The head of a big life insurance and annuity distributor wants state insurance regulators to add public disclosure rules for issuers' reinsurance arrangements.
Larry J. Rybka, the chief executive officer of Valmark Financial Group, asked for the new standards in a letter he sent last month to the Risk-Based Capital Model Governance Task Force.
"For virtually my entire 38-year career, the life-insurance industry has been able to say-truthfully-that no policyholder has ever failed to receive their full contractual death benefit," Rybka wrote in his letter, which was included in a RBC Model Governance Task Force meeting packet. "Recent events place that record in jeopardy and underscore the need for meaningful reform of the risk-based capital framework."
Courts have found that regulators had trouble addressing concerns at one annuity issuer, Atlantic Coast, quickly "because reinsurance credits were treated, by definition, as risk-free assets," Rybka said.
Rybka asked the RBC Model Governance Task Force to set tougher capital requirements for reinsured benefits; limit how much insurers can use reinsurance to improve RBC ratios, rather than to transfer life, casualty, morbidity or longevity risk; and increase transparency.
"Mandate detailed public disclosure of reinsurance counterparties, contractual terms, and any parental guarantees or side agreements," Rybka said. "Greater transparency will allow regulators and market participants to detect emerging concentrations of risk."
What it means: Valmark has helped place about $80 billion in in-force life insurance death benefits and in-force annuities with $4.5 billion in cash value.
Valmark's CEO wants to know what kinds of reinsurance arrangements support the death benefits and annuity value.
RBC basics: An RBC ratio shows roughly how much financial capacity a U.S. insurer has to meet insurance policy and annuity contract obligations. Some regulators object to the idea of members of the public discussing RBC ratios, but typical life and annuity issuers say they have RBC ratios ranging from 300% to 450% of regulators' minimum "company action level."
The task force: The RBC Model Governance Task Force is an arm of the National Association of Insurance Commissioners, a group for state insurance regulators.
Members of the task force will meet Aug. 12 in Minneapolis, at the NAIC's summer national meeting.
Valmark CEO Larry J. Rybka. Credit: Valmark
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