Fewer than 3% of life insurers faced regulatory action in 2009 as a result of low risk-based capital levels.
The percentage of life insurers with RBC levels triggering regulatory action fell to 2.32% in 2009, from 2.83% in 2008, staffers at the National Association of Insurance Commissioners, Kansas City, say in a new report.
The percentage of life insurers with RBC levels low enough to trigger regulatory action was 1.3% in 2006 and 1.49% in 2007, NAIC staffers say.
The RBC system is a method state regulators use to determine whether insurers have enough capital to make good on obligations to policyholders. The system gives insurers’ more credit for assets held in what appear to be safer, steadier investments than for assets held in what appear to be riskier investments.
If an insurance company’s RBC level falls below the “authorized control level,” the state insurance regulator can place the company under regulatory control.