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.

Regulators can use RBC calculations to assign a life insurance company to one of 5 action levels: No action; company action; regulatory action; authorized control; and mandatory control.

The NAIC staff found that 818 companies submitted RBC filings in 2009. There were 12 new filers, and 41 2008 filers that did not submit 2009 filings.

When NAIC staffers looked at the 806 companies that filed in both 2008 and 2009, they found that 20 companies triggered one of the action levels in 2008, and that 8 of those companies moved to the “no action” level in 2009. The remaining 12 companies had RBC levels triggering regulatory action in both 2008 and in 2009.

Insurance risk accounts for 51% of total RBC at insurers with just $10 million to $25 million in total admitted assets and only 15% of RBC at insurers with more than $10 billion in assets, NAIC staffers say.