State insurance regulators and a major actuarial group are exploring attitudes about the idea of setting up a peer review system for actuaries.[@@]
Many advocates of proposals to shift to a more flexible, statistics-based system for assessing life insurance company stability say developing a program for reviewing actuaries’ work might be important to making the system work.
The National Association of Insurance Commissioners, Kansas City, Mo., polled states about actuarial review programs, and the American Academy of Actuaries, Washington, polled actuaries.
The actuaries participating in the academy’s survey gave a grade of A to the importance of rating actuaries’ work on reserve valuation, an A- to the importance of rating actuaries’ work on risk-based capital valuation and just a C to the importance of rating actuaries’ work on tying assets and liabilities to the annual statement.
The NAIC survey found that state regulators like the idea of having an actuarial review board established with the consent of a commissioner, having a reviewer engaged by a domiciliary commissioner or having peer review provided by an independent audit committee, according to Dennis Lauzon, a New York regulator who is spearheading the NAIC actuarial review survey work.
Having peer review required by a firm’s auditing statements, having peer review performed by a regulatory staff in a domiciliary state; and not requiring peer review at all were much less popular alternatives, Lauzon says.
When asked about how states would set up a peer review system, 7 states said that a change in the law would be necessary, 3 states said that the change could be accomplished by regulation and 1 state said that the system could be changed through an actuarial guideline.
But the importance of peer review in the process of reserve valuation and RBC valuation was raised by almost all states. In the case of reserve valuation, 8 states cited it as “very important” and 2 states as “important,” while 8 states called RBC valuation “very important” and 2 states called it “important.”