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June 14, 2010 at 08:00 PM
A panel at the National Association of Insurance Commissioners wants a sister panel to help it review the methods used to calculate risk-based capital r(RBC) atios and set RBC requirements.
Christina Urias, chair of the Solvency Modernization Initiative Task Force at the NAIC, Kansas City, Mo., has written about the need for work on the RBC ratio system in a memo to Lou Felice, chair of the Capital Adequacy Task Force at the NAIC.
Regulators use the RBC ratio system to adjust the value of an insurer’s holdings to reflect the estimated level of risk and, after the adjustments are made, to determine whether the insurer has enough capital to meet its obligations. Regulators may step in when an insurer’s RBC ratio falls sharply or falls below a “regulatory intervention” level.
The SMI Task Force and its working groups have been looking at the U.S. financial regulatory system, and “we have agreed that our risk-based capital requirements should continue to be a component in the legal framework of U.S. solvency regulation in order to maintain a floor for triggering regulatory intervention,” Urias has written to Felice.
The NAIC has not conducted an overall review of the RBC system since the 1990s, Urias writes.
