With great actuarial flexibility comes great corporate responsibility.
That was the underlying message earlier this month during 2 separate conference calls.
State regulators and members of an actuarial group organized the calls to discuss the possible effects of a shift to “principles-based” actuarial standards on corporate governance standards for life insurers.
The Capital Adequacy Task Force/Life and Health Actuarial Task Force joint subgroup at the National Association of Insurance Commissioners, Kansas City, Mo., held one of the 2 conference calls.
Participants talked about the influence of corporate governance concerns on proposed revisions to the NAIC’s Model Audit Rule.
The current draft would require life insurers to use independent Certified Public Accountants, establish internal controls, and meet a number of new requirements for audit committees.
Life insurers would need solid corporate governance practices if principles-based reserving prevails because shifting away from the old, static reserving formulas could lead to large changes in reserves, conference call participants said.
Another group, the American Academy of Actuaries, Washington, held a conference call of its own to update AAA members on the status of its efforts to promote a shift to a principles-based system.
AAA conference call speakers cited developing and implementing an acceptable governance process as one of 4 key points that will need regulatory attention in the coming year.
The other points mentioned include establishing actuarial assumption margins; changing the Standard Valuation Law to accommodate principles-based reserving; and determining if a new approach will be applied to all contracts or only new contracts.