A reserve valuation office similar to the current securities valuation office of the National Association of Insurance Commissioners was one possible governance mechanism that was discussed recently.
A webcast sponsored by the Affordable Life Insurance Alliance, Washington, featured Larry Bruning, chief actuary with the Kansas insurance department, who offered insight into how an RVO could work.
Principle-based reserving is an approach for holding capital that relies more on flexible reserving than on formulaic reserves. The NAIC and the American Academy of Actuaries, Washington, are working on developing such a system.
The other two options mentioned as a way to govern the new system were the current individual state filing system for actuarial attestations and a state of domicile approach in which filings would be made to the insurance department of the state in which a company is based.
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The possibility of making a valuation body part of the current interstate compact that the NAIC is working to make operational was also discussed. Currently, 20 states out of a required 26 have agreed to be part of the compact.
Other possibilities that were discussed included having the RVO certify actuaries of state insurance departments to review company actuarial filings, certifying actuarial firms to carry out the work and other independent auditors. The argument was that certifying independent actuaries could reduce costs.