Insurers and their software companies are joining to fight a proposal to give regulators more time to update the risk-based capital (RBC) reporting rules for a given year.
Regulators use RBC figures to determine whether insurers have enough capital to support the policies they have written. Changes in RBC may increase or decrease what insurers charge for their products.
Members of the Capital Adequacy Task Force, an arm of the National Association of Insurance Commissioners (NAIC), have talked about moving the RBC formula finalization date for an RBC reporting year to July 31, from April 30, to accommodate late changes in insurance accounting rules or in insurance company annual statement blanks.
John Bauer and Connie Jasper Woodroof — representatives for a group of interested parties that includes America’s Health Insurance Plans (AHIP), the American Council of Life Insurers (ACLI), the American Insurance Association (AIA), the National Association of Mutual Insurance Companies (NAMIC), and the Property Casualty Insurers Association of America — said changing the RBC formula finalization deadline could cause big problems for insurers’ software vendors. The vendors need time to build formula changes in their RBC software and to test the changes, Bauer and Woodroof write, according to a comment letter included in an NAIC meeting packet.
“Many of the calculations are quite intricate, and an error in one calculation can result in a substantive RBC error,” Bauer and Woodroof write. They add that changing the finalization date would cause similar problems for the NAIC’s own data team.
John Bruins, a senior actuary at the ACLI, wrote separately that the proposed deadline change would keep insurers from knowing final RBC requirements until very late in the year. “We believe that an earlier date, not a later date, is needed for thoughtful, appropriate capital planning,” he says.