N.Y. Life Rolls Eyes at RBC Rule

Current RBC rules require an insurer to put the entire statutory carrying value of "affiliated alien life insurers" in the denominator, or risk-based capital level, in RBC calculations.

"The illogical effect of this requirement is that, for a company with even an average RBC ratio, an increase in the foreign insurance company' carrying value reduces that company's RBC ratio," Steinberg says. "The result is that the RBC ratios of companies like New York that have significant foreign insurance operations are significantly understated in comparison to similar companies whose U.S. operating insurance companies do not have foreign subsidiaries."

The quirk affects only mutual life insurers, because stock life insurers use non-insurance holding companies to control foreign life affiliates, Steinberg says.

New York Life would like to see regulators change the RBC rules to exclude the statutory carrying value of a non-U.S. affiliate from both the RBC, or denominator, in the RBC ratio and from the numerator — the total adjusted capital.