The American Academy of Actuaries (AAA) has created rigorous, detailed procedures for protecting against potential conflicts of interests, and its members can and should play a role in principles-based reserving (PBR) experience reporting, the group’s leader says.
Mary Frances Miller, president of the AAA, Washington, makes that case in a letter sent to the Life Actuarial Task Force at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo.
Advocates of a PBR approach want life insurers to set reserves using actuarial principles and statistical analyses rather than by relying on static formulas. The Life Actuarial Task Force is developing a valuation manual section, VM-50, that would explain how life claim experience reporting and analysis would work in a PBR system.
The Center for Economic Justice, Austin, Texas, said in a comment letter sent to the task force in June that the task force should avoid creating any special confidential data access provisions for actuarial groups that want to help with PBR claim experience studies. The center suggested that an actuarial group could have conflicts of interest, and that, if regulators need help with actuarial analysis for PBR purposes, they should hire consultants and use contracts that spell out requirements for confidentiality, conflicts of interest and antitrust issues.
The AAA — a group formed to give actuaries a vehicle for contributing to public policy discussions — believes the center has mischaracterized the AAA and the actuarial profession, Miller writes in the AAA comment letter.
The AAA is made up of volunteer actuaries who are experts in their practice areas and can provide objective analysis of public policy actuarial issues, Miller says.
“The academy has had in place for many years a conflict of interest policy with which academy member-volunteers must comply,” Miller says. “The academy requires an affirmative attestation each year from all volunteers that they understand and agree to their responsibilities under this policy before providing their services to the academy.”
The AAA also has strict antitrust policies, Miller says.
AAA volunteers do not ask insurers for confidential information, and, if a PBR project required use of confidential data, the AAA actuaries would divide the work with the NAIC staff or research teams at the Society of Actuaries, Schaumburg, Ill., to keep AAA volunteers from getting inappropriate access to confidential data, Miller says.
Miller notes that actuaries who are members of the AAA or the other four major actuarial groups must follow a Code of Professional Conduct. Actuaries who violate the code face disciplinary action, she says.