NAIC Property and Casualty Risk-Based Capital Working Group Meeting Report: July 6
Jul 6, 2009
The National Association of Insurance Commissioners (“NAIC”) Property and Casualty Risk-Based Capital (E) Working Group (“Working Group”) met via teleconference on July 6, 2009.
The Working Group adopted the 2009 Property and Casualty Risk-Based Capital (“RBC”) Formula and Instructions Publication. The proposed changes were made over the last year by the Working Group, the Capital Adequacy (E) Task Force, Financial Condition (E) Committee and finally, the Joint Executive (EX) Committee/Plenary. A Working Group member noted that many of the changes were driven by the newly added Hybrid Securities section. The Formula includes significant changes to underlying risk factors, which have already been adopted.
A summary of the changes, which are highlighted in bold, is attached.
At its June 3 meeting, the Working Group had agreed on a proposal to expand the Schedule P two-year lines to 10 years. The NAIC uses Schedule P Summary data to determine the reserving risk and the written premium risk charges in the Risk-Based Capital Formula. Investment analysts and rating agencies use the Schedule to measure the adequacy of a company’s held reserves and thereby estimate its financial strength and expected market value.
A Working Group member acknowledged concerns that additional tax liabilities would be created as a result of expanding Schedule P. However, another member noted that, since the data would be added as part of the electronic annual statement filing and not the hard-copy filing, the action was not expected to incur any Federal Internal Revenue Service penalties.
The Working Group passed a motion to release the proposal draft for comment, and also agreed that the draft exposure would be for a period of 60 days. A copy of the proposal is attached.
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