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NAIC Technical Groups Share Capital Load

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Many panels at the National Association of Insurance Commissioners are looking into life insurers’ request for changes in capital and surplus requirements.

The American Council of Life Insurers, Washington, has asked for the changes to help member insurers increase their flexibility and cope with the current economic environment.

The life industry risk-based capital ratio has dropped to about 300, from 370 at the beginning of the year, Bruce Ferguson, an ACLI senior vice president, said here at the winter meeting of the NAIC, Kansas City, Mo.

Ferguson acknowledged the need for regulators to evaluate the ACLI’s capital and surplus proposal carefully.

But it is also important to take action, Ferguson said.

NAIC bodies that are reviewing the ACLI proposal include the Life & Health Actuarial Task Force, the Life Risk Based Capital Working Group, the Reinsurance Task Force, the Statutory Accounting Principles Working Group and a new Capital and Surplus Relief Working Group.

The Reinsurance Task Force is looking at whether states should be allowed discretion in deciding what is acceptable collateral for reinsurance ceded, NAIC meeting attendees said.

If the discretion is used, the Securities Valuation Office could play a role in determining what is an acceptable alternative to collateral, attendees said.

Any use of discretion should be used in a consistent manner, so that states know what other states are doing, attendees said.

Ferguson said changes in the rules governing deferred tax assets could help life insurers generate up to half of the risk-based capital increase that they need.

The Statutory Accounting Principles Working Group is working on an alternative proposal to determine whether regulators should change statutory accounting rules to follow Generally Accepted Accounting Principles rules regarding recognition of a deferred tax asset, according to Thomas Hampton, the District of Columbia commissioner and chair of the Capital and Surplus Relief Working Group.

There are questions about whether the change should be temporary or permanent and about how a temporary change could be phased out, Hampton said.

Hampton said the capital and surplus working group is putting together a list of the proposals that have been rejected and which have been accepted on a temporary or permanent basis.


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