National Association of Insurance Commissioners (NAIC) officials want to include funding for a principles-based valuations impact study in the group’s 2011 budget.
The NAIC, Kansas City, Mo., began official consideration of the budget this week during the fall meeting in Orlando, Fla.
The NAIC is expecting to increase revenue 1.6%, to about $75.2 million, and expenses 5.3%, to $75.4 million.
For 2010, the NAIC adopted a budget that included a 0.8% cut in expenses. The association is predicting it will end the year with a total net operating margin of about $858,000.
NAIC members include insurance regulatory officials from the 50 states, the District of Columbia and 5 U.S. territories.
One sign of the severity of the effects of the Great Recession on California is NAIC member assessments. The states that pay an assessment of more than $100,000 are California, Florida, New York and Pennsylvania and Texas. NAIC assessments will be rising for 4 of those states in 2011 but falling to $171,080, from $172,352, for California.
Policy and business initiatives that could affect the 2011 budget include a $29,460 allocation for the hiring of an additional part-time technical services division employee. The employee will help the NAIC keep up with growing demands on its messaging systems and other communications systems, officials say.
The NAIC also plans to spend $83,953 on a records management project and $166,500 to help states comply with new federal health insurance consumer assistance data collection and reporting requirements.
The NAIC expects to spend $250,000 on a study of a proposed valuation methodology that would be used with the NAIC’s recently adopted Standard Valuation Law.
The NAIC’s Life and Health Actuarial Task Force has proposed shifting to a “principles-based reserving” approach, which would put more emphasis on use of general principles, actuarial judgment and statistical analysis, and less on use of unchanging formulas and pre-set numerical limits.
“The impact of the proposed valuation changes will be determined by comparing the reserves as calculated under the proposed principle-based valuation methodology with the reserves calculated under the current formula-based valuation methodology,” officials say in the NAIC budget proposal. “This information will be valuable to insurance regulators, life insurance companies and state legislators as they contemplate adopting the modifications to the Standard Valuation Law.”
The NAIC’s Executive Committee approved the release of a request for proposal (RFP) for the study, officials say.
The Executive Committee expects to hold a public teleconference hearing on the budget proposal Nov. 30.
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