CAPITAL ADEQUACY (E) TASK FORCE · CAPITAL ADEQUACY (E) TASK FORCE Capital Adequacy (E) Task Force Aug. 4, 2019, Minutes ... Presentation of the Review of Life Mortality Risk-Based

© 2019 National Association of Insurance Commissioners

CAPITAL ADEQUACY (E) TASK FORCE Capital Adequacy (E) Task Force Aug. 4, 2019, Minutes Capital Adequacy (E) Task Force June 28, 2019, Minutes (Attachment One) Proposal 2018-17-CA (Attachment One-A) Proposal 2019-05-P (Attachment One-B) Proposal 2019-08-P (Attachment One-C) Proposal 2018-18-L (Attachment One-D) Proposal 2019-10-L (Attachment One-E) Health Risk-Based Capital (E) Working Group July 17, 2019, Minutes (Attachment Two) Health Risk-Based Capital (E) Working Group June 24, 2019, Minutes (Attachment Two-A) Health Risk-Based Capital (E) Working Group May 13, 2019, Minutes (Attachment Two-B) Comment Letter from UnitedHealth Group (UHG) Regarding Proposal 2019-04-H (Attachment Two-B1) Comment Letter from UnitedHealth Group (UHG) Regarding Proposal 2018-17-CA (Attachment Two-B2) 2018 Health RBC Statistics (Attachment Two-C) 2019 Health RBC Newsletter (Attachment Two-D) Life Risk-Based Capital (E) Working Group Aug. 3, 2019, Minutes (Attachment Three) Life Risk-Based Capital (E) Working Group July 22, 2019, Minutes (Attachment Three-A) Proposal to Update the RBC Charge for Unaffiliated Common Stock Supporting Long-Horizon Contractual

Commitments (Attachment Three-A1) Life Risk-Based Capital (E) Working Group June 25, 2019, Minutes (Attachment Three-B) Presentation of the Review of Life Mortality Risk-Based Capital from the Academy’s C2 Work Group

(Attachment Three-B1) Life Risk-Based Capital (E) Working Group June 17, 2019, Minutes (Attachment Three-C) Life Risk-Based Capital (E) Working Group June 6, 2019, Minutes (Attachment Three-D) Life Risk-Based Capital (E) Working Group May 13, 2019, Minutes (Attachment Three-E) Life Risk-Based Capital (E) Working Group April 26, 2019, Minutes (Attachment Three-F) Longevity Risk (A/E) Subgroup July 17, 2019, Minutes (Attachment Three-G) Presentation of the Correlation Recommendation from the Academy Longevity Risk Task Force (Attachment Three-H) Property and Casualty Risk-Based Capital (E) Working Group Aug. 4, 2019 Minutes (Attachment Four) Property and Casualty Risk-Based Capital (E) Working Group May 17, 2019, Minutes (Attachment Four-A) Catastrophe Risk (E) Subgroup Aug. 2, 2019, Minutes (Attachment Four-B) P/C RBC Newsletter (Attachment Four-C) Working Agenda of the Capital Adequacy (E) Task Force (Attachment Five) 2020 Proposed Charges (Attachment Six)

Draft Pending Adoption

© 2019 National Association of Insurance Commissioners 1

Draft: 8/5/19 Capital Adequacy (E) Task Force

New York, New York August 4, 2019

The Capital Adequacy (E) Task Force met in New York, NY, Aug. 4, 2019. The following Task Force members participated: David Altmaier, Chair (FL); Todd E. Kiser, Vice Chair, represented by Jake Garn (UT); Lori K. Wing-Heier represented by David Phifer (AK); Jim L. Ridling represented by Richard Ford (AL); Ricardo Lara represented by Rachel Hemphill (CA); Andrew N. Mais represented by Kathy Belfi (CT); Stephen C. Taylor represented by Philip Barlow (DC); Trinidad Navarro represented by Dave Lonchar (DE); Doug Ommen represented by Mike Yanacheak (IA); Robert H. Muriel represented by Kevin Fry (IL); Vicki Schmidt represented by Tish Becker (KS); Steve Kelley represented by Kathleen Orth (MN); Chlora Lindley-Myers represented by Debbie Doggett (MO); Mike Causey represented by Jackie Obusek (NC); Marlene Caride represented by John Sirovetz (NJ); John G. Franchini represented by Anna Krylova (NM); Jillian Froment represented by Dale Bruggeman and Tom Botsko (OH); Glen Mulready represented by Joel Sander (OK); Kent Sullivan represented by Mike Boerner (TX); Mike Kreidler represented by Patrick McNaughton (WA); and Mark Afable represented by Randy Milquet (WI).

1. Adopted its June 28 Minutes The Task Force met June 28 and took the following action: 1) adopted its Spring National Meeting Minutes (see NAIC Proceedings – Spring 2019, Capital Adequacy (E) Task Force); 2) disbanded the Operational Risk (E) Subgroup; and 3) adopted its Working Group’s proposals:

a. Proposal 2018-17-CA (Electronic Capitation Tables). b. Proposal 2019-05-P (Underwriting Risk Line 1 Factors). c. Proposal 2019-08-P (Affiliated Investment Instructions). d. Proposal 2018-18-L (Life and Fraternal Combination Blank). e. Proposal 2019-10-L (Interest Rate Risk and Market Risk, LR027).

Mr. Yanacheak made a motion, seconded by Mr. Boerner, to adopt the Task Force’s June 28 minutes (Attachment One). The motion passed unanimously. 2. Adopted its Working Group Reports Mr. Phifer made a motion, seconded by Mr. Botsko, to adopt the reports and minutes of the Health Risk-Based Capital (E) Working Group (Attachment Two); the Life Risk-Based Capital (E) Working Group (Attachment Three); and the Property and Casualty Risk-Based Capital (E) Working Group (Attachment Four). The motion passed unanimously. 3. Adopted its Working Agenda

Mr. McNaughton said the Health Risk-Based Capital (E) Working Group removed the “Bilateral Agreement Between the United States of America and the European Union on Prudential Measures regarding Insurance and Reinsurance” (Covered Agreement) as a completed task, added a referral from the Operational Risk (E) Subgroup, and formed an ad hoc group to review the excessive growth charge and provide a recommendation, if appropriate, to the Working Group. Commissioner Altmaier said the Task Force added the structural notes referral to its working agenda. Mr. Botsko summarized the changes to the 2019 property/casualty (P/C) risk-based capital (RBC) working agenda: 1) removed “continue working with the Academy to review the methodology and revise the underwriting (premium and reserve) charges in the PRBC formula as appropriate” in the carry-over items; and 2) added “evaluate the proposed changes from the Affiliated Investment Ad Hoc Group related to P/C RBC affiliated investments,” “Evaluate the proposed changes from the Investment Risk-Based Capital WG related to Bond changes in the P/C formula,” and “continue working with the Academy to review the methodology and revise the underwriting (investment income adjustment, loss concentration, LOB UW risk) charges in the PRBC formula as appropriate” in the new items section, respectively. Ms. Orth made a motion, seconded by Mr. Yanacheak, to adopt the Task Force’s working agenda (Attachment Five). The motion passed unanimously. 4. Exposed its 2020 Proposed Charges

Draft Pending Adoption


Commissioner Altmaier said the only change to the charges was to remove the specific charge for the Operational Risk (E) Subgroup now that it has been disbanded. Mr. Barlow said the C-3 Phase II/AG 43 (E/A) Subgroup’s name was changed to the Variable Annuities Capital and Reserves (E/A) Subgroup. Mr. Boerner said item B under that Subgroup’s charges was completed at this meeting, and it should be removed. The Task Force will expose its 2020 proposed charges (Attachment Six) for a 30-day public comment period ending Sept. 4. 5. Heard an Update Regarding the Affiliate Investment Ad Hoc Group Mr. Botsko said the Affiliated Investment Ad Hoc Group has been meeting on a regular basis for the past few months. It has finalized the instructions for Direct U.S. Insurers Subject to RBC, and it is close to finalizing the Indirect U.S. Insurers Subject to RBC. The instruction revisions are staying on track to apply consistency across the three types of insurance, as well as with the Annual Statement Instructions. As it reaches consensus with its revisions, it plans to expose each revision for feedback, both in the working groups and the Task Force, to keep this project moving forward. However, it will implement all the revisions at the same time. 6. Discussed the RBC Preamble Commissioner Altmaier said the purpose of the RBC preamble is to provide some history and background on the RBC as a reference when reviewing the numerous referrals and proposal that pass to the Task Force and its working groups. He added that the preamble was exposed for a 30-day public comment period ending May 7. Several comment letters were received and included in the draft, and it will be re-exposed for a 30-day public comment period ending Sept. 4. Candy Gallaher (America’s Health Insurance Plans—AHIP) said several of the comments referenced in its letter were included in the preamble draft. AHIP has other non-controversial comments to add, and it will do so in the re-exposure period. Edits have been included on the draft preamble, and Commissioner Altmaier suggested re-exposing for it another 30-day public comment period. The Task Force agreed. Nancy Bennett (American Academy of Actuaries—Academy) said it is important that the preamble state that the purpose of the RBC is to identify weakly capitalized companies; and under the critical concepts section, it should exclude the reference that RBC seeks to modify the risk profile of all insurance companies to the point where they all have an equal probability of insolvency. She said RBC did not have that intent, nor is it designed in such a way that it could be achieved in aggregate; but it is designed at a risk level, just not in such a way as to incentivize a particular risk. 7. Received the Structured Notes Referral Mr. Bruggeman said the purpose of the referral is to notify the Task Force that the Statutory Accounting Principles (E) Working Group adopted clarification to the accounting and reporting guidance for structured notes. He said a structured note is defined as an investment that is structured to resemble a debt instrument, where the contractual amount of the instrument to be paid at maturity is at risk for other than the failure of the borrower to pay the contractual amount due. He asked that the Task Force consider the appropriate RBC charges for structured notes, as well as the determination on how gains and losses on these derivatives shall be reported through the Interest Maintenance Reserve (IMR)/Asset Valuation Reserve (AVR). 8. Discussed the Comprehensive Fund Referral Mr. Fry said the Valuation of Securities (E) Task Force has been looking into bond mutual funds or exchange-traded funds (ETFs) that have bond-like characteristics and more inconsistent RBC treatment than bonds. The Statutory Accounting Principles (E) Working Group sought to characterize shares of such funds as being “bond-like,” and they were accommodated by including them in the scope of Statement of Statutory Accounting Principles (SSAP) No. 26R—Bonds. Inconsistencies with RBC treatment can be avoided if it is recognized as “bond-like.” Mr. Fry suggested that a separate schedule be developed to list the different types of mutual funds so that RBC can determine the appropriate risk charge by removing them from a schedule that receives a flat charge. Mr. Barlow concurred that categorizing these funds on a separate schedule to analyze and appoint an appropriate charge, instead of leaving these funds on a schedule that by default receives a stock charge and is now categorized to be “bond-like,” would be beneficial. Mr. Bruggeman said he agrees that a better charge should be evaluated in RBC to create a separate schedule so RBC can assign a different charge for those funds; but maybe subtotal lines can be provided on the current schedule to help identify the funds for RBC. Mr. Fry said it would be beneficial to categorize these funds together, knowing that this would take some time. Commissioner Altmaier said comprehensive funds are already listed on the Task Force’s working agenda. He said the Task Force will consider all investment referrals and provide an update during a future meeting. Having no further business, the Capital Adequacy (E) Task Force adjourned. W:\National Meetings\2019\SpringTF\CapAdequacy\04-07_CapitalAdequacyTFmin_final.docx

Attachment One Capital Adequacy (E) Task Force

8/4/19


Draft: 7/2/19

Capital Adequacy (E) Task Force Conference Call June 28, 2019

The Capital Adequacy (E) Task Force met via conference call on June 28, 2019. The following Task Force members participated: David Altmaier, Chair (FL); Todd E. Kiser, Vice Chair, represented by Jake Garn (UT); Jim L. Ridling represented by Richard Ford (AL); Ricardo Lara represented by Rachel Hemphill (CA); Andrew N. Mais represented by Wanchin Chou (CT); Doug Ommen represented by Mike Yanacheak (IA); Robert H. Muriel represented by Kevin Fry (IL); Vicki Schmidt represented by Tish Becker (KS); Steve Kelley represented by John Robinson (MN); Chlora Lindley-Myers represented by John Rehagen (MO); Mike Causey represented by Jackie Obusek (NC); Marlene Caride represented by John Sirovetz (NJ); John G. Franchini (NM); Jillian Froment represented by Dale Bruggeman and Tom Botsko (OH); Glen Mulready represented by Eli Snowbarger (OK); Elizabeth Kelleher Dwyer represented by Matt Gendron (RI); Kent Sullivan represented by Mike Boerner (TX); Mike Kreidler represented by Patrick McNaughton (WA); and Mark Afable represented by Randy Milquet (WI).

1. Adopted its Spring National Meeting Minutes Mr. Sirovetz made a motion, seconded by Mr. Bruggeman, to adopt the Task Force’s April 7 minutes (see NAIC Proceedings – Spring 2019, Capital Adequacy (E) Task Force). The motion passed unanimously. 2. Disbanded the Operational Risk (E) Subgroup Commissioner Altmaier said the Operational Risk (E) Subgroup completed its charge by the Spring National Meeting. The Property and Casualty Risk-Based Capital (E) Working Group and the Health Risk-Based Capital (E) Working Group will continue to evaluate the risk-based capital (RBC) risk charges in the formula, which will include operational risk. Mr. Fry made a motion, seconded by Mr. Sirovetz, to disband the Operational Risk (E) Subgroup. The motion passed unanimously. 3. Adopted Proposal 2018-17-CA Mr. McNaughton said that the purpose of proposal 2018-17-CA (Electronic Capitation Tables) is to capture the capitation tables electronically to provide greater transparency and analysis of data and allow for crosschecks. He added that the effective date is for year-end 2020. Mr. McNaughton made a motion, seconded by Mr. Chou, to adopt proposal 2018-17-CA (Attachment One-A). The motion passed unanimously. 4. Adopted Proposal 2019-05-P Mr. Botsko said the purpose of proposal 2019-05-P (Underwriting Risk Line 1 Factors) is to update the line 1 factors. He added that this is an annual process for the premium and reserve factors. Mr. Botsko made a motion, seconded by Mr. Chou, to adopt proposal 20109-05-P Underwriting Risk Line 1 factors (Attachment One-B). The motion passed unanimously. 5. Adopted Proposal 2019-08-P Mr. Botsko said the purpose of proposal 2019-08-P (Affiliate Investment Instructions) is to remove the word “bond” from the instructions as affiliated bonds are no longer included in the affiliated investment calculations. He added that there is a change from “F” to “E” and “A” in the indirectly owned U.S. property/casualty (P/C) insurance affiliates to remove fair value. Mr. Botsko made a motion, seconded by Mr. Boerner, to adopt proposal 2019-08-P (Attachment One-C). The motion passed unanimously. 6. Adopted Proposal 2018-18-L

Attachment One Capital Adequacy (E) Task Force

8/4/19


Mr. Boerner said the purpose of proposal 2018-18-L (Life and Fraternal Combination Blank) is based on changes to the annual statement to combine fraternal with the life blank. The life and fraternal RBC formulas are nearly identical except for a few items that are not applicable to fraternal and references to the fraternal annual statement blank. The Working Group received comments from the fraternal industry and incorporated their input into the proposal. Mr. Boerner made a motion, seconded by Mr. Chou, to adopt proposal 2018-18-L (Attachment One-D). The motion passed unanimously. 7. Adopted Proposal 2019-10-L Mr. Boerner said that the purpose of proposal 2019-10-L (Interest Rate Risk and Market Risk, LR027) is to modify the instructions as part of the Variable Annuities Framework adopted by the Variable Annuities Issues (E) Working Group. He added that extraordinary effort put into addressing the issues and the resulting framework involved modifications to both reserves and capital. Mr. Boerner made a motion, seconded by Mr. Botsko to adopt proposal 2019-10-L (Attachment One-E). The motion passed unanimously. 8. Discussed Other Matters Commissioner Altmaier said that the Task Force received a notification of the Blanks (E) Working Group procedural changes now that the Working Group will no longer be meeting at the national meeting. He encouraged other groups to review those changes on the Blanks (E) Working Group’s web page and provide comments if necessary. He added that the Task Force will not be making comments on the exposure. Having no further business, the Capital Adequacy (E) Task Force adjourned. W:\National Meetings\2019\SummerTF\CapAdequacy\06-28_CapitalAdequacyTFmin_final.docx

2019 National Association of Insurance Commissioners

Capital Adequacy (E) Task ForceRBC Proposal Form

[ x ] Capital Adequacy (E) Task Force [ ] Health RBC (E) Working Group [ ] Life RBC (E) Working Group[ ] Catastrophe Risk (E) Subgroup [ ] Investment RBC (E) Working Group [ ] SMI RBC (E) Subgroup [ ] C3 Phase II/ AG43 (E/A) Subgroup [ ] P/C RBC (E) Working Group [ ] Stress Testing (E) Subgroup

DATE: 12-3-18

CONTACT PERSON: Crystal Brown

TELEPHONE: 816-783-8146

EMAIL ADDRESS: [email protected]

ON BEHALF OF: Health RBC (E) Working Group

NAME: Patrick McNaughton

TITLE: Chief Financial Examiner/Chair

AFFILIATION: WA Office of Insurance Commissioner

ADDRESS: PO Box 40255

Olympia, WA 98504-0255

FOR NAIC USE ONLY

Agenda Item # 2018-17-CA Year 2020

DISPOSITION

[ ] ADOPTED

[ ] REJECTED

[ ] DEFERRED TO

[ x ] REFERRED TO OTHER NAIC GROUP

[ x ] EXPOSED May 7, 2019

[ ] OTHER (SPECIFY)

IDENTIFICATION OF SOURCE AND FORM(S)/INSTRUCTIONS TO BE CHANGED

[ x ] Health RBC Blanks [ x ] Property/Casualty RBC Blanks [ ] Life RBC Instructions[ x ] Fraternal RBC Blanks [ ] Health RBC Instructions [ ] Property/Casualty RBC Instructions[ x ] Life RBC Blanks [ ] Fraternal RBC Instructions [ ] OTHER ______________

DESCRIPTION OF CHANGE(S)Make the Capitation Tables included in the forecasting files of the Health, Life, Fraternal and P/C to be captured electronically.

REASON OR JUSTIFICATION FOR CHANGE **Making the capitation tables electronic capture only, would allow for greater transparency and analysis of the data. It would also allow for the addition of crosschecks.

Note: These tables are not new tables and have been included in the forecasting formula to calculate Lines 19 & 22 on page XR019, Lines 2 & 5 on page PR013, and Lines 2& 5 on page LR028. The only change is to capture them electronically within the NAIC database.

Additional Staff Comments:12-3-18 cgb The WG agreed to refer the proposal to the Capital Adequacy Task Force for exposure.4-7-19 cgb The CADTF exposed the proposal for a 30-day comment period ending on May 7, 20195-7-19 cgb Comment letter received from UnitedHealth Group5-13-19 cgb The WG received comments and modified the proposal with a friendly amendment to add the followingparenthetical “(and is to be filed electronically if any data is included)” to the instructions for the Less Secured Capitations toProviders and Less Secured Capitations to Intermediaries lines for all lines of business. The WG agreed to refer the proposalwith the friendly amendment to the Task Force for consideration.

___________________________________________________________________________________________________ ** This section must be completed on all forms. Revised 11-2013

Attachment One-A Capital Adequacy (E) Task Force

8/4/19


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(e.g

., an

acc

epta

ble

lette

r of c

redi

t equ

al to

5 p

erce

nt o

f ann

ual c

laim

s pai

d to

that

pro

vide

r), t

hen

the

amou

nt o

f ca

pita

tion

is p

rora

ted.

The

exe

mpt

ion

is c

alcu

late

d se

para

tely

for e

ach

prov

ider

and

inte

rmed

iary

. A

sam

pleT

hew

orks

heet

to c

alcu

late

the

exem

ptio

n is

show

n in

Fig

ure

(2) a

nd F

igur

e (3

)(an

d is

to b

e fil

ed e

lect

roni

cally

if a

ny d

ata

is in

clud

ed).

Det

ail E

limin

ated

To

Con

serv

e Sp

ace


8/4/19


Capitations Paid Directly to ProvidersPaid Capitations Letter of Credit Funds Protection Exempt

No. Name of Provider During Year Amount Withheld Percentage Capitations1 #VALUE!2 #VALUE!3 #VALUE!4 #VALUE!5 #VALUE!6 #VALUE!7 #VALUE!8 #VALUE!9 #VALUE!

10 #VALUE!11 #VALUE!12 #VALUE!13 #VALUE!14 #VALUE!15 #VALUE!16 #VALUE!17 #VALUE!18 #VALUE!19 #VALUE!20 #VALUE!21 #VALUE!22 #VALUE!23 #VALUE!24 #VALUE!25 #VALUE!26 #VALUE!27 #VALUE!28 #VALUE!29 #VALUE!30 #VALUE!31 #VALUE!32 #VALUE!33 #VALUE!34 #VALUE!35 #VALUE!36 #VALUE!37 #VALUE!38 #VALUE!39 #VALUE!40 #VALUE!41 #VALUE!42 #VALUE!43 #VALUE!44 #VALUE!45 #VALUE!46 #VALUE!47 #VALUE!48 #VALUE!49 #VALUE!50 #VALUE!

### Total to Providers - XXX XXX XXX -


8/4/19


Capitations Paid to Unregulated Intermediaries

Paid Capitations Letter of Credit Funds Protection ExemptNumName of Provider During Year Amount Withheld Percentage Capitations

1 #VALUE!2 #VALUE!3 #VALUE!4 #VALUE!5 #VALUE!6 #VALUE!7 #VALUE!8 #VALUE!9 #VALUE!

10 #VALUE!11 #VALUE!12 #VALUE!13 #VALUE!14 #VALUE!15 #VALUE!16 #VALUE!17 #VALUE!18 #VALUE!19 #VALUE!20 #VALUE!21 #VALUE!22 #VALUE!23 #VALUE!24 #VALUE!25 #VALUE!26 #VALUE!27 #VALUE!28 #VALUE!29 #VALUE!30 #VALUE!31 #VALUE!32 #VALUE!33 #VALUE!34 #VALUE!35 #VALUE!36 #VALUE!37 #VALUE!38 #VALUE!39 #VALUE!40 #VALUE!41 #VALUE!42 #VALUE!43 #VALUE!44 #VALUE!45 #VALUE!46 #VALUE!47 #VALUE!48 #VALUE!49 #VALUE!50 #VALUE!

### Total to Unregulated Intermediaries - XXXX XXXX XXXX -

Go back to the beginning of page Go to Regulated


8/4/19


Capitations Paid to Regulated Intermediaries

Paid Capitations Domiciliary ExemptNumName of Provider During Year State Capitations

1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 -

10 - 11 - 12 - 13 - 14 - 15 - 16 - 17 - 18 - 19 - 20 - 21 - 22 - 23 - 24 - 25 - 26 - 27 - 28 - 29 - 30 - 31 - 32 - 33 - 34 - 35 - 36 - 37 - 38 - 39 - 40 - 41 - 42 - 43 - 44 - 45 - 46 - 47 - 48 - 49 - 50 -

### Total to Regulated Intermediaries - XXX - ### Total - XXX -

Go back to the beginning of page


8/4/19



Capital Adequacy (E) Task Force RBC Proposal Form

[ ] Capital Adequacy (E) Task Force [ ] Health RBC (E) Working Group [ ] Life RBC (E) Working Group

[ ] Catastrophe Risk (E) Subgroup [ ] Investment RBC (E) Working Group [ ] Operational Risk (E) Subgroup

[ ] C3 Phase II/ AG43 (E/A) Subgroup [ ] P/C RBC (E) Working Group [ ] Longevity Risk (A/E) Subgroup

DATE: 4/7/19

CONTACT PERSON: Eva Yeung

TELEPHONE: 816-783-8407


ON BEHALF OF: P/C RBC (E) Working Group

NAME: Tom Botsko

TITLE: Chair

AFFILIATION: Ohio Department of Insurance

ADDRESS: 50 West Town Street, Suite 300

Columbus, OH 43215

FOR NAIC USE ONLY

Agenda Item # 2019-05-P

Year 2019

DISPOSITION

[ ] ADOPTED

[ ] REJECTED

[ ] DEFERRED TO

[ ] REFERRED TO OTHER NAIC GROUP

[ x ] EXPOSED 4/7/19

[ ] OTHER (SPECIFY)


[ ] Health RBC Blanks [ x ] Property/Casualty RBC Blanks [ ] Life and Fraternal RBC Instructions[ ] Health RBC Instructions [ ] Property/Casualty RBC Instructions [ ] Life and Fraternal RBC Blanks

[ ] OTHER ____________________________

DESCRIPTION OF CHANGE(S)

The proposed change would update the Line 1 Factors for PR017 and PR018.

REASON OR JUSTIFICATION FOR CHANGE **

The proposed change would provide routine annual update of the industry underwriting factors (premium and reserve) in the PCRBC formula.

Additional Staff Comments:

The P/C RBC WG exposed this proposal for a 30-day public comment period ending May 6.The P/C RBC WG adopted this proposal on May 17 conference call.

___________________________________________________________________________________________________** This section must be completed on all forms. Revised 2-2019


Attachment One-B Capital Adequacy (E) Task Force

8/4/19

PR01

7 Lin

e 1

Rese

rves

Sche

dule

P L

ine

of B

usin

ess

LOB

Shor

t ta

iled

Prop

osed

fo

r ad

optio

n -

2019

PR

017

Line

1

2018

PR

017

Line

1

2017

PR01

7 Li

ne 1

2016

PR01

7 Li

ne 1

2015

PR01

7 Li

ne 1

2014

PR01

7 Li

ne 1

2013

PR01

7 Li

ne 1

2012

PR01

7 Li

ne 1

2011

PR01

7 Li

ne 1

2010

PR01

7 Li

ne 1

2009

PR01

7 Li

ne 1

2008

PR01

7 Li

ne 1

2007

PR01

7 Li

ne 1

H/F

A0.

989

0.98

90.

984

0.97

20.

962

0.96

70.

960

0.94

90.

962

0.98

40.

983

0.98

30.

995

PPA

B1.

026

1.02

21.

012

1.00

21.

002

0.99

40.

986

0.99

10.

989

0.99

20.

998

1.00

31.

007

CA

C1.

087

1.06

01.

034

1.01

50.

987

0.97

90.

986

0.99

80.

992

1.01

51.

031

1.04

51.

062

WC

D0.

955

0.95

20.

971

0.97

10.

961

0.98

60.

980

0.99

00.

999

1.00

51.

016

1.03

31.

051

CM

PE

0.99

20.

967

0.95

60.

942

0.93

80.

941

0.92

70.

932

0.95

20.

962

0.99

31.

034

1.03

7

MM

Occ

urre

nce

F10.

864

0.87

10.

868

0.84

10.

966

0.96

60.

991

1.07

21.

048

1.21

31.

251

1.34

31.

333

MM

Clm

s M

ade

F20.

907

0.88

60.

854

0.82

20.

839

0.80

80.

824

0.88

70.

925

0.98

11.

033

1.08

31.

140

SLG

0.93

80.

933

0.92

60.

919

0.97

50.

990

0.95

40.

942

0.93

10.

998

1.04

31.

060

1.10

8

OL

H0.

971

0.96

60.

952

0.92

90.

923

0.91

60.

919

0.91

40.

954

0.95

90.

963

1.00

61.

015

Fide

lity

/ Sur

ety

KX

0.99

50.

996

1.01

61.

035

1.01

61.

050

1.12

61.

194

1.19

11.

253

1.24

71.

290

1.27

4

Spec

ial P

rope

rtyI

X0.

972

0.97

10.

982

0.97

30.

991

0.99

21.

035

1.11

31.

097

1.14

41.

097

1.10

21.

102

Auto

Phy

sica

l Dam

age

JX

0.99

61.

000

1.00

10.

995

0.99

51.

005

1.05

41.

105

1.10

51.

155

1.10

71.

110

1.10

6

Oth

er (C

redi

t, A&

H)

LX

0.97

30.

976

0.98

10.

986

1.04

11.

061

1.11

31.

138

1.17

71.

277

1.26

21.

325

1.28

2

Fina

ncia

l / M

ortg

age

Gua

rant

yS

X0.

788

0.87

00.

820

0.85

31.

185

1.44

41.

256

1.08

71.

276

0.84

10.

893

1.48

31.

495

Intl

M1.

037

0.85

10.

855

0.89

71.

350

0.74

20.

813

0.86

91.

015

1.10

21.

181

1.17

51.

291

Rei

n. P

rope

rty &

Fin

anci

al L

ines

NP

0.87

20.

834

0.81

40.

814

1.00

20.

976

0.93

40.

921

0.93

70.

965

0.96

91.

025

1.04

8

Rei

n. L

iabi

lity

O0.

955

0.94

50.

914

0.89

60.

938

0.90

51.

009

1.08

91.

169

1.30

41.

259

1.31

41.

296

PLR

0.91

30.

921

0.93

50.

937

1.07

21.

018

0.98

10.

978

1.00

91.

063

1.07

31.

109

1.11

2

War

rant

yT

X1.

017

1.01

50.

989

0.97

70.

994

1.04

01.

082

1.19

71.

268

1.71

71.

634

n/a

n/a



8/4/19

PR01

8 Lin

e 1

Prem

ium

s

Sche

dule

P L

ine

of B

usin

ess

LOB

Cat

Li

nes

Shor

t ta

iled

Prop

osed

fo

r ado

ptio

n -

2019

PR

018

Line

1

2018

PR

018

Line

1

2017

PR01

8 Li

ne 1

2016

PR01

8 Li

ne 1

2016

PR01

8A

Line

1

2015

PR01

8 Li

ne 1

2015

PR01

8A

Line

1

2014

PR01

8 Li

ne 1

2014

PR01

8A

Line

1

2013

PR01

8 Li

ne 1

2013

PR01

8A

Line

1

2012

PR01

8 Li

ne 1

2011

PR01

8 Li

ne 1

2010

PR01

8 Li

ne 1

2009

PR01

8 Li

ne 1

2008

PR01

8 Li

ne 1

2007

PR01

8 Li

ne 1

H/F

A*

0.68

10.

687

0.68

80.

701

0.68

70.

701

0.68

00.

713

0.68

40.

725

0.69

30.

728

0.72

60.

736

0.73

70.

742

0.75

0

PPA

B0.

810

0.80

60.

800

0.79

20.

792

0.78

60.

786

0.78

00.

780

0.78

40.

784

0.79

20.

804

0.81

50.

821

0.83

10.

836

CA

C0.

737

0.72

40.

706

0.68

90.

689

0.68

40.

684

0.67

60.

676

0.66

80.

668

0.66

90.

679

0.70

50.

737

0.76

30.

784

WC

D0.

726

0.74

40.

751

0.75

20.

752

0.75

10.

751

0.74

90.

749

0.75

00.

750

0.75

50.

766

0.78

0.80

50.

830.

847

CM

PE

*0.

666

0.66

40.

647

0.64

80.

647

0.65

50.

638

0.65

20.

633

0.65

30.

631

0.64

40.

654

0.67

40.

695

0.71

00.

727

MM

Occ

urre

nce

F10.

730

0.78

00.

777

0.76

70.

767

0.88

00.

880

0.88

30.

882

0.87

40.

874

0.91

60.

952

1.03

11.

104

1.19

51.

231

MM

Clm

s M

ade

F20.

768

0.74

70.

722

0.69

10.

691

0.69

70.

697

0.68

00.

687

0.69

50.

695

0.71

80.

771

0.86

00.

928

1.00

31.

091

SLG

*0.

593

0.56

90.

567

0.57

20.

562

0.63

00.

609

0.64

50.

621

0.64

90.

629

0.59

70.

599

0.58

20.

673

0.70

90.

732

OL

H0.

638

0.63

30.

629

0.61

80.

618

0.61

60.

616

0.61

70.

617

0.62

00.

620

0.63

70.

662

0.68

70.

714

0.73

80.

758

Fide

lity

/ Sur

ety

KX

0.39

90.

417

0.43

00.

464

0.46

40.

462

0.46

20.

473

0.47

30.

496

0.49

60.

528

0.55

50.

584

0.58

60.

583

0.58

2

Spec

ial P

rope

rtyI

*X

0.55

40.

563

0.55

50.

559

0.54

90.

571

0.55

10.

572

0.54

80.

574

0.55

10.

562

0.55

90.

565

0.57

50.

590

0.56

8

Auto

Phy

sica

l Dam

age

JX

0.73

00.

732

0.72

70.

711

0.71

10.

703

0.70

30.

686

0.68

30.

681

0.67

60.

683

0.68

10.

692

0.69

70.

705

0.71

6

Oth

er (C

redi

t, A&

H)

LX

0.68

20.

709

0.71

20.

699

0.69

90.

706

0.70

60.

754

0.75

40.

778

0.77

80.

794

0.78

60.

691

0.69

70.

737

0.78

9

Fina

ncia

l / M

ortg

age

Gua

rant

yS

X0.

811

1.09

91.

175

1.29

31.

293

1.09

61.

096

1.24

21.

242

1.27

11.

271

1.20

61.

142

0.73

80.

605

0.80

50.

827

Intl

M*

0.79

50.

584

0.56

50.

607

0.56

31.

150

1.14

21.

131

1.11

71.

093

1.08

00.

931

0.93

70.

954

0.95

60.

930

0.87

4

Rei

n. P

rope

rty &

Fin

anci

al L

ines

NP

*0.

522

0.48

60.

459

0.51

20.

440

0.72

30.

648

0.76

40.

665

0.76

60.

699

0.75

70.

805

0.82

80.

924

0.97

70.

994

Rei

n. L

iabi

lity

O*

0.67

90.

666

0.60

90.

600

0.58

80.

749

0.74

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60.

782

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841

0.91

51.

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1.10

71.

165

1.16

4

PLR

0.65

60.

671

0.67

00.

684

0.68

40.

715

0.71

50.

716

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2

War

rant

yT

X0.

695

0.73

20.

645

0.61

10.

611

0.79

90.

799

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90.

789

0.86

40.

864

0.86

20.

916

0.86

00.

800

n/a

n/a



8/4/19



[ ] Capital Adequacy (E) Task Force [ ] Health RBC (E) Working Group [ ] Life RBC (E) Working Group



DATE: 4/11/19

CONTACT PERSON: Eva Yeung

TELEPHONE: 816-783-8407


ON BEHALF OF: P/C RBC (E) Working Group

NAME: Tom Botsko

TITLE: Chair

AFFILIATION: Ohio Department of Insurance

ADDRESS: 50 West Town Street, Suite 300

Columbus, OH 43215

FOR NAIC USE ONLY

Agenda Item # 2019-08-P

Year 2019

DISPOSITION

[ ] ADOPTED

[ ] REJECTED

[ ] DEFERRED TO


[ x ] EXPOSED 4/12/19

[ ] OTHER (SPECIFY)


[ ] Health RBC Blanks [ ] Property/Casualty RBC Blanks [ ] Life and Fraternal RBC Instructions[ ] Health RBC Instructions [ x ] Property/Casualty RBC Instructions [ ] Life and Fraternal RBC Blanks

[ ] OTHER ____________________________

DESCRIPTION OF CHANGE(S)

The proposed changes will correct the following affiliated investment instructions to match the blanks:1) Remove “Bonds” from the instructions as affiliated bonds are no longer included in the affiliated investments

calculations;2) Change “F” to “E” and “A” in the indirectly owned U.S. P&C Insurance Affiliates

REASON OR JUSTIFICATION FOR CHANGE **

The proposed changes provide some minor edits to the instructions to be consistent with the recent changes in the P/C affiliated investment calculations.

Additional Staff Comments:

The P/C RBC WG exposed this proposal for a 30-day public comment period ending May 12. The P/C RBC WG adopted this proposal on May 17 conference call.___________________________________________________________________________________________________** This section must be completed on all forms. Revised 2-2019

Attachment One-C Capital Adequacy (E) Task Force

8/4/19


©19

94-2

019

Nat

iona

l Ass

ocia

tion

of In

sura

nce

Com

mis

sion

ers

1 5/

10/2

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Det

ail E

limin

ated

To

Con

serv

e Sp

ace

Dire

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ned

U.S

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perty

& C

asua

lty In

sura

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es

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affil

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the

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sura

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filia

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nter

its n

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liate

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AIC

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pany

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ffilia

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Tot

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boo

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the

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and

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e in

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umns

(1) t

hrou

gh (8

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e re

quire

d R

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be

auto

mat

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ly c

alcu

late

d by

the

prog

ram

. If n

o va

lue

is e

nter

ed

in th

e To

tal V

alue

of A

ffili

ate’

s Com

mon

Sto

ck c

olum

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olum

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), th

en th

e pr

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m w

ill a

ssum

e 10

0 pe

rcen

tow

ners

hip.

If th

e re

porti

ng c

ompa

ny d

oes n

ot o

wn

any

of th

e af

filia

te’s

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mm

on s

tock

but

doe

s ow

n ei

ther

pre

ferr

ed s

tock

s or

bon

ds, t

he T

otal

Val

ue o

f Aff

iliat

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mon

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ck m

ust b

e en

tere

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(7) s

o th

at th

epr

ogra

m c

an c

alcu

late

whe

ther

an

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cess

RB

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xist

s. Th

e R

BC

cha

rge

for t

he o

wne

rshi

p of

the

affil

iate

’s c

omm

on st

ock

will

be

auto

mat

ical

ly c

alcu

late

d; h

owev

er, t

he re

quire

d R

BC

can

not e

xcee

d th

e bo

ok/a

djus

ted

carr

ying

val

ue o

f the

com

mon

stoc

k in

Col

umn

(5).

The

book

/ ad

just

ed c

arry

ing

valu

e of

any

pre

ferr

ed s

tock

mus

t be

ente

red

in C

olum

n (1

0) a

nd th

e to

tal o

utst

andi

ng v

alue

of t

he a

ffilia

te’s

pre

ferr

ed s

tock

mus

t be

ente

red

in C

olum

n (1

1). A

gain

, the

per

cent

age

of o

wne

rshi

p an

d th

e R

BC

requ

ired

for t

he o

wne

rshi

p of

pre

ferr

ed st

ock

will

be

auto

mat

ical

ly c

alcu

late

d. E

ven

if th

e re

porti

ng c

ompa

ny d

oes n

ot o

wn

any

of th

e af

filia

te’s

pre

ferr

ed st

ock,

the

tota

l out

stan

ding

val

ue o

f tha

t aff

iliat

e’s p

refe

rred

stoc

k m

ust b

e en

tere

d so

that

the

prog

ram

will

cor

rect

ly c

alcu

late

any

exc

essR

BC

.

The

risk-

base

d ca

pita

l to

be e

nter

ed fo

r eac

h af

filia

te p

rope

rty a

nd c

asua

lty in

sure

r sho

uld

be o

btai

ned

by u

sing

a se

para

te c

opy

of th

e R

BC

pro

gram

for e

ach

affil

iate

. Mon

olin

e fin

anci

al

guar

anty

insu

rers

, mon

olin

e m

ortg

age

guar

anty

insu

rers

and

title

insu

rers

are

not

sub

ject

to ri

sk-b

ased

cap

ital.

Thes

e af

filia

tes

and

othe

r sim

ilar a

ffili

ates

sho

uld

be re

porte

d as

P&

C

Insu

ranc

e A

ffili

ates

Not

Sub

ject

to R

BC

.

Dire

ctly

Ow

ned

U.S

. Life

Insu

ranc

e A

ffili

ates

Ente

r inf

orm

atio

n re

gard

ing

any

top-

laye

r dire

ctly

ow

ned

U.S

. life

insu

ranc

e af

filia

tes i

n th

e sc

hedu

le fo

r dire

ctly

ow

ned

com

pani

es in

the

Aff

iliat

ed B

onds

and

Sto

cks

wor

kshe

et. F

or

each

aff

iliat

e en

ter t

he sa

me

info

rmat

ion

as th

at re

quire

d fo

r dire

ctly

ow

ned

P&C

insu

ranc

e af

filia

tes t

hat a

re su

bjec

t to

RB

C. I

f a U

.S. l

ife in

sura

nce

affil

iate

is n

ot su

bjec

t to

RB

C, t

hen

it sh

ould

be

treat

ed a

s Life

Insu

ranc

e A

ffili

ates

Not

Sub

ject

to R

BC

.

The

risk-

base

d ca

pita

l of e

ach

Life

aff

iliat

e sh

ould

be

obta

ined

by

usin

g a

sepa

rate

cop

y of

the

Life

RB

C p

rogr

am fo

r eac

h af

filia

te.

Dire

ctly

Ow

ned

Hea

lth In

sura

nce

Aff

iliat

es

Ente

r inf

orm

atio

n re

gard

ing

any

top-

laye

r dire

ctly

ow

ned

Hea

lth In

sura

nce

affil

iate

s in

the

sche

dule

for d

irect

ly o

wne

d co

mpa

nies

in th

e A

ffili

ated

Bon

ds a

nd S

tock

sw

orks

heet

. For

ea

ch a

ffili

ate

ente

r the

sam

e in

form

atio

n as

that

requ

ired

for d

irect

ly o

wne

d P&

C in

sura

nce

affil

iate

s th

at a

re s

ubje

ct to

RB

C. I

f a H

EALT

H IN

SUR

AN

CE

aff

iliat

e is

not

sub

ject

to

RB

C, t

hen

it sh

ould

be

treat

ed a

s Hea

lth In

sura

nce

Aff

iliat

esN

ot S

ubje

ct to

RB

C.

The

risk-

base

d ca

pita

l of e

ach

Hea

lth In

sura

nce

affil

iate

shou

ld b

e ob

tain

ed b

y us

ing

a se

para

te c

opy

of th

e H

ealth

RB

C p

rogr

am fo

r eac

h af

filia

te.

Indi

rect

ly O

wne

d U

.S. P

&C

Insu

ranc

e A

ffili

ates

The

first

step

in e

nter

ing

info

rmat

ion

on in

dire

ctly

ow

ned

U.S

. ins

uran

ce a

ffili

ates

that

are

subj

ect t

o R

BC

is to

allo

cate

the

repo

rting

ent

ity’s

boo

k/ad

just

ed c

arry

ing

valu

e of

the

hold

ing

com

pany

bet

wee

n an

y to

p-la

yer,

indi

rect

ly o

wne

d in

sura

nce

affil

iate

s an

d th

e H

oldi

ng C

ompa

ny V

alue

in E

xces

s of

Indi

rect

ly O

wne

d In

sura

nce

Aff

iliat

es. T

o do

that

, the

car

ryin

g va

lue

of th

e ho

ldin

g co

mpa

ny is

firs

t allo

cate

d ba

sed

on th

e va

lues

sho

wn

on th

e ho

ldin

g co

mpa

ny’s

bal

ance

she

et. T

he fo

llow

ing

exam

ple

show

s a

hypo

thet

ical

hol

ding

com

pany

, H

olde

r Inc

., th

at is

100

per

cent

ow

ned

by B

igun

Insu

ranc

e C

ompa

ny a

nd sh

ows t

he a

lloca

tion

of H

olde

r’s c

arry

ing

valu

e am

ong

thes

e ca

tego

ries:


8/4/19


©19

94-2

019

Nat

iona

l Ass

ocia

tion

of In

sura

nce

Com

mis

sion

ers

2 5/

10/2

019

Bal

ance

She

etH

olde

r, In

c.12

/31/

XX

XX

AB

C L

ife$4

,000

,000

Long

-Ter

m D

ebt

$14,

000,

000

XY

Z C

asua

lty$2

,000

,000

Oth

er L

iabi

litie

s$5

,000

,000

Non

-U.S

. Cas

ualty

$6,0

00,0

00G

X T

odd

Rea

l Est

ate

$4,0

00,0

00C

ash

$5,0

00,0

00Eq

uity

$5,0

00,0

00O

ther

Ass

ets

$3,0

00,0

00

Tota

l Ass

ets

$24,

000,

000

Tota

l Lia

b &

Equ

ity$2

4,00

0,00

0

Sinc

e A

BC

Life

Insu

ranc

e C

ompa

ny m

akes

up

1/6

($4,

000,

000/

$24,

000,

000)

of t

he to

tal a

sset

s fo

r Hol

der,

Inc.

, the

n th

is in

dire

ctly

ow

ned

U.S

. aff

iliat

e re

pres

ents

1/6

of t

he c

arry

ing

valu

e of

Hol

der,

Inc.

on

the

stat

emen

t of

Big

un I

nsur

ance

Com

pany

. Si

mila

rly,

the

indi

rect

ly o

wne

d U

.S.

affil

iate

XY

Z C

asua

lty r

epre

sent

s 1/

12 o

f th

e ca

rryi

ng v

alue

($

2,00

0,00

0/$2

4,00

0,00

0) o

f Hol

der o

n B

igun

’s an

nual

stat

emen

t. N

on-U

.S. C

asua

lty, w

hich

is a

n al

ien

insu

ranc

e aff

iliat

e, re

pres

ents

1/4

of t

he ca

rryi

ng v

alue

($6,

000,

000/

$24,

000,

000)

of

Hol

der o

n B

igun

’s a

nnua

l sta

tem

ent.

One

-hal

f of t

he c

arry

ing

valu

e of

Hol

der,

Inc.

($12

,000

,000

/$24

,000

,000

) rep

rese

nts t

he H

oldi

ng C

ompa

ny V

alue

in E

xces

s of I

ndire

ctly

Ow

ned

Insu

ranc

e A

ffili

ates

. If B

igun

Insu

ranc

e C

ompa

ny c

arrie

s Hol

der,

Inc.

on

its a

nnua

l sta

tem

ent a

t $30

,000

,000

(ass

ume

that

this

is th

e cu

rren

t fai

r val

ue o

f sha

res i

n H

olde

r, w

hich

was

a

publ

icly

trad

ed c

orpo

ratio

n of

whi

ch B

igun

has

just

acq

uire

d 10

0 pe

rcen

tow

ners

hip)

, the

n B

igun

will

allo

cate

1/6

of t

hat $

30,0

00,0

00 to

AB

C L

ife, 1

/12

of th

at $

30,0

00,0

00 to

XY

Z C

asua

lty, 1

/4 o

f tha

t $30

,000

,000

to N

on-U

.S. C

asua

lty, a

nd 1

/2 to

Hol

der u

nder

the

cate

gory

Hol

ding

Com

pany

Val

ue in

Exc

ess

of In

dire

ctly

Ow

ned

Insu

ranc

e A

ffili

ates

.The

RB

C

char

ge fo

r the

indi

rect

ow

ners

hip

of c

omm

on s

tock

in A

BC

Life

will

be

com

pute

d as

the

less

er o

f AB

C L

ife’s

Tot

al R

BC

Afte

r Cov

aria

nce

or $

5,00

0,00

0 (1

/6 o

f $30

,000

,000

). Th

e R

BC

cha

rge

for t

he in

dire

ct o

wne

rshi

p of

XY

Z C

asua

lty w

ill b

e th

e le

sser

of X

YZ’

s Tot

al R

BC

Afte

r Cov

aria

nce

or $

2,50

0,00

0 (1

/12

of $

30,0

00,0

00).

If B

igun

onl

y ac

quire

d 50

per

cent

of t

he s

hare

s of

Hol

der,

then

thes

e va

lues

mus

t be

adju

sted

to r

efle

ct B

igun

’s p

artia

l ow

ners

hip

and

a de

term

inat

ion

mad

e as

to th

e na

ture

oft

he

carr

ying

val

ue o

f Hol

der.

If H

olde

r’s

carr

ying

val

ue is

bas

ed o

n ot

her t

han

fair

valu

e, th

en th

e al

loca

tions

follo

w a

s de

scrib

ed in

(a).

If th

e ca

rryi

ngva

lue

of H

olde

r is b

ased

on

its fa

ir va

lue,

then

the

allo

catio

ns a

nd a

ny a

dditi

onal

RB

C d

ue to

the

use

of fa

ir va

lue

are

desc

ribed

in (b

).

(a)

Now

the

carr

ying

val

ue (n

ot b

ased

on

fair

valu

e) o

n B

igun

’s a

nnua

l sta

tem

ent i

s $1

5,00

0,00

0 w

hich

is a

lloca

ted

as $

2,50

0,00

0 to

AB

C L

ife (1

/6 o

f $15

,000

,000

), $1

,250

,000

toX

YZ

Cas

ualty

(1/1

2 of

$15

,000

,000

) as

Indi

rect

ly O

wne

d U

.S. I

nsur

ance

Aff

iliat

es, $

3,75

0,00

0 to

Non

-U.S

. Cas

ualty

(1/4

of $

15,0

00,0

00) a

s In

dire

ctly

Ow

ned

Alie

n In

sura

nce

Aff

iliat

e, a

nd $

7,50

0,00

0 to

Hol

der a

s th

e H

oldi

ng C

ompa

ny V

alue

in E

xces

s of

Indi

rect

ly O

wne

d In

sura

nce

Aff

iliat

es. T

he R

BC

Afte

r Cov

aria

nce

for t

he in

dire

ctly

ow

ned

U.S

.in

sura

nce

affil

iate

s is

als

o ad

just

ed b

y 50

% to

refle

ct B

igun

’s p

erce

ntag

e of

ow

ners

hip.

The

refo

re, B

igun

will

ent

er $

2,50

0,00

0 as

the

carr

ying

val

ue fo

r AB

C L

ife in

Col

umn

(5)

and

$5,0

00,0

00 ($

2,50

0,00

0 / 0

.50)

as t

he to

tal o

utst

andi

ng c

omm

on st

ock

in C

olum

n (7

).

(b)

In th

is e

xam

ple,

the

carr

ying

val

ue (b

ased

on

fair

valu

e) o

n B

igun

’san

nual

stat

emen

t is $

18,0

00,0

00, w

hich

will

be

allo

cate

d in

the

sam

e m

anne

r des

crib

ed in

(a) a

bove

. H

owev

er,

one

addi

tiona

l ste

p is

add

ed re

gard

ing

the

indi

rect

ly*

owne

d U

.S. I

nsur

ance

Aff

iliat

es th

at a

re su

bjec

t to

RB

C. F

or e

xam

ple,

ass

ume

that

the

carr

ying

val

ue (b

ased

on

fair

valu

e) o

fA

BC

on

Big

un’s

ann

ual s

tate

men

t is

larg

er th

an A

BC

’s R

BC

Afte

r C

ovar

ianc

e (p

rora

ted

50 p

erce

ntfo

r its

par

tial o

wne

rshi

p), t

he a

mou

nt o

f H

olde

r ap

plic

able

to A

BC

Life

($3,

000,

000:

1/6

of $

18,0

00,0

00) w

ill b

e re

duce

d by

its

stat

utor

y su

rplu

s**

(pro

rate

d 50

per

cent

for i

ts p

artia

l ow

ners

hip)

, and

if a

pos

itive

am

ount

resu

lts, t

hen

the

larg

er o

f tha

tam

ount

tim

es 2

2.5

perc

ento

r the

exc

ess

of A

BC

’s R

BC

Afte

r Cov

aria

nce

(pro

rate

d 50

per

cent

for i

ts o

wne

rshi

p) o

ver t

he v

alue

obt

aine

d fr

om s

tep

(a) w

ill b

e re

porte

d as

a R

2co

mpo

nent

of s

uch

stoc

k in

the

form

ula.

The

sam

e w

ill a

pply

to X

YZ

Cas

ualty

.

The

info

rmat

ion

for a

ll to

p-la

yer,

indi

rect

ly o

wne

d U

.S. p

rope

rty a

nd c

asua

lty in

sura

nce

affil

iate

s and

indi

rect

ly o

wne

d U

.S. l

ife in

sura

nce

affil

iate

s is e

nter

ed in

the

appr

opria

te c

olum

ns

in th

e A

ffili

ated

Sto

cks

wor

kshe

et. F

or e

ach

affil

iate

ent

er it

s na

me,

aff

iliat

e co

de, N

AIC

com

pany

cod

e an

d th

e pr

o-ra

ta s

hare

of r

isk-

base

d ca

pita

l alo

ng w

ith a

ll ot

her i

nfor

mat

ion

requ

ired

inC

olum

ns (1

) thr

ough

(11)

. If t

he a

mou

nt in

Col

umn

(5) i

s bas

ed o

n fa

ir va

luee

quity

met

hod,

then

pla

ce a

n “F

E” in

Col

umn

(6),

othe

rwis

e pl

ace

an “

A”

in C

olum

n (6

).an

d


8/4/19


©19

94-2

019

Nat

iona

l Ass

ocia

tion

of In

sura

nce

Com

mis

sion

ers

3 5/

10/2

019

Indi

rect

ly O

wne

d U

.S. L

ife In

sura

nce

Aff

iliat

es

Indi

rect

ly o

wne

d U

.S. l

ife in

sura

nce

affil

iate

s are

trea

ted

in a

man

ner s

imila

r to

indi

rect

ly o

wne

d P&

C in

sura

nce

affil

iate

s. N

ote

that

the

insu

ranc

e af

filia

te m

ust b

e su

bjec

t to

RB

C a

nd

file

an R

BC

repo

rt to

be

incl

uded

in th

is se

ctio

n. O

ther

wis

e, th

e af

filia

te’s

val

ue w

ill b

e in

clud

ed in

the

Hol

ding

Com

pany

Val

ue in

Exc

ess o

f Ins

uran

ce A

ffili

ates

sect

ion.

Indi

rect

ly O

wne

d M

anag

ed C

are

Org

aniz

atio

nsIn

dire

ctly

ow

ned

Man

aged

Car

e af

filia

tes a

re tr

eate

d in

a m

anne

r sim

ilar t

o in

dire

ctly

ow

ned

P&C

insu

ranc

e af

filia

tes.

Not

e th

at th

e in

sura

nce

affil

iate

mus

t be

subj

ect t

o R

BC

and

file

an

RB

C re

port

to b

e in

clud

ed in

this

sect

ion.

Oth

erw

ise,

the

affil

iate

’s v

alue

will

be

incl

uded

in th

e H

oldi

ng C

ompa

ny V

alue

in E

xces

s of I

nsur

ance

Aff

iliat

es se

ctio

n.

Aff

iliat

es th

at a

re N

otSu

bjec

t to

RB

C

This

cat

egor

y in

clud

es th

ese

cate

gorie

s of a

ffili

ated

inve

stm

ents

:

7.In

vest

men

t Affi

liate

s8.

Dire

ctly

Ow

ned

Alie

n In

sura

nce

Aff

iliat

es9.

Indi

rect

ly O

wne

d A

lien

Insu

ranc

e A

ffili

ates

10.

Hol

ding

Com

pany

Val

ue in

Exc

ess o

f Ind

irect

ly O

wne

d In

sura

nce

Aff

iliat

es11

.In

vest

men

t in

Ups

tream

Affi

liate

(Par

ent)

12.

P&C

Insu

ranc

e A

ffili

ates

Not

Sub

ject

to R

BC

13.

Life

Insu

ranc

e A

ffili

ates

Not

Sub

ject

to R

BC

14.

Hea

lth In

sura

nce

Aff

iliat

es N

ot S

ubje

ct to

RB

C15

.O

ther

Affi

liate

s

The

RB

C c

harg

e fo

r th

ese

inve

stm

ents

is c

alcu

late

d by

mul

tiply

ing

a fa

ctor

tim

es th

e bo

ok/a

djus

ted

carr

ying

val

ue o

f the

com

mon

sto

cks,

and

pref

erre

d st

ocks

and

bond

s of

thos

e af

filia

tes.

Det

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RB

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)will

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8/4/19




[ ] Capital Adequacy (E) Task Force [ ] Health RBC (E) Working Group [ X ] Life RBC (E) Working Group



DATE: 12/11/18

CONTACT PERSON: Dave Fleming

TELEPHONE: 816-783-8121


ON BEHALF OF: Life Risk-Based Capital (E) Working Group

NAME: Philip Barlow, Chair

TITLE: Associate Commissioner for Insurance

AFFILIATION: District of Columbia

ADDRESS: 1050 First Street, NE Suite 801

Washington, DC 20002

FOR NAIC USE ONLY

Agenda Item # 2018-18-L

Year 2019

DISPOSITION

[ ] ADOPTED

[ ] REJECTED

[ ] DEFERRED TO


[ ] EXPOSED

[ ] OTHER (SPECIFY)


[ ] Health RBC Blanks [ ] Property/Casualty RBC Blanks [ X ] Life RBC Instructions[ X ] Fraternal RBC Blanks [ ] Health RBC Instructions [ ] Property/Casualty RBC Instructions

[ X ] Life RBC Blanks [ X ] Fraternal RBC Instructions [ ] OTHER ______________

DESCRIPTION OF CHANGE(S)Combine the RBC reporting for life and fraternal companies into one formula. The combined formula will be based on changes to the existing life blank and instructions.

REASON OR JUSTIFICATION FOR CHANGE **The fraternal annual statement blank is being eliminated beginning with yearend 2019. The life and fraternal RBC formulasare nearly identical except for a few items which are not applicable to fraternals and references to the fraternal annual statement blank. A combined formula will eliminate the need to maintain two sets of instructions and blank pages along with reducing time spent on maintenance of tables, specs and validation rules.

Additional Staff Comments:• 02-22-19: Proposal was exposed with comments due 03-25-19 (DBF)• 04-26-19: Proposal was re-exposed with comments due 05-09-19 (DBF)

___________________________________________________________________________________________________** This section must be completed on all forms. Revised 6-2018

Attachment One-D Capital Adequacy (E) Task Force

8/4/19



Life / Fraternal Combination

Items that are not applicable to fraternals

LR017 – Off Balance Sheet and Other Items – Lines 32 and 33LR019 – Health Premiums – Lines 10-13, 17-20, 23-27, 31, 34 and 35LR021 – Underwriting Risk – Other – Lines 4 thru 6.2LR024 – Health Claim Reserves – Lines 11 and 12LR025 – Life Insurance – Lines 3, 4 and 9 thru 21LR026 – Premium Stabilization Reserves – Lines 1 thru 6LR032 – Capital Notes Before Limitation LR033 – Calculation of Total Adjusted Capital – Lines 10.1 thru 10.4, 13, 14 and 18LR038 – Additional Information Required – Lines 10.11 thru 10.13

Annual Statement references that will be different from what is in the current fraternal RBC formula

LR004 – Mortgages – First footnote’s reference to page 3LR006 – Separate Accounts – Lines 10 thru 12 references to page 3LR009 – BA Mortgages – First footnote’s reference to page 3LR016 – Reinsurance – Lines 13 thru 16 references to page 3LR024 – Health Claim Reserves – Lines 1 thru 6 references to Exhibit 6LR025 – Life Insurance – Line 1 reference to Exhibit of Life InsuranceLR029 – Business Risk – Lines 37 and 38 references to page 3 and line 45 reference to Exhibit 3LR033 – Calculation of Total Adjusted Capital – Lines 1 and 2 references to page 3LR034 – Risk-Based Capital Level of Action – Lines 1 and 4 references to 5-Year HistoricalLR035 – Trend Test – Lines 4 thru 7 references to 5-Year HistoricalLR038 – Additional Information Required – Line 7.1 and 7.2 references to 5-Year Historical and line 9.1 page 3 reference LR039 – Title of schedule will be different – Authorized Control Level instead of 50% of the Calculated RBC Amount

Changes needed to the existing life RBC blank

Jurat – Title to be Life and Fraternal Risk-Based Capital, remove “life” from Risk-Based Capital for contact personLR019 – Line 34 reference to Exhibit 6 changed to column 10LR024 – Lines 1 and 11 changed to company records, lines 2-6 and 12 to be blank or zero-filled LR026 – Lines 3 and 4 changed to company recordsLR030 – Title to be Calculation of Tax Effect for Life and Fraternal Risk-Based CapitalLR031 – Calculation of Authorized Control Level Risk-Based Capital – Lines 10, 19, 41, 48, 51, 54, 57, 62 and 65 references

to LR030 to include title change reflecting and FraternalLR038 – Add and Fraternal to lines 1.2 and 2.2LR043 – Column 2 heading to be Total from Life and Fraternal Risk-Based Capital Report


8/4/19


© 1

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8/4/19


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CAPITAL ADEQUACY (E) TASK FORCE · CAPITAL ADEQUACY (E) TASK FORCE Capital Adequacy (E) Task Force Aug. 4, 2019, Minutes ... Presentation of the Review of Life Mortality Risk-Based

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