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The American Council of Life Insurers wants regulators to let life and annuity issuers continue to tell agents, advisors, investors and consumers about their risk-based capital ratios.
An RBC ratio is supposed to summarize how well an insurer can support the insurance policies, annuity contracts and other arrangements it has sold, given the amount of obligations it has assumed, the value of its financial resources, and the apparent riskiness of the assets in its investment portfolio.
Some regulators at the National Association of Insurance Commissioners say that RBC ratios can be misleading, and they want to let insurers and others use RBC ratios only in connection with regulatory proceedings.
Two representatives of the ACLI have written to the NAIC to say the ACLI wants regulators to continue to let insurers disclose their RBC ratios to members of the public.
"We agree that a company's RBC ratio alone should not be used to rank insurers' financial strength," Marlana Gomez-Vock, a senior vice president at the ACLI, and Colin Masterson, a senior policy analyst at the ACLI, wrote to NAIC task force leaders who are looking at the confidentiality proposal.
But the document talking about use of RBC ratios, a preamble to the official RBC ratio model rules, "should continue to re-affirm the appropriate disclosure and discussion of information that is already publicly disclosed in annual statements," the ACLI reps wrote in a letter sent Oct. 20.
What it means: Some regulators want to keep advisors, consumers and others from using what they might have thought of as a standard insurance company financial wellness benchmark, because they worry about insurers and members of the public taking the ratio out of context.
The ACLI believes members of the public should be able to see RBC ratios.
The backdrop: The United States leaves regulation of the business of insurance to the states.
The NAIC is a group that helps state regulators share ideas about insurance regulation and develops model laws, model regulations and other model documents they can use to shape policy in their own states.
Two NAIC panels, the Capital Adequacy Task Force and the Risk-Based Capital Governance Task Force, included the ACLI letter in a document packet for an online joint meeting set to take place today.
The ACLI's views: Although people may need to be judicious when interpreting RBC ratios, making the ratios confidential would "decrease transparency around the industry's capital levels and cast doubt on reasonable uses of RBC," the ACLI reps told the NAIC task force leaders.
A new state RBC ratio confidentiality rule could conflict with the disclosure requirements set by other regulators, such as the U.S. Securities and Exchange Commission, the reps argued.
Outside the United States, national governments usually oversee insurance companies. Making RBC ratios confidential could hurt NAIC efforts to promote acceptance of the U.S. state-based approach outside the United States, the ACLI reps said.
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