History of the Financial Examiners Educational Foundation
The Financial Examiners Educational Foundation was formed in 1981 by the Society of Financial Examiners (SOFE). It is qualified tax exempt, nonprofit educational organization.
The SOFE was organized in 1973 as a nonprofit professional organization of financial examiners from various regulatory agencies including insurance, banking, savings and loans, and credit unions of regulatory . SOFE ‘s organizing principles required adherence to a strict code of conduct and ethics, promoted uniform examination procedures, and encouraged training and educational programs. The key objectives of SOFE was to improve the expertise and professionalism of its members.
The creation of the organization was the brainchild of a small group of state insurance department employees, all of whom were or had been financial examiners. The Founders included Christy Armstrong, Roy Bess, Richard Gregg, William Gould, John Kline, William Sheppard, Vincent Vaccarello, Jay Voorhis, all of whom pushed for membership and support from financial regulatory agencies. However, throughout the early years (1973 thru 1978), SOFE was unable to gain any traction in growing its membership or obtain support from several insurance, banking, savings and loans or credit union agencies. The membership never exceeded fifty until late 1978.
Throughout the period of 1974 thru 1978, there were heated debates at the National Association of Insurance Commissioners (NAIC) meetings regarding the effectiveness of financial examinations and the financial surveillance of US insurers. Pressure was mounting on Commissioners because of the increasing number of insurance company insolvencies and the fact that one large national insurer was under supervision. This tension was heightened by the recommendations of a consulting firm retained by the NAIC which set forth dramatic changes in the examination and surveillance system employed by state insurance regulatory agencies. In addition, the state system of regulation of insurers was being seriously questioned by Congress and the news media.
A number of solutions were suggested by the NAIC’s consulting firm and others. These included requiring annual audited financial reports prepared by independent CPAs, certification of loss and loss adjustment expenses reserves by casualty actuaries, elimination of policyholder’s treatment reviews from the scope of financial examinations, and the expansion of the state insurance guaranty association system. During this period the Founders were busy promoting SOFE as the accreditation and certification body for those that conducted financial examinations. In 1978, the Founders believed they had sufficient support from NAIC members to have SOFE designated as the training and testing organization for certification of financial examiners and requiring those designations to conduct financial examinations of insurers.
By 1978, it was clear that SOFE might not survive. There was no increase in membership from banking, savings and loans, or credit unions. SOFE membership was composed primarily of insurance examiners and its financial condition was deteriorating. However, the lobbying efforts of the Founders paid off. At the NAIC meeting in June, 1978, the Commissioners approved a resolution from the Financial Condition Examination Subcommittee that the Society of Financial Examiners be the accreditation and certification body for financial condition examiners. Approval of this resolution was conditioned on a stipulation that examiners training, testing and certification procedures and standards would be developed by SOFE and the Griffith Foundation. The NAIC contributed funds to SOFE to accomplish this objective. A continuing education program would also be developed and required for SOFE members to maintain their professional designation.
Since SOFE was recognized by the NAIC and state insurance departments as the accrediting body for financial examiners, its membership has grown to over 1700 members representing 50 states, District of Columbia, Canada, Aruba and Netherlands Antilles. Whereas SOFE was originally conceived to provide training, accreditation and certification to insurance, banking and thrift financial examiners, today it serves almost solely insurance examiners, financial analysts and IT examiners.
The Financial Examiners Educational Foundation was originally formed as the Society of Financial Examiner’s Educational Foundation by those responsible for the formation of SOFE. The organization’s purpose was to provide sorely needed funding to educate, train and promote the expertise of insurance company examiners employed by state insurance departments. At that time neither the NAIC, SOFE or state insurance departments had funds available for these purposes.
The Foundation approached a number of individuals, companies, and associations who shared SOFE’s interest in continuing education programs and professional development for examiners. The Foundation established yearly budgets to utilize annual earnings on the contributed funds for training and educational programs. In the early years, the Foundation worked closely with the NAIC in developing various educational seminars on a variety of technical topics relevant for examiners which the Foundation financially supported.
In 1995, the Foundation was renamed ‘The Financial Examiners Educational Foundation’ to reflect its expanded scope of providing financial support to a broader range of insurance educational providers and projects. It continues to be dedicated to providing educational opportunities for state insurance department employees concerned with any aspect of solvency regulation and surveillance. . It persists to work with the NAIC, SOFE, and other groups interested in the improvement of solvency regulation.
Until recently, the Foundation had a policy of spending only annual investment earnings from the endowment fund on educational activities. This fund was created at the time of the formation of the educational foundation and was comprised of contributions from the insurance industry and other entities closely related to the insurance industry. However, given the lack of ongoing contributions to the Foundation and the small investment returns available on the conservative portfolio in the Foundations endowment fund, in order to provide any meaningful education projects it has been forced to start expending the principal of the endowment.
Educational projects and resources provided by the Foundation over the years include:
Various symposiums and seminars fulfilling continuing education requirements held in conjunction with NAIC national meetings.
Training videos on a variety of financial/insurance topics distributed to all insurance departments.
Textbooks to insurance departments on subjects such as Insurance Accounting and Reporting, many of which are required for industry and professional exams.
New insurance commissioner introductory sessions.
Scholarships for state insurance examiners to attend educational conferences, symposiums and seminars.
Speaker fees for quality speakers at SOFE professional development seminars.
With additional financial support from individual and other insurance industry sources, the Foundation hopes to be able to continue funding projects as it has done in the past and to provide funds for innovative research into new insurance financial regulation initiatives.