Two reforms would solve the issue.
One, total transparency on each derivative position reported each day.
Two, Mark-To-Market total liability and price value on each position reported each day.
If the positions are highly customized, illiquid, and cannot be truly valued in the derivative markets, as allegedly happened during the meltdown, then the position should be valued as a 100% liability.
Don't want 100% derivative liabilities on your books?
Fine, then don't create ultra complex derivative positions that cannot be truly valued in the market.
As to derivative insurance policies, like AIG went bankrupt on, the same rules can apply.
If the derivative cannot be truly valued, then the derivative insurance policy can't be truly valued, and the policies should be carried on their books as 100% liabilities.
Don't want the liabilities?
Then, don't write the insurance policies.
Transparency???
Why don’t you tell me everything you do in your business every day? The derivatives I trade are the business of me, my company, the applicable exchange, and my counterparty - AND THAT IS IT.