurance departments seeking assistance in enhancing their information systems. 2. Financial Analysis and Solvency Surveillance Financial analysis and solvency surveillance are also major areas of activity for the NAIC. The NAIC has long served a vital coordinating function in the event that a single large, multi-state company experiences financial difficulty. Since the early 1970s, the Insurance Regulatory Information System (IRIS) has served as the NAIC's baseline system for monitoring insurers' financial condition at a national level and identifying those insurers requiring further regulatory attention. Companies are first processed through a statistical phase consisting of a series of eleven financial ratios followed by a series of additional screening criteria. Companies showing unusual results are then analyzed further by a select team of state financial examiners who recommend further investigation by the companies' domiciliary regulators, if necessary. Companies deemed to be "high priority" are followed up by the NAIC's Examination Oversight Task Force which takes action if the domiciliary state |