Solvency Panel To Review Paper

“Aviva USA strongly supports the movement to a principle-based approach to solvency standards, as opposed to the current factor-based prescribed approach, David Neve, a vice president at Aviva USA, writes in a comment. “While the current [risk-based capital] system is a risk-based system, the use of static risk factors that are the same for all companies cannot adequately capture all of the underlying risks of the company.”

William Sergeant, director of accounting policy at State Farm, says maintaining the kind of statistical modeling expertise needed in each state insurance department to implement a principles-based approach to solvency regulation would not be cost-effective.

“A formulaic approach, such as RBC, is a more consistent and effective way to regulate for minimum solvency levels,” Sergeant writes.