A panel at the National Association of Insurance Commissioners decided here this weekend to unveil Actuarial Guideline VACARVM, a model guideline that has been germinating for nearly a decade.

The model, which would help insurers apply the Commissioners Annuity Reserve Valuation Method for variable annuities with guarantee provisions, would replace Actuarial Guideline 39, a temporary guideline that was adopted in 2002. The temporary guideline was extended a few years ago and now is on track to expire Jan. 1, 2008.

Members of the NAIC’s Life & Health Actuarial Task Force voted to expose AG VACARVM here at the NAIC’s fall meeting.

Tom Campbell, chair of the American Academy of Actuaries, Washington, and a representative for the American Council of Life Insurers, Washington, emphasized the importance of adopting AG VACARVM as quickly as possible, to make sure a new, permanent guideline is in place when AG 39 expires.

Campbell rejected suggestions that the NAIC, Kansas City, Mo., ought to wait and fold AG VACARVM into a wide-ranging manual that will explain how to apply principles-based reserving methods to establishing and evaluating life insurance and annuity reserves.

Advocates of principles-based reserving methods want to move toward allowing for flexible use of modern statistical forecasting methods, away from relying on un-changing formulas.

Campbell and John Bruins, an ACLI life actuary, argued that it would be better to adopt AG VACARVM as a stand-alone model as quickly as possible.

“AG 39 doesn’t work,” Bruins said.

Regulators also talked about strategies for coping with the possibility that the VACARVM guideline model might not be in place when AG 39 expires.

John Rink, a Nebraska regulator, offered a motion to extend AG to Jan. 1, 2009. No one seconded the motion.

Bruins recommended a number of changes to AG 39 if AG 39 must be extended.

One change would be to allow for a quarterly release of 2.5% of the accumulated reserve for reporting quarters beginning Jan. 1, 2008. Accumulated charges net of this release trigger would be subject to asset adequacy analysis, Bruins said.

The ACLI also would recommend modifying AG 39 to allow credit for more forms of reinsurance and to allow credit for hedging programs.