CAPITAL ADEQUACY(E) TASK FORCE - National Association …

© 2020 National Association of Insurance Commissioners

CAPITAL ADEQUACY (E) TASK FORCE Capital Adequacy (E) Task Force Nov. 19, 2020, Virtual National Meeting Minutes Capital Adequacy (E) Task Force Oct. 27, 2020, Minutes (Attachment One) Capital Adequacy (E) Task Force Sept. 25, 2020, Conference Call Minutes (Attachment One-A) Health Risk-Based Capital (E) Working Group Oct. 29, 2020, Minutes (Attachment Two) Health Risk-Based Capital (E) Working Group Sept. 11, 2020, Minutes (Attachment Two-A) Comments Regarding Investment Income to Underwriting Risk from UnitedHealth Group (Attachment Two-

A1) Referral Letter to the American Academy of Actuaries Regarding Request for Analysis to Incorporate

Investment Income into the Underwriting Risk Component of the Health Risk-Based Capital Formula (Attachment Two-A2)

Two- and Five-Year Bond Factors for 2020 Impact Analysis (Attachment-Two-A3) Health Care Receivable Guidance (Attachment Two-B) Health Risk-Based Capital (E) Working Group Aug. 18, 2020, Minutes (Attachment Three) 2020 Health RBC Newsletter (Attachment Three-A) Life Risk-Based Capital (E) Working Group Nov. 10, 2020, Virtual National Meeting Minutes (Attachment Four) Life Risk-Based Capital (E) Working Group Oct. 9, 2020, Virtual National Meeting Minutes (Attachment Four-A) Comment Letter from Illinois Department of Insurance Regarding the Mortgage Reporting Guidance Document

and Instructional Change (Attachment Four-A1) Comment Letter from the American Council of Life Insurers (ACLI) and Mortgage Bankers Association

(MBA) Regarding the Mortgage Reporting Guidance Document and Instructional Change (Attachment Four-A2)

Life Risk-Based Capital (E) Working Group Sept. 25, 2020, Virtual National Meeting Minutes (Attachment Four-B) Life Risk-Based Capital (E) Working Group Sept. 11, 2020, Virtual National Meeting Minutes (Attachment Four-C) Update from the American Academy of Actuaries’ C2 Mortality Risk Work Group (Attachment Four-C1) Summary of the RBC Mortgage Reporting Guidance Proposal from the American Council of Life Insurers

(ACLI) and Mortgage Bankers Associations (MBA) (Attachment Four-C2) Life Risk-Based Capital (E) Working Group Aug. 21, 2020, Virtual National Meeting Minutes (Attachment Four-D) Update from the Academy C-3 Work Group (Attachment Four-D1) Revised 2020 Life RBC Newsletter (Attachment Four-D2) Life Risk-Based Capital (E) Working Group Working Agenda (Attachment Four-E) Joint Property and Casualty Risk-Based Capital (E) Working Group and Catastrophe Risk, Nov. 11, 2020, Evote

Minutes (Attachment Five) 2020 U.S. and Non-U.S. Catastrophe Risk Event Lists (Attachment Five-A) Property and Casualty Risk-Based Capital (E) Working Group Oct. 27, 2020, Minutes (Attachment Six) Catastrophe Risk (E) Subgroup Oct. 19, 2020, Minutes (Attachment Six-A) 2019-49: Retroactive Reinsurance Exception from the Statutory Accounting Principles (E) Working Group

(Attachment Six-B) Proposal 2020-02-CA (Attachment Seven) Proposal 2020-04-H (Attachment Eight) Proposal 2020-07-H (Attachment Nine) Proposal 2020-12-CR (Attachment Ten) Working Agenda (Attachment Eleven)

© 2020 National Association of Insurance Commissioners 1

Draft: 11/30/20

Capital Adequacy (E) Task Force Virtual Meeting (in lieu of meeting at the Fall National Meeting)

November 19, 2020

The Capital Adequacy (E) Task Force met Nov. 19, 2020. The following Task Force members participated: Tynesia Dorsey, Chair, represented by Tom Botsko (OH); Tanji J. Northrup, Vice Chair, represented by Jake Garn (UT); Lori K. Wing-Heier represented by Wally Thomas (AK); Jim L. Ridling represented by Richard Ford (AL); Alan McClain represented by Kim Johnson (AR); Ricardo Lara represented by Perry Kupferman (CA); Andrew N. Mais represented by Wanchin Chou (CT); Karima M. Woods represented by Philip Barlow (DC); David Altmaier represented by Carolyn Morgan (FL); Doug Ommen represented by Mike Yanacheak (IA); Dean L. Cameron represented by Eric Fletcher (ID); Robert H. Muriel represented by Kevin Fry and Vincent Tsang (IL); Vicki Schmidt represented by Sarah Smith (KS); Grace Arnold represented by Kathleen Orth (MN): Chlora Lindley-Myers represented by John Rehagen (MO); Mike Causey represented by Jackie Obusek (NC); Bruce R. Ramge represented Lindsay Crawford (NE); Marlene Caride represented by Diana Sherman (NJ); Glen Mulready represented by Andrew Schallhorn (OK); Elizabeth Kelleher Dwyer represented by Jack Broccoli (RI); Raymond G. Farmer represented Daniel Morris (SC); Texas represented by Mike Boerner (TX); Mike Kreidler represented by Steve Drutz (WA); and Mark Afable represented by Randy Milquet (WI). 1. Adopted its Oct. 27 Minutes The Task Force met Oct. 27 and took the following action: 1) exposed a new bond structure to include hybrid securities; and 2) received a proposal regarding asset concentration factors. Mr. Chou made a motion, seconded by Mr. Boerner, to adopt the Task Force’s Oct. 27 minutes (Attachment One). The motion passed unanimously.

2. Adopted its Working Group Reports and Minutes

a. Health Risk-Based Capital (E) Working Group

Mr. Drutz noted some items of interest from the Health Risk-Based Capital (E) Working Group’s Oct. 29 minutes, which included the following action: 1) referred the healthcare receivable guidance to the Blanks (E) Working Group; 2) received an update from the American Academy of Actuaries (Academy) on investment income in the underwriting risk component; 3) received updates from its ad hoc groups, excessive growth charge and the Health Test; and 4) exposed a referral letter to the Academy to add investment income to the underwriting risk in the health risk-based capital (RBC) formula.

b. Life Risk-Based Capital (E) Working Group Mr. Barlow said that the Life Risk-Based Capital (E) Working Group met Nov. 10 and took the following action: 1) adopted industry-requested RBC mortgage reporting guidance and; 2) receive a memorandum from the Financial Condition (E) Committee on bond factors. He also said the Working Group will work on 2021 instructions.

c. Catastrophe Risk (E) Subgroup

Mr. Chou noted that the Catastrophe Risk (E) Subgroup and the Property and Casualty Risk-Based Capital (E) Working Group conducted a joint e-vote that concluded Nov. 11 and took the following action: 1) adopted the 2020 Catastrophe Event List; and 2) discussed wildfire as another catastrophe event.

d. Property and Casualty Risk-Based Capital (E) Working Group

Mr. Botsko said that the Property and Casualty Risk-Based Capital (E) Working Group met Oct. 27 and took the following action: 1) discussed retroactive reinsurance exceptions and a referral received from the Statutory Accounting Principles (E) Working Group; and 2) removed operational risk from the R-cat component. Mr. Chou made a motion, seconded by Mr. Drutz, to adopt the reports of the Health Risk-Based Capital (E) Working Group (Attachment Two and Three), the Life Risk-Based Capital (E) Working Group (Attachment Four), the joint Catastrophe Risk (E) Subgroup and Property and Casualty Risk-Based Capital (E) Working Group Nov. 11 minutes (Attachment Five), and the Property and Casualty Risk-Based Capital (E) Working Group (Attachment Six). The motion passed unanimously.


3. Adopted Proposal 2020-02-CA Mr. Drutz said proposal 2020-02-CA was drafted to delete the federal Affordable Care Act (ACA) fee sensitivity test from all three formulas due to the repeal of the ACA fee. The proposed change would be for 2021 reporting. The Task Force exposed the proposal for a 30-day comment period ending May 4. No comments were received. Mr. Drutz made a motion, seconded by Mr. Boerner, to adopt proposal 2020-02-CA (ACA Fee Sensitivity Test) (Attachment Six). The motion passed unanimously. 4. Adopted Proposal 2020-04-H Mr. Drutz said the Health Risk-Based Capital (E) Working Group adopted proposal 2020-04-H based on an inquiry from a software vendor on an inconsistency between the health RBC formula within the forecasting spreadsheet and the validation for the MAX function in line 17 of the excessive growth charge. The proposal will add the MAX function to line 17 of the health RBC forecasting formula for 2021 reporting (Attachment Seven). Mr. Drutz made a motion, seconded by Mr. Chou, to adopt proposal 2020-04-H (Safe Growth/Safe Harbor Max Function). The motion passed unanimously. 5. Adopted Proposal 2020-07-H Mr. Drutz said XR007 and miscellaneous assets will be reported on page XR008, with all subsequent pages renumbered accordingly. The Health Risk-Based Capital (E) Working Group adopted proposal 2020-07-H to break or separate bonds and miscellaneous assets into separate pages withing the health RBC blank. Bonds will be reported on page XR007. Mr. Drutz made a motion, seconded by Mr. Boerner, to adopt proposal 2020-07-H (Split Bonds and Misc. Assets) (Attachment Eight). The motion passed unanimously. 6. Adopted Proposal 2020-12-CR Mr. Chou said the Catastrophe Risk (E) Subgroup and the Property and Casualty Risk-Based Capital (E) Working Group jointly conducted an e-vote that concluded Nov. 9 to adopt the 2020 (January through October) Catastrophe Event List. Both groups are planning to conduct another e-vote in January 2021 to adopt any November and December catastrophe events. Mr. Chou made a motion, seconded by Mr. Milquet, to adopt proposal 2020-12 CR (2020 Catastrophe Event List) (Attachment Nine). The motion passed unanimously. 7. Adopted its Working Agenda Mr. Barlow said that the Life Risk-Based Capital (E) Working Group removed items from its working agenda that it was not going to work on, or it rolled them up into other agenda items. The Working Group deferred the federal Tax Cuts and Jobs Act, and it rolled consideration of (CDAs) into the updates for C-3 Phase I or C-3 Phase II methodology. He said that one new item was added to develop the economic scenario generator (ESG) for implementation. Mr. Drutz said the Health Risk-Based Capital (E) Working Group added two new items to its working agenda for 2020: 1) work with the Academy to evaluate incorporating and including investment income in the Underwriting Risk component of the health RBC formula; and 2) to discuss and determine the bond factors for the 20 designations. Mr. Botsko summarized the changes to the Property and Casualty Risk-Based Capital (E) Working Group’s 2020 working agenda: 1) removed “Evaluate the RBC impact on the modification of the installment fees and expenses reporting guidance” as the Ref #2019-40: Reporting of Installment Fees and Expenses was adopted by the Statutory Accounting Principles (E) Working Group on March 18; and 2) added “modify instructions to PR027 Interrogatories that clarify how insurers with no gross exposure to earthquake or hurricane should complete the interrogatories” and “remove the embedded 3% operational risk component contained in the reinsurance contingent credit risk factor of Rcat” in the new items section. He stated that both items have been exposed for a 30- and 35-day comment period, respectively. Mr. Botsko added that the Task Force received a proposal regarding the Supplementary Investment Risks Interrogatories (SIRI) to provide clarifying language for the asset concentration factor for mutual funds. Mr. Botsko said that the Task Force will


table this discussion until the bond factors are adopted and when all RBC referrals regarding assets (items 39-41) can be reviewed holistically. Mr. Chou made a motion, seconded by Mr. Garn, to adopt its working agenda (Attachment Ten). The motion passed unanimously. Having no further business, the Capital Adequacy (E) Task Force adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\11_CapitalAdequacyTFmin

Attachment One Capital Adequacy (E) Task Force

11/19/20


Draft: 11/5/20

Capital Adequacy (E) Task Force Virtual Meeting

October 27, 2020

The Capital Adequacy (E) Task Force met Oct. 27, 2020. The following Task Force members participated: Tynesia Dorsey, Chair, represented by Tom Botsko (OH); Tanji J. Northrup, Vice Chair, represented by Jake Garn (UT); Jim L. Ridling represented by Richard Ford (AL); Alan McClain represented by Mel Heaps (AR); Ricardo Lara represented by Perry Kupferman (CA); Andrew N. Mais represented by Wanchin Chou (CT); Karima M. Woods represented by Philip Barlow (DC); David Altmaier represented by Robert Ridenour and Carolyn Morgan (FL); Doug Ommen represented by Mike Yanacheak (IA); Robert H. Muriel represented by Kevin Fry (IL); Vicki Schmidt represented by Tish Becker (KS); Grace Arnold represented by Kathleen Orth (MN): Chlora Lindley-Myers represented by John Rehagen (MO); Mike Causey represented by Jackie Obusek (NC); Marlene Caride represented by Diana Sherman (NJ); Glen Mulready represented by Diane Carter (OK); Elizabeth Kelleher Dwyer represented by Jack Broccoli (RI); Raymond G. Farmer represented Will Davis (SC); Kent Sullivan represented by Mike Boerner (TX); Mike Kreidler represented by Steve Drutz (WA); and Mark Afable represented by Randy Milquet (WI). 1. Adopted its Sept.25 Minutes The Task Force conducted an e-vote that concluded Sept. 25 to adopt its 2021 proposed charges. Mr. Chou made a motion, seconded by Mr. Rehagen, to adopt the Task Force’s Sept. 25 minutes (Attachment One-A). The motion passed unanimously.

2. Exposed Proposal 2020-10-CA Mr. Botsko said the purpose of the new bond structure is to include hybrid securities and pull the bonds from schedules D, DA and schedule E footnotes. He suggested exposing proposal 2021-10-CA for a 45-day comment period ending Dec. 11. The Task Force agreed. 3. Received Proposal 2020-09-CA (Asset Concentration) Mr. Fry said the purpose of this proposal is to provide clarification for the asset concentration factor, for mutual funds that are classified as diversified and should be excluded from the top 10. Caroline Busby (BlackRock Solutions) added that it supports the clarifying language to exclude eligible investment from the Investment Company Act of 1940 on registered exchange-traded funds (ETFs), as well as align the language with recent updates made to the Supplementary Investment Risks Interrogatories (SIRI). These ETFs are diversified like many bond mutual funds and should be excluded from the asset concentration like mutual funds. Mr. Botsko asked what volume these investments have to risk-based capital (RBC) overall. Ms. Busby said according to year-end data provided by Standard & Poor’s, companies held about $31 billion in bond ETFs compared to $6.7 trillion overall in admitted assets, so relatively minimal. Mr. Barlow added that even though the percentage of assets are low, it could be very impactful to a few companies that hold many ETFs. Ms. Busby added that even though states have a limit on bond ETFs, due to COVID-19, more and more companies are investing in ETFs, and the language should align with the Statutory Accounting Principles (SAPs). Daniel Tobin (John Hancock) added that some of these assets are eligible to be treated as bonds so the proposal should cover LR010, which is where bonds are reported. Jane Barr (NAIC) said that the Task Force can accept this proposal and continue to research the additional suggestion made prior to exposing for comments. Mr. Botsko concurred and said that the Task Force can expose this proposal during its Nov. 19 meeting. Having no further business, the Capital Adequacy (E) Task Force adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\10_CapitalAdequacyTFmin

Attachment One-A Capital Adequacy (E) Task Force

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Draft: 9/29/20

Capital Adequacy (E) Task Force E-Vote

September 25, 2020

The Capital Adequacy (E) Task Force conducted an e-vote that concluded Sept. 25, 2020. The following Task Force members participated: Tynesia Dorsey represented by Tom Botsko (OH); Lori K. Wing-Heier represented by Wally Thomas (AK); Alan McClain represented by Mel Anderson (AR); Ricardo Lara represented by Perry Kupferman (CA); Andrew N. Mais represented by Wanchin Chou (CT); Karima M. Woods represented by Philip Barlow (DC); David Altmaier represented by Ray Spudeck and Carolyn Morgan (FL); Vicki Schmidt represented by Tish Becker (KS); Chlora Lindley-Myers represented by Debbie Doggett (MO); Mike Causey represented by Jackie Obusek (NC); Bruce R. Ramge represented by Lindsay Crawford (NE); Marlene Caride represented by Diana Sherman (NJ); Barbara D. Richardson represented Kelsey Barlow (NV); Glen Mulready represented by Diane Carter (OK); Elizabeth Kelleher Dwyer represented by Jack Broccoli (RI); Kent Sullivan represented by Jamie Walker (TX); Mike Kreidler represented by Steve Drutz (WA); and Mark Afable represented by Randy Milquet (WI). 1. Adopted its 2021 Proposed Charges Mr. Drutz made a motion, seconded by Mr. Thomas, to adopt the Task Force’s 2021 proposed charges with a friendly amendment to remove the duplicative reference “to make a recommendation to the Capital Adequacy (E) Task Force.” The motion passed.

Having no further business, the Capital Adequacy (E) Task Force adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\09_CapitalAdequacyTFmin

Attachment Two Capital Adequacy (E) Task Force

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Draft: 11/10/20

Health Risk-Based Capital (E) Working Group Virtual Meeting (in lieu of meeting at the 2020 Fall National Meeting)

October 29, 2020

The Health Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Oct. 29, 2020. The following Working Group members participated: Steve Drutz, Chair (WA); Steve Ostlund (AL); Andrew Greenhalgh (CT); Carolyn Morgan (FL); Chut Tee (KS); Rhonda Ahrens and Michael Muldoon (NE); Kelsey Barlow (NV); Tom Dudek (NY); Kimberly Rankin (PA); and Mike Arendall, Aaron Hodges and Mike Boerner (TX). 1. Adopted its Sept. 11 Minutes The Working Group met Sept. 11 and took the following action: 1) discussed its Aug. 31 regulator-to-regulator meeting; 2) received comments and referred a letter to the American Academy of Actuaries (Academy) for investment income in underwriting risk; 3) discussed the two- and five-year proposed bond factors for the 2020 impact analysis; 4) adopted updates to the 2020 working agenda; and 5) exposed proposal 2020-07-H, which splits bonds and miscellaneous assets onto separate pages. Mr. Ostlund made a motion, seconded by Mr. Dudek, to adopt the Working Group’s Sept. 11 minutes (Attachment Two-A). The motion passed unanimously.

2. Referred Health Care Receivable Guidance to the Blanks (E) Working Group Mr. Drutz said the purpose of the Health Care Receivable Guidance is to provide more consistent reporting of the health care receivable data, most specifically in Exhibit 3A, and refer it to the Blanks (E) Working Group for consideration as guidance to be used in 2020 reporting. He said that the Academy uses data in Exhibit 3, Exhibit 3A, and the Underwriting and Investment Part 2B to update the risk-based capital (RBC) health care receivable factors. The proposed guidance and examples were developed in conjunction with the Academy, the Working Group, and NAIC staff support of the Blanks (E) Working Group and Statutory Accounting Principles (E) Working Group.

Mr. Drutz noted that during the initial exposure, some questions were raised. As a result, additional modifications were made, and the guidance was re-exposed for a 10-day public comment period. No comments were received. Mr. Boerner made a motion, seconded by Ms. Barlow, to refer the Health Care Receivable Guidance to the Blanks (E) Working Group for consideration in 2020 reporting (Attachment Two-B). The motion passed unanimously. 3. Adopted Proposal 2020-07-H Mr. Drutz said that the Working Group exposed proposal 2020-07-H for a 30-day comment period ending Oct. 12, and no comments were received. He said that the purpose of the proposal is to break bonds and miscellaneous assets into separate pages within the health RBC blank. Bonds would be reported on page XR007, and miscellaneous assets would be reported on page XR008. All subsequent pages would be renumbered accordingly. Mr. Muldoon made a motion, seconded by Mr. Dudek, to adopt proposal 2020-07-H. The motion passed unanimously.

4. Received an Update from the Academy on Investment Income in the Underwriting Risk Component Mr. Drutz said the Working Group requested the Academy’s assistance in incorporating investment income in the underwriting risk component of the health RBC formula. Derek Skoog (Academy) said that the Academy has begun working on the request and noted that the analysis is complicated. However, he said the Academy plans to have an update to the Working Group in December. 5. Received an Update on the Excessive Growth Charge Ad Hoc Group Mr. Drutz said that the Excessive Growth Charge Ad Hoc Group has met several times since August. He said the ad hoc group has identified areas and data points that will be used in its analysis of the charge based on the request made to the Working

Attachment Two Capital Adequacy (E) Task Force

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Group from the Operational Risk (E) Subgroup. Mr. Drutz said the ad hoc group’s next meeting is scheduled for Nov. 20, and it will discuss how to use the data, as well as identify which ratios and trends should be analyzed. He said the ad hoc group is continuing to move forward on its goals with this project.

6. Received an Update on the Health Test Ad Hoc Group

Mr. Drutz said the Health Test Ad hoc Group last met Sept. 1. He said since that time, the Blanks (E) Working Group has looked into developing a potential proposal that could affect the work the ad hoc group plans to perform. Mr. Drutz said that to avoid duplication, the ad hoc group will take a pause in meeting until the Blanks (E) Working Group has determined how to move forward with the potential changes.

Having no further business, the Health Risk-Based Capital (E) Working Group adjourned. W:\QA\RBC\HRBC\2020\Calls And Meetings\10-29-20 HRBC Call\10_29_20_HRBC Minutes.Docx

Attachment Two-A Capital Adequacy (E) Task Force

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Draft: 10/22/20

Health Risk-Based Capital (E) Working Group Conference Call

September 11, 2020

The Health Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Sept. 11, 2020. The following Working Group members participated: Steve Drutz, Chair (WA); Steve Ostlund (AL); Eric Unger (CO); Wanchin Chou and Andrew Greenhalgh (CT); Leean Chojnowski (FL); Tish Becker (KS); Rhonda Ahrens and Lindsay Crawford (NE); Kelsey Barlow (NV); and Aaron Hodges and Mike Boerner (TX). 1. Discussed its Aug. 31 Regulator-Only Conference Call The Working Group met Aug. 31 in regulator-to-regulator session, pursuant to paragraph 6 (consultations with NAIC staff members related to NAIC technical guidance) of the NAIC Policy Statement on Open Meetings, to hear a recap and discuss the proposed bond factors project.

2. Received Comments and Referred a Letter to the Academy for Investment Income in Underwriting Risk Mr. Drutz said the Working Group previously exposed the referral letter to the American Academy of Actuaries (Academy) regarding the request for analysis in incorporating investment income in the underwriting risk component of the health risk-based capital (RBC) formula for a 15-day public comment period, and one comment letter was received from UnitedHealth Group (UHG). James Braue (UHG) summarized his comments (Attachment Two-A1) in supporting the referral letter with the caveat that if the Academy deems it infeasible to incorporate the investment income into the underwriting risk, then it would like the Working Group to revisit including investment income in the bond factors. He suggested clarifying in the letter the extent to which the Working Group would expect the Academy to review the factors, and it supports incorporating the investment income into the current factors without altering the current methodology or underlying assumptions. Mr. Drutz said clarifying language was added to the letter that clarified that the evaluation of the factors should be based on the existing underwriting risk factors, and there should be no alteration of the existing methodology or assumptions underlying those factors in any other way. Mr. Ostlund made a motion, seconded by Mr. Boerner, to approve sending the referral letter to the Academy with the clarifying language with a response date of Oct. 21 (Attachment Two-A2). The motion passed unanimously. 3. Discussed the Two- and Five-Year Proposed Bond Factors for 2020 Impact Analysis Mr. Drutz said the Working Group previously exposed the proposed two- and five-year bond factors at the Summer National Meeting, and no comments were received. He said the bond structure was added to the health formula in 2020 for the purposes of completing an impact analysis for the changes to the bond factors in the health RBC formula. Mr. Ostlund made a motion, seconded by Mr. Unger, to approve using the two- and five-year bond factors in the 2020 impact analysis (Attachment Two-A3). The motion passed unanimously. 4. Adopted Updates to its 2020 Working Agenda Mr. Drutz said “Discuss and determine the bond factors for the 20 designations” was added as a new item to the 2020 health RBC working agenda. Mr. Boerner made a motion, seconded by Ms. Becker, to adopt the updates to the 2020 health RBC working agenda. The motion passed unanimously.

Attachment Two-A Capital Adequacy (E) Task Force

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5. Exposed Proposal 2020-07-H: Split Bonds and Miscellaneous Assets onto Separate Pages

Mr. Drutz said proposal 2020-07-H was developed to split the bonds and miscellaneous assets onto separate pages in the health RBC formula for 2021; the bonds would remain on page XR007, and miscellaneous assets would move to page XR008. All subsequent pages would then be renumbered accordingly within the blank and instructions. The reason for this change is due to differences in character limits in the page numbers within the NAIC system, the excel spreadsheet, and vendor software. Hearing no objections, the Working Group agreed to expose proposal 2020-07-H for a 30-day public comment period ending Oct. 12. Having no further business, the Health Risk-Based Capital (E) Working Group adjourned. W:\QA\RBC\HRBC\2020\Calls And Meetings\9-11-20 HRBC Call\09_11_20_HRBC Minutes.Docx

Corporate Finance – Actuarial Services Division 185 Asylum Street, CityPlace I ● Hartford, CT 06103

August 31, 2020

Mr. Steven Drutz, Chair Health Risk-Based Capital (E) Working Group National Association of Insurance Commissioners 1100 Walnut Street, Suite 1500 Kansas City, MO 64106-2197

Via electronic mail to Crystal Brown.

Re: Referral Letter to Academy to add Investment Income to Underwriting Risk

Dear Mr. Drutz:

I am writing on behalf of UnitedHealth Group in regard to your working group’s draft referral letter to the American Academy of Actuaries (“the Academy”), exposed for comment on August 18, 2020. The draft referral letter asks the Academy to address the subject of reflecting investment income in the Risk-Based Capital (RBC) charges for health underwriting risk.

The subject of reflecting investment income in the Health RBC formula was raised in our October 4, 2018, comment letter to your working group and the Investment RBC Working Group, and addressed further in a November 13, 2018, follow-up letter to the Investment RBC Working Group. Our recommendation at the time was that investment income should be reflected in the factors being developed for bond default risk. The response from the Academy was that investment income would be more appropriately reflected in the factors for underwriting risk, similar to how investment income is treated in the property/casualty RBC formula.

We believe that such an approach would be acceptable. As we explained at the July 30, 2020, virtual meeting of your working group, there would be advantages to reflecting investment income in the bond factors as we originally proposed; however, reflecting investment income in the underwriting risk factors is an acceptable alternative. Therefore, we support the referral letter, with the caveat (also expressed at the July 30 meeting) that if the Academy ultimately deems it impractical to appropriately reflect investment income in the underwriting risk factors, we would want to return to the subject of reflecting investment income in the bond factors.

We will note one point about the referral letter as exposed. The letter does not explicitly state whether the Academy is being asked simply to revise the existing underwriting risk factors to

Attachment Two-A1 Capital Adequacy (E) Task Force

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include investment income, not altering the methodology or assumptions underlying those factors in any other way; or whether your working group expects that the factors will be updated more broadly. While presumably the former is intended, a clarification of that point would be desirable.

We appreciate your consideration of these comments, and we would be happy to discuss this matter further with the Working Group.

James R. Braue Director, Actuarial Services UnitedHealth Group

cc: Crystal Brown, NAIC Randi Reichel, UnitedHealth Group


11/19/20


TO: Derek Skoog, Chair of the Health Solvency Subcommittee of the American Academy of Actuaries

FROM: Steve Drutz, Chair of the Health Risk-Based Capital (E) Working Group

Date: September 11, 2020

RE: Request for Analysis to Incorporate Investment Income into the Underwriting Risk Component of the Health Risk-Based Capital Formula

On July 30, 2020 the Health Risk-Based Capital (E) Working Group agreed to request assistance from the Health Solvency Subcommittee of the American Academy of Actuaries (Academy) to evaluate incorporating and including investment income into the Underwriting Risk component of the Health RBC formula. In a letter sent to the Working Group dated March 4, 2020, the Academy responded to comments made requesting that investment income be included in the proposed bond factors for the new 20 designations. The Academy noted that they did not believe it would be appropriate to ascribe all investment income to offset default risk and suggested utilizing investment income to offset specific risk charges, such as in Underwriting Risk.

The Health Risk-Based Capital (E) Working Group requests that the Health Solvency Subcommittee evaluate including investment income in the existing Underwriting Risk factors and not alter the existing methodology or assumptions underlying those factors in any other way. Please notify the Working Group by October 21, 2020 if the Academy can move forward with this project and provide an estimated timeline for completion.

Please forward a copy of your analysis to Crystal Brown via email [email protected].

cc: Devin Boerm, Staff Support- Health Solvency Subcommittee of the American Academy of Actuaries



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mailto:[email protected]

1850 M Street NW Suite 300 Washington, DC 20036 Telephone 202 223 8196 Facsimile 202 872 1948 www.actuary.org

June 24, 2020

Steve Drutz Chair, Health Risk-Based Capital (E) Working Group National Association of Insurance Commissioners (NAIC)

Re: Draft Bond Structure and Instructions

Dear Mr. Drutz:

On behalf of the American Academy of Actuaries1 Health Solvency Subcommittee, I am pleased to provide this response letter to the NAIC Health Risk-Based Capital (HRBC) Working Group. This letter is in response to the request from the HRBC Working Group to provide the health bond factors over both a two-year and five-year time horizon. The table below shows the health base risk factors over a two-year and five-year time horizon before any adjustments have been made to account for minimum risk factors.

Indicated Base Risk Factors

Moody's Rating Class

S&P Rating Class 2Yr 5Yr

Aaa AAA 0.0% 0.3%Aa1 AA+ 0.0% 0.5%Aa2 AA 0.1% 0.8%Aa3 AA- 0.2% 1.1%A1 A+ 0.3% 1.4%A2 A 0.5% 1.6%A3 A- 0.7% 1.9%Baa1 BBB+ 1.0% 2.2%Baa2 BBB 1.2% 2.5%Baa3 BBB- 1.5% 3.1%

1 The American Academy of Actuaries is a 19,500-member professional association whose mission is to serve the public and the U.S. actuarial profession. For more than 50 years, the Academy has assisted public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States.


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2

No adjustments have been made to the bond risk factor model utilized to develop the original results,2 beyond adjusting the time horizon to illustrate bond factors for the two-year and five-year time horizons.

***** We appreciate the opportunity to provide this analysis and would welcome the opportunity to speak with you regarding these comments in more detail and answer any questions you might have. If you have any questions or would like to discuss further, please contact Devin Boerm ([email protected]) or Craig Hanna ([email protected]) at 202-223-8196.

Sincerely, Derek Skoog, MAAA, FSA Chairperson Health Solvency Subcommittee American Academy of Actuaries

Cc: Crystal Brown: Senior Insurance Reporting Analyst

2 See Academy report titled “An Update to the Property & Casualty and Health Risk-Based Capital Bond Factors: Report to the NAIC Investment Risk-Based Capital (E) Working Group, Health Risk-Based Capital (E) Working Group, and Property and Casualty Risk-Based Capital (E) Working Group.


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TO: Jake Garn, Chair of the Blanks (E) Working Group

FROM: Steve Drutz, Chair of the Health Risk-Based Capital (E) Working Group

Date: October 29, 2020

RE: Referral of the Health Care Receivable Guidance

The health care receivable factors in the heath risk-based capital formula were revised in 2016 as a result of the report from the American Academy of Actuaries (Academy) “Recommendation on Credit Risk Factors for Health Care Receivables.” The Academy utilized 2013 and 2014 Health Annual Statement Exhibit 3, Exhibit 3A and Underwriting and Investment Exhibit, Part 2B data to develop the recommended factors. They found through this analysis that there were inconsistencies in the reporting of Exhibit 3A. Since that time, the Health Risk-Based Capital (E) Working Group has worked the Academy to review the data on an annual basis.

The Academy has identified that inconsistencies in the data continue to be reported in Exhibit 3A. As a result, the Health Risk-Based Capital (E) Working Group has worked with the Academy to draft the recommended Health Care Receivable Guidance for Exhibit 3, Exhibit 3A and Underwriting and Investment Exhibit 2B reporting.

The Health Risk-Based Capital (E) Working Group requests that the Blanks (E) Working Group consider including the recommended guidance for 2020 reporting on the Blanks (E) Working Group’s webpage as well as a link to the guidance in the Health Annual Statement Instructions.

Please contact Crystal Brown (NAIC Staff Support) via email [email protected] with any questions.

cc Mary Caswell, Calvin Ferguson

Attachment: Health Care Receivable Guidance

Attachment Two-B Capital Adequacy (E) Task Force

11/19/20


1 2 3 4 5 6 7Name of Debtor 1 – 30 Days 31 – 60 Days 61 – 90 Days Over 90 Days Non-admitted Admitted

Pharmaceutical rebate receivables 1,000,000$ 9,700,000$ Claim overpayment receivables -$ -$ Loans and advances to providers -$ -$ Capitation arrangement receivables -$ -$ Risk sharing receivables -$ -$ Other receivables -$ -$ Gross health care receivables 1,000,000$ 9,700,000$

R6 R7

1 2 3 4

Line of BusinessOn Claims Incurred Prior to January 1 of

Current YearOn Claims Incurred

During the Year

On Claims Unpaid December 31 of Prior Year

On Claims Incurred During the Year

Claims Incurred in Prior Years

(Columns 1 + 3)1. Comprehensive (hospital and medical)

Pharmaceutical rebate receivables (9,500,000)$ (33,500,000)$ (9,500,000)$ Claim overpayment receivables -$ -$ -$ Loans and advances to providers -$ -$ -$ Capitation arrangement receivables -$ -$ -$ Risk-sharing receivables -$ -$ -$ Other health care receivables -$ -$ -$

2. Medicare Supplement3. Dental4. Vision5. Federal Employees Health Benefits Plan6. Title XVIII - Medicare7a. Medicaid before collected receivables7b. Medicaid collected receivables7. Title XIX - Medicaid 8. Other health9. Health subtotal (Lines 1 to 8) (9,500,000) (33,500,000) 0 0 (9,500,000) 010. Health care receivables (a) B1 B2 B3 B4 B6 = Prior Yr(R6+R7)

Pharmaceutical rebate receivables 600,000$ 10,000,000$ -$ 100,000$ 600,000$ 10,000,000$ Claim overpayment receivables -$ -$ -$ -$ -$ -$ Loans and advances to providers -$ -$ -$ -$ -$ -$ Capitation arrangement receivables -$ -$ -$ -$ -$ -$ Risk-sharing receivables -$ -$ -$ -$ -$ -$ Other health care receivables -$ -$ -$ -$ -$ -$

11. Other non-health12. Medical incentive pools and bonus amounts13. Totals (Lines 9 10+11+12) (10,100,000) (43,500,000) 0 (100,000) (10,100,000) (10,000,000)

(a) excludes ______________ loans or advances to providers not yet expensed B1 + B2 + B3 + B4 = R6 + R7 [assumes no amounts in the 10(a) footnote]

5 6

1 2 3 4

Type of Health Care ReceivableOn Amounts Accrued

Prior to January 1 of Current Year

On Amounts Accrued During the Year

On Amounts Accrued December 31 of Prior Year


1. Pharmaceutical rebate receivables 9,500,000$ 33,500,000$ 600,000$ 10,100,000$ 10,100,000$ 10,000,000$ 2. Claim overpayment receivables -$ -$ -$ -$ -$ -$ 3. Loans and advances to providers -$ -$ -$ -$ -$ -$ 4. Capitation arrangement receivables -$ -$ -$ -$ -$ -$ 5. Risk sharing receivables -$ -$ -$ -$ -$ -$ 6. Other health care receivables -$ -$ -$ -$ -$ -$ 7. Totals (Lines 1 through 6) 9,500,000$ 33,500,000$ 600,000$ 10,100,000$ 10,100,000$ 10,000,000$

A3 = B1 + B3 A4 = B2 + B4 A6 = Prior Yr(R6+R7)Note that the accrued amounts in columns 3, 4, and 6 are the total health care receivables, not just the admitted portion.

The example the to information on the collection of that health care that collection can inthe form of or legally that to health care The format of the example for

only not of the format that it in part of the to SSAP No. 84 Health Care and Government Insured Plan Receivables for

The 12/31/20x2 annual statement had an accrual for $10 million of Pharmaceutical Rebates Receivable. The insurer’s contract with its pharmaceutical benefits manager provides that the PBM will makequarterly payments to the insurer consisting of a minimum guaranteed amount for the prior quarter and additional amounts for older quarters based on actual rebates collected from manufacturers. During20x3 the PBM makes quarterly payments summarized for 20x3 as follows:

$500,000 Rebates paid in 1Q 20x3 for scripts with fill dates in 4Q 20x1 $9 million Rebates paid in 20x3 for scripts with fill dates in 20x2 $33.5 million Rebates paid in 20x3 for scripts with fill dates in 20x3

Based on contract values and past rebate history the valuation actuary accrues the following as of 12/31/20x3, $1 million of which is nonadmitted:

$600,000 Rebates to be collected for scripts with fill dates in 20x2 (rebates on drug claims as of 12/31/20x3) $10,000,000 Rebates to be collected for scripts with fill dates in 20x3 (rebates on drug claims as of 12/31/20x3) $100,000 Rebates to be collected for scripts with fill dates in 20x3 (rebates on drug claims as of 12/31/20x3)

Guidance on Reporting Exhibit 3A Collection and Offset Amounts

Estimated Claim Reserve and Claim Liability

December 31 of Prior Year

This document was developed for assistance only and has not been adopted as part of the Annual Statement instructions.

Estimated Health Care Receivables Accrued as of December 31

of Prior Year

Health Care Receivables

in Prior Years(Columns 1 + 3)

Claims Paid During the Year Claim Reserve and Claim Liability5 6

Health Care Receivables Collected Health Care Receivables AccruedDuring the Year as of December 31 of Current Year

December 31 of Current Year


11/19/20



Pharmaceutical rebate receivables -$ -$ Claim overpayment receivables -$ 700,000$ Loans and advances to providers -$ -$ Capitation arrangement receivables -$ -$ Risk sharing receivables -$ -$ Other receivables -$ -$ Gross health care receivables -$ 700,000$

R6 R7

1 2 3 4

Line of BusinessOn Claims Incurred Prior to January 1 of Current Year






Pharmaceutical rebate receivables -$ -$ -$ Claim overpayment receivables (5,200,000)$ -$ (5,200,000)$ Loans and advances to providers -$ -$ -$ Capitation arrangement receivables -$ -$ -$ Risk-sharing receivables -$ -$ -$ Other health care receivables -$ -$ -$

2. Medicare Supplement3. Dental4. Vision5. Federal Employees Health Benefits Plan6. Title XVIII - Medicare7a. Medicaid before collected receivables7b. Medicaid collected receivables7. Title XIX - Medicaid 8. Other health9. Health subtotal (Lines 1 to 8) (5,200,000) 0 0 0 (5,200,000) 010. Health care receivables (a) B1 B2 B3 B4 B6 = Prior Yr(R6+R7)

Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ Claim overpayment receivables 700,000$ -$ -$ -$ 700,000$ 6,000,000$ Loans and advances to providers -$ -$ -$ -$ -$ -$ Capitation arrangement receivables -$ -$ -$ -$ -$ -$ Risk-sharing receivables -$ -$ -$ -$ -$ -$ Other health care receivables -$ -$ -$ -$ -$ -$

11. Other non-health12. Medical incentive pools and bonus amounts13. Totals (Lines 9 10+11+12) (5,900,000) 0 0 0 (5,900,000) (6,000,000)


5 6

1 2 3 4

Type of Health Care Receivable

On Amounts Accrued Prior to

January 1 of Current Year

On Amounts Accrued

During the Year

On Amounts Accrued December

31 of Prior Year

On Amounts Accrued

During the Year

1. Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ 2. Claim overpayment receivables 5,200,000$ -$ 700,000$ -$ 5,900,000$ 6,000,000$ 3. Loans and advances to providers -$ -$ -$ -$ -$ -$ 4. Capitation arrangement receivables -$ -$ -$ -$ -$ -$ 5. Risk sharing receivables -$ -$ -$ -$ -$ -$ 6. Other health care receivables -$ -$ -$ -$ -$ -$ 7. Totals (Lines 1 through 6) 5,200,000$ -$ 700,000$ -$ 5,900,000$ 6,000,000$


The example the to information on the collection of that health care thatcollection can in the form of or legally that to health care The format of theexample for only not of the format that it in part of the to SSAP No. 84 Health Careand Government Insured Plan Receivables for further of current year current

The 12/31/20x2 annual statement had an accrual for $6 million of Claim Overpayment Receivables. The overpayments had been made because the claim payment system had been payingincorrect amounts to a contracted hospital system, which affected claims incurred July 20x1 through June 20x2. ABC HMO notified the hospital system of the $6 million overpayment issue inNovember 20x2. Claims paid in December 20x2 and later month were paid correctly, but as of 12/3/20x2, no recovery had been started for claims paid in November 20x2 or prior.

During 20x3 and 20x4, the following happened: 1. There was no claim overpayment recovery for any provider other than this hospital system. 2. For claims incurred January through June 20x2, ABC HMO collected the entire $3.1 million of overpayment by legally settled offsetting against claim payments made in CY 20x3.3. For claims incurred July through December 20x1, the hospital system and the ABC HMO negotiated that the $2.9 million overpayment by ABC HMO would be fully settled by the following

schedule of payments from the hospital system, which would not run through the claim payment system. The total of these receivables is not in excess of reported claims owed to the hospital. $700,000 on 6/15/20x3$700,000 on 9/15/20x3$700,000 on 12/15/20x3$700,000 on 3/15/20x4 (which was recorded as a claim overpayment receivable as of 12/31/20x3)


Estimated Claim Reserve and Claim

Liability December 31 of Prior Year



of Prior Year

Health Care Receivables in Prior Years

(Columns 1 + 3)

Claims Paid During the Year Claim Reserve and Claim Liability5 6


December 31 of Current Year


11/19/20



Pharmaceutical rebate receivables -$ -$ Claim overpayment receivables -$ -$ Loans and advances to providers -$ -$ Capitation arrangement receivables -$ -$ Risk sharing receivables -$ -$ Other receivables -$ -$ Gross health care receivables -$ -$

R6 R7

1 2 3 4



During the Year





Pharmaceutical rebate receivables -$ -$ -$ Claim overpayment receivables -$ -$ -$ Loans and advances to providers (2,999,000)$ -$ (2,999,000)$ Capitation arrangement receivables -$ -$ -$ Risk-sharing receivables -$ -$ -$ Other health care receivables -$ -$ -$

2. Medicare Supplement3. Dental4. Vision5. Federal Employees Health Benefits Plan6. Title XVIII - Medicare7a. Medicaid before collected receivables7b. Medicaid collected receivables7. Title XIX - Medicaid 8. Other health9. Health subtotal (Lines 1 to 8) (2,999,000) 0 0 0 (2,999,000) 010. Health care receivables (a) B1 B2 B3 B4 B6 = Prior Yr(R6+R7)

Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ Claim overpayment receivables -$ -$ -$ -$ -$ -$ Loans and advances to providers -$ -$ -$ -$ -$ 3,000,000$ Capitation arrangement receivables -$ -$ -$ -$ -$ -$ Risk-sharing receivables -$ -$ -$ -$ -$ -$ Other health care receivables -$ -$ -$

11. Other non-health12. Medical incentive pools and bonus amounts13. Totals (Lines 9 10+11+12) (2,999,000) 0 0 0 (2,999,000) (3,000,000)


5 6

1 2 3 4






1. Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ 2. Claim overpayment receivables -$ -$ -$ -$ -$ -$ 3. Loans and advances to providers 2,999,000$ -$ -$ -$ 2,999,000$ 3,000,000$ 4. Capitation arrangement receivables -$ -$ -$ -$ -$ -$ 5. Risk sharing receivables -$ -$ -$ -$ -$ -$ 6. Other health care receivables -$ -$ -$ -$ -$ -$ 7. Totals (Lines 1 through 6) 2,999,000$ -$ -$ -$ 2,999,000$ 3,000,000$






of Prior Year




Claims Paid During the Year Claim Reserve and Claim Liability5 6December 31 of Current Year


The example the to information on the collection of that health care that collection canin the form of or legally that to health care The format of the example for

only not of the format that it in part of the to SSAP No. 84 Health Care and Government Insured PlanReceivables

The 12/31/20x2 annual statement had an accrual for $3 million of Loans and Advances to Providers. The advances were made in December 20x2 because an update to the claim payment systeminadvertently blocked payments to a group of providers. The amounts loaned were based on unpaid claims received through December 20x2. In January 20x3 the claim payment system problem wasresolved. As the unpaid claims were adjudicated, the loan balances were reduced by the claim payments that would have been made. By 12/31/20x3, all loan amounts had been satisfied except $1,000 forone provider whose practice was closed. That balance was determined to be uncollectable as of 12/31/20x3 and was written off. These advances were not greater than the reported claims owed to theproviders.


11/19/20



Pharmaceutical rebate receivables -$ -$ Claim overpayment receivables -$ -$ Loans and advances to providers -$ -$ Capitation arrangement receivables 3,000$ -$ Risk sharing receivables -$ -$ Other receivables -$ -$ Gross health care receivables 3,000$ -$

R6 R7

1 2 3 4



During the Year





Pharmaceutical rebate receivables -$ -$ -$ Claim overpayment receivables -$ -$ -$ Loans and advances to providers -$ -$ -$ Capitation arrangement receivables (197,000)$ -$ (197,000)$ Risk-sharing receivables -$ -$ -$ Other health care receivables -$ -$ -$

2. Medicare Supplement3. Dental4. Vision5. Federal Employees Health Benefits Plan6. Title XVIII - Medicare7a. Medicaid before collected receivables7b. Medicaid collected receivables7. Title XIX - Medicaid8. Other health9. Health subtotal (Lines 1 to 8) (197,000) 0 0 0 (197,000) 010. Health care receivables (a) B1 B2 B3 B4 B6 = Prior Yr(R6+R7)

Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ Claim overpayment receivables -$ -$ -$ -$ -$ -$ Loans and advances to providers -$ -$ -$ -$ -$ -$ Capitation arrangement receivables -$ -$ 3,000$ -$ 3,000$ 200,000$ Risk-sharing receivables -$ -$ -$ -$ -$ -$ Other health care receivables -$ -$ -$ -$ -$ -$

11. Other non-health12. Medical incentive pools and bonus amounts13. Totals (Lines 9 10+11+12) (197,000) 0 (3,000) 0 (200,000) (200,000)


5 6

1 2 3 4






1. Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ 2. Claim overpayment receivables -$ -$ -$ -$ -$ -$ 3. Loans and advances to providers -$ -$ -$ -$ -$ -$ 4. Capitation arrangement receivables 197,000$ -$ 3,000$ -$ 200,000$ 200,000$ 5. Risk sharing receivables -$ -$ -$ -$ -$ -$ 6. Other health care receivables -$ -$ -$ -$ -$ -$ 7. Totals (Lines 1 through 6) 197,000$ -$ 3,000$ -$ 200,000$ 200,000$






of Prior Year

Health Care Receivables in Prior Years

(Columns 1 + 3)




SSAP No. 84 Health Care and Government Insured Plan Receivables

The 12/31/20x2 annual statement had an accrual for $200,000 of Capitation Arrangement Receivables. The capitation payments were made in December 20x2 to providers who had cancelled their capitation contract effective 11/30/20x2. The HMO requested providers to refund the capitation payments – most did, with $190,000 collected from in this manner. A few providers did not send refund payments. For these, the HMO collected $7,000 by means of legally settled offsets against fee-for-service claims during 20x3. The HMO is carrying the remaining $3,000 as a non-admitted health care receivable as of 12/31/20x3.


11/19/20



Pharmaceutical rebate receivables -$ -$ Claim overpayment receivables -$ -$ Loans and advances to providers -$ -$ Capitation arrangement receivables -$ -$ Risk sharing receivables 1,600,000$ -$ Other receivables -$ -$ Gross health care receivables 1,600,000$ -$

R6 R7

1 2 3 4



During the Year





Pharmaceutical rebate receivables -$ -$ -$ Claim overpayment receivables -$ -$ -$ Loans and advances to providers -$ -$ -$ Capitation arrangement receivables -$ -$ -$ Risk-sharing receivables -$ -$ -$ Other health care receivables -$ -$ -$

2. Medicare Supplement3. Dental4. Vision5. Federal Employees Health Benefits Plan6. Title XVIII - Medicare7a. Medicaid before collected receivables7b. Medicaid collected receivables7. Title XIX - Medicaid 8. Other health9. Health subtotal (Lines 1 to 8) 0 0 0 0 0 010. Health care receivables (a) B1 B2 B3 B4 B6 = Prior Yr(R6+R7)

Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ Claim overpayment receivables -$ -$ -$ -$ -$ -$ Loans and advances to providers -$ -$ -$ -$ -$ -$ Capitation arrangement receivables -$ -$ -$ -$ -$ -$ Risk-sharing receivables 1,190,000$ 370,000$ 10,000$ 30,000$ 1,200,000$ 900,000$ Other health care receivables -$ -$ -$ -$ -$ -$

11. Other non-health12. Medical incentive pools and bonus amounts13. Totals (Lines 9 10+11+12) (1,190,000) (370,000) (10,000) (30,000) (1,200,000) (900,000)


5 6

1 2 3 4






1. Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ 2. Claim overpayment receivables -$ -$ -$ -$ -$ -$ 3. Loans and advances to providers -$ -$ -$ -$ -$ -$ 4. Capitation arrangement receivables -$ -$ -$ -$ -$ -$ 5. Risk sharing receivables -$ -$ 1,200,000$ 400,000$ 1,200,000$ 900,000$ 6. Other health care receivables -$ -$ -$ -$ -$ -$ 7. Totals (Lines 1 through 6) -$ -$ 1,200,000$ 400,000$ 1,200,000$ 900,000$






of Prior Year







The 12/31/20x2 annual statement had an accrual for $900,000 of Risk-Sharing Receivables. The accrual was for a contract with a multi-specialty provider group that looks at actual incurred claims compared to a target for those claims. The experience period for the agreement is the 12 months ending 3/31/20x3, so the accrual as of 12/31/20x2 was for the first nine months of the risk-sharing contract period. The contract provides that the final accounting is to be made using claims runout paid through 3/31/20x4, with nothing to be paid by the provider group until 5/31/20x4. The calculations as of 12/31/20x3 resulted in a $1.6 million accrual, of which $1.2 million was allocated to the incurred period 4/1/20x2 through 12/31/20x2 and $400,000 was allocated to the incurred period 1/1/20x3 through 3/31/20x3. For admissability amounts see SSAP No. 84.


11/19/20



Pharmaceutical rebate receivables -$ -$ Claim overpayment receivables -$ -$ Loans and advances to providers -$ -$ Capitation arrangement receivables -$ -$ Risk sharing receivables -$ -$ Other receivables -$ 4,000,000$ Gross health care receivables -$ 4,000,000$

R6 R7

1 2 3 4



During the Year





Pharmaceutical rebate receivables -$ -$ -$ Claim overpayment receivables -$ -$ -$ Loans and advances to providers -$ -$ -$ Capitation arrangement receivables -$ -$ -$ Risk-sharing receivables -$ -$ -$ Other health care receivables -$ -$ -$

2. Medicare Supplement3. Dental4. Vision5. Federal Employees Health Benefits Plan6. Title XVIII - Medicare7a. Medicaid before collected receivables7b. Medicaid collected receivables7. Title XIX - Medicaid 8. Other health9. Health subtotal (Lines 1 to 8) 0 0 0 0 0 010. Health care receivables (a) B1 B2 B3 B4 B6 = Prior Yr(R6+R7)

Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ Claim overpayment receivables -$ -$ -$ -$ -$ -$ Loans and advances to providers -$ -$ -$ -$ -$ -$ Capitation arrangement receivables -$ -$ -$ -$ -$ -$ Risk-sharing receivables -$ -$ -$ -$ -$ -$ Other health care receivables -$ -$ 4,000,000$ -$ 4,000,000$ 4,000,000$

11. Other non-health12. Medical incentive pools and bonus amounts13. Totals (Lines 9 10+11+12) 0 0 (4,000,000) 0 (4,000,000) (4,000,000)


5 6

1 2 3 4






1. Pharmaceutical rebate receivables -$ -$ -$ -$ -$ -$ 2. Claim overpayment receivables -$ -$ -$ -$ -$ -$ 3. Loans and advances to providers -$ -$ -$ -$ -$ -$ 4. Capitation arrangement receivables -$ -$ -$ -$ -$ -$ 5. Risk sharing receivables -$ -$ -$ -$ -$ -$ 6. Other health care receivables -$ -$ 4,000,000$ -$ 4,000,000$ 4,000,000$ 7. Totals (Lines 1 through 6) -$ -$ 4,000,000$ -$ 4,000,000$ 4,000,000$






of Prior Year







The 12/31/20x2 annual statement had an accrual for $4 million of Other Health Care Receivables. The accrual was for an expected payment for a Medicaid contract, under which the HMO is compensated for the medical costs of ventilator-dependent members, up to a specified limit. The accrual was for the 12-month period ending 6/30/20x2. The Medicaid contract requires claims to be reported monthly, but permits claims to be reported up to 365 days after the date of service, with final settlement therefore due after 6/30/20x3. In December 20x3 the state sent the health plan a letter confirming, that based on claims reported to date, the state owes a $4 million payment. For 12/31/20x3 the health plan accrued the full $4 million as an admitted health care receivable asset, citing that the amount was undisputed.


11/19/20



Pharmaceutical rebate receivables 1,000,000$ 9,700,000$ Claim overpayment receivables -$ 700,000$ Loans and advances to providers -$ -$ Capitation arrangement receivables 3,000$ -$ Risk sharing receivables 1,600,000$ -$ Other receivables -$ 4,000,000$ Gross health care receivables 2,603,000$ 14,400,000$

R6 R7

1 2 3 4



During the Year





Pharmaceutical rebate receivables (9,500,000)$ (33,500,000)$ (9,500,000)$ Claim overpayment receivables (5,200,000)$ -$ (5,200,000)$ Loans and advances to providers (2,999,000)$ -$ (2,999,000)$ Capitation arrangement receivables (197,000)$ -$ (197,000)$ Risk-sharing receivables -$ -$ -$ Other health care receivables -$ -$ -$

2. Medicare Supplement3. Dental4. Vision5. Federal Employees Health Benefits Plan6. Title XVIII - Medicare7. Title XIX - Medicaid 8. Other health9. Health subtotal (Lines 1 to 8) (17,896,000) (33,500,000) 0 0 (17,896,000) 010. Health care receivables (a) B1 B2 B3 B4 B6 = Prior Yr(R6+R7)

Pharmaceutical rebate receivables 600,000$ 10,000,000$ -$ 100,000$ 600,000$ 10,000,000$ Claim overpayment receivables 700,000$ -$ -$ -$ 700,000$ 6,000,000$ Loans and advances to providers -$ -$ -$ -$ -$ 3,000,000$ Capitation arrangement receivables -$ -$ 3,000$ -$ 3,000$ 200,000$ Risk-sharing receivables 1,190,000$ 370,000$ 10,000$ 30,000$ 1,200,000$ 900,000$ Other health care receivables -$ -$ 4,000,000$ -$ 4,000,000$ 4,000,000$

11. Other non-health12. Medical incentive pools and bonus amounts13. Totals (Lines 9 10+11+12) (20,386,000) (43,870,000) (4,013,000) (130,000) (24,399,000) (24,100,000)


5 6

1 2 3 4






1. Pharmaceutical rebate receivables 9,500,000$ 33,500,000$ 600,000$ 10,100,000$ 10,100,000$ 10,000,000$ 2. Claim overpayment receivables 5,200,000$ -$ 700,000$ -$ 5,900,000$ 6,000,000$ 3. Loans and advances to providers 2,999,000$ -$ -$ -$ 2,999,000$ 3,000,000$ 4. Capitation arrangement receivables 197,000$ -$ 3,000$ -$ 200,000$ 200,000$ 5. Risk sharing receivables -$ -$ 1,200,000$ 400,000$ 1,200,000$ 900,000$ 6. Other health care receivables -$ -$ 4,000,000$ -$ 4,000,000$ 4,000,000$ 7. Totals (Lines 1 through 6) 17,896,000$ 33,500,000$ 6,503,000$ 10,500,000$ 24,399,000$ 24,100,000$





6December 31 of Current Year



Claims Paid During the Year Claim Reserve and Claim Liability5


of Prior Year





11/19/20


Attachment Three Capital Adequacy (E) Task Force

11/19/20


Draft: 8/28/20

Health Risk-Based Capital (E) Working Group Conference Call August 18, 2020

The Health Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met via conference call Aug. 18, 2020. The following Working Group members participated: Steve Drutz, Chair (WA); Steve Ostlund (AL); Eric Unger (CO); Wanchin Chou (CT); Carolyn Morgan (FL); Tish Becker (KS); Lindsey Crawford and Michael Muldoon (NE); Tom Dudek (NY); Kimberly Rankin (PA); and Aaron Hodges and Mike Boerner (TX). 1. Adopted its July 30 Minutes The Working Group met July 30 and took the following action: 1) adopted its Dec. 17, 2019, minutes; 2) approved the 2019 health risk-based capital (RBC) statistics; 3) referred the federal Affordable Care Act (ACA) Fee Sensitivity Test Proposal (2019-02-CA) to the Capital Adequacy (E) Task Force for exposure; 4) adopted Proposal 2020-04-H for the MAX function in Line 17 of the excessive growth charge; 5) received an update on the health bond factors, including investment income and the five-year time horizon; 6) adopted updates to its 2020 working agenda; 7) discussed the impact of COVID-19 and pandemic risk in the health RBC formula; 8) discussed the health care receivable guidance; and 9) received an update on the Health Test Ad Hoc Group. Mr. Boerner made a motion, seconded by Mr. Chou, to adopt the Working Group’s July 30 minutes (see NAIC Proceedings – Summer 2020, Capital Adequacy (E) Task Force). The motion passed unanimously. 2. Adopted the 2020 Health RBC Newsletter Mr. Drutz said the newsletter has been updated to include a summary of the 2020 health RBC formula changes. He said these changes have been incorporated into the 2020 health RBC instructions, blanks and formula. Mr. Dudek made a motion, seconded by Ms. Rankin, to adopt the 2020 Health RBC Newsletter (Attachment Three-A). The motion passed unanimously. 3. Exposed the Referral Letter to the Academy to Add Investment Income to the Underwriting Risk of the Health RBC

Formula Mr. Drutz said the Working Group directed NAIC staff to draft a letter to the American Academy of Actuaries (Academy) to request its assistance in incorporating investment income into the underwriting risk component of the health RBC formula on its July 30 call. He suggested that the Working Group expose the draft letter for a 15-day public comment period. Hearing no objections, the Working Group agreed to expose the referral letter for a 15-day public comment period ending Sept. 2. 4. Adopted Updates to its 2020 Working Agenda Mr. Drutz said the “evaluation of incorporating and including investment income in the underwriting risk component of the health RBC formula” was added as a new item to the 2020 health RBC working agenda. Mr. Chou made a motion, seconded by Mr. Unger, to adopt the updates to the 2020 health RBC working agenda. The motion passed unanimously.

5. Exposed the Health Care Receivable Guidance Mr. Drutz said the Working Group has worked with the Academy for several years now on reviewing and updating the health care receivable factors within the health RBC formula. He said the ongoing work has been a result of inconsistent reporting in the annual statement filing on the data used to evaluate those factors, most specifically in Exhibit 3A. Because of this, the Working Group began developing guidance for more consistent reporting. Based on comments received in the initial exposure of the draft guidance and ongoing discussions, it was agreed that additional clarity and examples were needed. Mr. Drutz said

Attachment Three Capital Adequacy (E) Task Force

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the Working Group has worked with the Academy and NAIC staff support for the Blanks (E) Working Group to develop revised guidance that will include examples. He said this proposed guidance could be used for 2020 reporting and be posted on the Blanks (E) Working Group’s webpage, as well as a possible link to the guidance within the annual statement instructions. Kevin Russell (Academy) provided a summary of each of the examples drafted in the guidance. He said the claim overpayment receivables are the receivables that have experienced the most inconsistent reporting, which is believed to be due to offsets for claims repayments. Ray Nelson (America’s Health Insurance Plans—AHIP) asked if a header and disclaimer should be added to the last page of the guidance, which is a compilation of all of the health care receivable examples. Mr. Drutz agreed that they should be added. Mr. Nelson also asked if the previously exposed version of the guidance would be included with the examples. Crystal Brown (NAIC) said the proposed examples and guidance would replace the previously exposed guidance. Mr. Drutz said in working through the guidance, other potential changes were identified to Exhibit 3A in the instructions and column headings. However, due to the timing, this would need to be a separate proposal to the Blanks (E) Working Group for possible 2021 consideration. Mr. Drutz said the Working Group will continue to work with the Academy and Blanks (E) Working Group staff support to bring this back to the Working Group for discussion on a future call. Hearing no objections, the Working Group agreed to expose the health care receivable guidance for a 30-day public comment period ending Sept. 17. 6. Discussed the Impact of COVID-19 and Pandemic Risk on the Health RBC Formula Mr. Drutz said the Working Group briefly discussed evaluating the impact of COVID-19 and pandemic risk on the health RBC formula on its July 30 call. He asked what the Working Group thinks about reincorporating the pandemic risk interrogatory questions back into the health RBC formula and if there is any value in this. Mr. Chou recommended that because there are still so many uncertainties, the Working Group continue the discussion rather than make any changes right now. Mr. Drutz agreed, and he asked the Working Group to continue thinking about this topic for discussion on future calls. Having no further business, the Health Risk-Based Capital (E) Working Group adjourned. W:\QA\RBC\HRBC\2020\Calls And Meetings\8-18-20\08_18_20_HRBC Minutes.Docx

Attachment Three-A Capital Adequacy (E) Task Force

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020 NAIC Health Risk-Based Capital Report Including Overview & Instructions for Companies

2020 NAIC Health Risk-Based Capital Report Including Overview & Instructions for Com-panies

Attachment Three-A Capital Adequacy (E) Task Force

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Attachment Four Capital Adequacy (E) Task Force

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Draft: 12/8/20

Life Risk-Based Capital (E) Working Group Virtual Meeting (in lieu of meeting at the 2020 Fall National Meeting)

November 10, 2020 The Life Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Nov. 10, 2020. The following Working Group members participated: Philip Barlow, Chair (DC); Steve Ostlund (AL); Wanchin Chou (CT); Sean Collins (FL); Vincent Tsang (IL); John Robinson (MN); Derek Wallman (NE); Seong-min Eom (NJ); Bill Carmello (NY); Andrew Schallhorn (OK); Mike Boerner (TX); and Tomasz Serbinowski (UT). 1. Adopted its Oct. 9, Sept. 25, Sept. 11, Aug. 21, and Summer National Meeting Minutes Mr. Ostlund made a motion, seconded by Mr. Chou, to adopt the Working Group’s Oct. 9 (Attachment Four-A), Sept. 25 (Attachment Four-B), Sept. 11 (Attachment Four-C), Aug. 21 (Attachment Four-D) and July 30 (see NAIC Proceedings – Summer 2020, Capital Adequacy (E) Task Force, Attachment Four) minutes. The motion passed unanimously. 2. Received an Update on ESGs Pat Allison (NAIC) provided an update on the work being done on economic scenario generators (ESGs). She said there was a joint meeting of the Working Group and the Life Actuarial (A) Task Force on Oct. 27. During that meeting, she said the background and the deliverables that Conning will have for the ESG project were discussed, and these are posted on both groups’ websites. She said there will be a meeting of the Task Force on Dec. 3; it will discuss the timeline for the project, and Conning will provide some overview information and start discussion of the interest rate generator in particular. 3. Discussed Possible Modifications to the Life and Fraternal Statistics Mr. Barlow said the Working Group has discussed the statistics previously and the possibility of modifying them in a manner that will lend itself more to driving action on the part of the Working Group. He asked if there are Working Group members willing to review the statistics and propose possible modifications. Mr. Boerner, Mr. Tsang, Mr. Robinson and Mr. Chou said they would be willing to support that effort. Mr. Barlow said this effort will start with Working Group members, but it will clearly involve feedback from interested parties before changes are made. 4. Adopted Revisions to the Working Agenda Mr. Barlow said the Working Group made changes to the life risk-based capital (RBC) calculation for the 2018 tax reform changes; although, there were a few minor considerations that the Working Group believed might merit further consideration. After the initial work was done, he said nothing further has been undertaken, and he asked if there is interest or a need to go back and look at the work that was done for possible additional changes. Paul S. Graham (American Council of Life Insurers—ACLI) said the items that were being contemplated were from the perspective of setting it up so future changes to the tax rates would be easier to incorporate, and he suggested that it might make sense in the current environment to wait and get some clarity on what any possible changes might be since any changes would not affect the end result of the calculation but would be moving any tax adjustments from one bucket to another. The Working Group agreed to delete this item from the working agenda and consider tax rate changes as they arise. With respect to contingent deferred annuities, Mr. Barlow suggested that this item could be included in the work that the American Academy of Actuaries (Academy) is doing on updating the C-3 Phase I and C-3 Phase II methodologies. Link Richardson (Academy) agreed with that approach, and he said he would suggest it to the Academy’s C3 Life & Annuities Work Group. He said if needed, the Work Group could reach out to other Academy groups as well. The Working Group agreed to delete this item and combine it with the Academy’s work on C-3. With respect to the items relating to review of the primary security and RBC shortfalls, Mr. Barlow noted that NAIC staff review this annually. He suggested that these items be removed from the working agenda and considered as part of the review of the RBC statistics. The Working Group agreed. With respect to determining if any adjustment is needed due to the changes made to the Life and Health Insurance Guaranty Association Model Act (#520), Mr. Graham said one of the changes has to do with losses on long-term care (LTC) where

Attachment Four Capital Adequacy (E) Task Force

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previously these were included only in the health assessments, they would now be split between life and health. He said he believes the reason for this item being referred to the Working Group was concern with the fact that the C-4a risk component is based on the amount of guaranty fund assessments. He said the risk charge is tied to the maximum amount of assessments in any one year for a life company, and that is not affected by the changes to Model #520; therefore, he does not believe there is any need to change the C-4a charge. Mr. Barlow said he is inclined to agree, but he wants to ensure that the Working Group appropriately addresses the item before removing it. Dave Fleming (NAIC) said he agrees with Mr. Graham, and he suggested that a memorandum from NAIC staff noting the reasons for no change being needed was appropriate for the Working Group to consider. The Working Group agreed. Lou Felice (NAIC) said the item relating to determining if any adjustment is needed to the reinsurance credit risk in light of changes related to collateral is related to the “Bilateral Agreement Between the United States of America and the European Union on Prudential Measures Regarding Insurance and Reinsurance” (Covered Agreement). He said the issue has to do with how the life RBC formula pulls in this information for authorized and unauthorized reinsurers. He said it may only require simple changes, but the formula’s treatment must be in conformity with the Covered Agreement for those treaties subject to it. Mr. Fleming said he believes this may require only instructional changes. He said the Academy is considering a separate reinsurance proposal for the life RBC formula’s treatment of items from the liabilities page that may be tangent to this, and he believes these may be addressed in one proposal. Mr. Ostlund made a motion, seconded by Mr. Robinson, to adopt the Working Group’s working agenda (Attachment Four-E) with the modifications suggested on this call. The motion passed unanimously. Having no further business, the Life Risk-Based Capital (E) Working Group adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\LifeRBC\11_10_20 Call

Attachment Four-A Capital Adequacy (E) Task Force

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Draft: 11/10/20

Life Risk-Based Capital (E) Working Group Virtual Meeting October 9, 2020

The Life Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Oct. 9, 2020. The following Working Group members participated: Philip Barlow, Chair (DC); Steve Ostlund (AL); Perry Kupferman (CA); Deborah Batista (CO); Wanchin Chou (CT); Vincent Tsang (IL); John Robinson (MN); William Leung (MO); Rhonda Ahrens (NE); Seong-min Eom (NJ); Bill Carmello (NY); Andrew Schallhorn (OK); Mike Boerner (TX); and Tomasz Serbinowski (UT). 1. Adopted the Mortgage Reporting Guidance Document and Instructional Change Mr. Barlow said there were two comment letters received, one from the Illinois Department of Insurance (DOI) (Attachment Four-A1) and a joint one from the American Council of Life Insurers (ACLI) and Mortgage Bankers Association (MBA) (Attachment Four-A2). Mr. Tsang summarized his comment letter and suggested that 2020 net operating income (NOI) information be reported in the risk-based capital (RBC) report to identify if it is higher, lower or indifferent from the proposed 85% of the 2019 NOI. This will allow state insurance regulators to compare and analyze the 2020 NOI to the 2019 NOI should the industry be affected in the future by additional waves of the pandemic. Mr. Tsang said he supports the industry request to replace the 2020 NOI by 85% of the 2019 NOI but wants more disclosure in the reporting. Mr. Barlow said the proposed instructions do not facilitate the capture of that additional information. Alabama, Connecticut, Minnesota, Nebraska and Texas supported Illinois’ suggestion. Mike Monahan (ACLI) said the ACLI is in favor of additional disclosure and requested that the Working Group move forward with the guidance. Mr. Barlow said the Working Group would need to consider how to make the change in the most minimal way possible because it would affect three years of reporting and would then need to be undone. He said the sentiment of the Working Group is to add the additional disclosure to capture the 2020 NOI in the 2021 RBC reporting. Mr. Tsang said he would like to see the number captured so it could be used in determining the impact. Dave Fleming (NAIC) said the suggested changes would not be a structural change; instead, it would be an instructional change in the company generated worksheet. He said the instructions could be modified to incorporate the changes into the 2021 instructions that would need to be exposed by April 30, 2021. Mr. Fleming said the Working Group has adopted everything in the guidance document except for the NOI portion. He said the instructions could be worked on separately. Mr. Carmello made a motion, seconded by Mr. Ostlund, to adopt the 2020 Mortgage Reporting Guidance including the NOI and direct NAIC staff to work with industry on drafting instructional changes to the company-generated worksheet to appropriately capture the actual 2020 NOI. 2. Received a Memorandum from the Financial Condition (E) Committee on Bond Factors Mr. Barlow said the Working Group received a memorandum from the Financial Condition (E) regarding the new 20designation bond factors to be put into place for year-end 2021 and consider analysis that will be prepared by the ACLI and presented to the Working Group. He said this is a good path forward to complete the work on the bond factors. He said the ACLI has done some work on the bond factors and is interested in working with interested state insurance regulators to develop the scope of work they are doing and in determining if there are any changes to the current proposal for the bond factors. Mr. Barlow said he believes the work the American Academy of Actuaries (Academy) did the work the Investment Risk-Based Capital (E) Working Group asked it to do. He said he is comfortable with the Academy’s work and that the factors it developed are reasonably appropriate factors for bonds. He added that he is open to new information and is happy to work with the ACLI to address its concerns. Mr. Barlow said he would be content with moving forward with the factors but would suggest an adjustment to the portfolio adjustment be made. He said that while he believes the work the Academy did is actuarially sound, it could be harsh for smaller companies and would consider making a non-actuarial adjustment to the portfolio adjustment to address the concern. Mr. Barlow noted that the factors were developed before the tax law change, so at a minimum the factors would need to be updated to reflect the tax effect. He said the new 20-designation structure is in place, so the Working Group will have a short window of time to perform analysis on the 2020 RBC filings before deciding on final factors. He said the ACLI will present

Attachment Four-A Capital Adequacy (E) Task Force

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its report and findings to the Working Group, and if there is information that is needed to complete its work, then that request should be brought to the Working Group. The Working Group would then need to evaluate whether that information is useful in ultimately making a decision on the work. Mr. Robinson asked if the ACLI’s findings would be sent to the Academy for review. Mr. Barlow said the ACLI’s work will be handled in the same manner as any other work that comes to the Working Group; the proposal would be presented, and it would be exposed for public comment. Mr. Chou suggested the Working Group have more open discussion as the ACLI works through its study to address any transparency concerns rather than waiting until the conclusion of its study. Mr. Barlow said the Working Group has work that was completed by the Academy on behalf of the Investment Risk-Based Capital (E) Working Group, and it is up to the state insurance regulators to determine the assumptions and procedures in determining what is done to the RBC calculation. He said that in his time as Working Group chair and as a member of the Working Group, work has been accepted as is from the Academy, and the Working Group has received work that it requested the Academy revise in some way to address state insurance regulator concerns. He said if the Working Group feels that an assumption needs to be revised, it is on the Working Group to make that decision. Steve Clayburn (ACLI) asked that the Working Group review the request for proposal (RFP) that the ACLI has drafted to make sure it addresses state insurance regulator requests as well. He said the consultant who wins the RFP will review the underlying modeling that was done for those factors because industry has some concerns. Mr. Barlow encouraged Working Group members who are interested to provide their thoughts on the RFP to the ACLI. He said the factors will need to be exposed by the end of April 2021, so the Working Group will have some time to work on this and perform the analysis after the March 1, 2021, filing deadline. Mr. Barlow said the bond factors were developed several years ago and that there has been more experience since that time. He said if new bond factors are put in place now with more current assumptions, it could result in a change in the factors because of the additional experience. He said the goal should be to work with the work that has already been done and finalize the factors. Mr. Tsang asked if the Working Group should work with the Academy and look at making an adjustment to the portfolio adjustment while the ACLI does its analysis. Mr. Barlow said the portfolio adjustment should be a relatively simple change that the Working Group could make, and it is not uncommon for there to be regulatory adjustments to the Academy recommendations. He also noted that the ACLI planned to look at the portfolio adjustment. Nancy Bennett (Academy) said that capital requirements for bonds is designed to work together in a two-step process. She said the first is the individual level, and the second is the portfolio level, which makes an adjustment for diversification of an individual insurer’s portfolio. She said if the Working Group wanted to make some kind of state insurance regulator adjustments to the portfolio adjustment so that it affects some companies differently, it can be done. However, she said that is a function of judgement, and that is the regulator’s judgement to apply. In order for the Academy to revise it, it would need additional regulatory direction. Ms. Ahrens suggested waiting for the ACLI to complete its analysis before the Academy or the Working Group performs any additional work. Mr. Tsang suggested the Working Group look at making any adjustments to the portfolio adjustment parallel to the ACLI’s work. The Working Group agreed to continue the discussion during a future meeting. Having no further business, the Life Risk-Based Capital (E) Working Group adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\LifeRBC\10_9_20 Call

Via email:

Due to the financial hardship caused by the epidemic, I support the ACLI’s proposal of using the greater of (a) 2020 NOI and (b) 85% of 2019 NOI in the calculation of the rolling average NOI.

If an insurance entity is using 85% of the 2019 NOI as a replacement of the actual 2020 NOI for a particular mortgage, I believe it would be beneficiary for the regulators to

• Quantify the difference between the 2020 NOI and 85% of the 2019 NOI

• Keep track of the types of mortgages with depressed 2020 NOI• Evaluate whether the currently assumed 85% is reasonable.

I suggest adding a line (e.g., 16a “Actual 2020NOI”) right after line 16 in the LR 004 of the RBC Instructions and the associated RBC spreadsheet where companies can report the mortgages’ actual 2020 NOIs.

Thanks,

Vincent Tsang Illinois Department of Insurance


Attachment Four-A1 Capital Adequacy (E) Task Force

11/19/20

Paul S. Graham III Mike Flood SVP, Policy Development SVP, CMF, Policy & Member Engagement

October 6, 2020

Philip A. Barlow, FSA, MAAA;

Chair, Life Risk-Based Capital (E) Working Group

National Association of Insurance Commissioners

1100 Walnut Street, Suite 1500

Kansas City, MO 64106-2197

Re: Exposure Draft Notice: Life Risk-Based Capital (E) Working Group (ending 10/7/20)

Dear Mr. Barlow:

The Mortgage Bankers Associations (MBA)1 and the American Council of Life Insurers (ACLI),2 on

behalf of our respective member insurers, submit these comments in support of the exposure drafts

“Guidance on Mortgage Reporting for 2020” and “Instructional Changes for 2021” that the Life Risk-

Based Capital Working Group of the National Association of Insurance Commissioners (NAIC)

released on September 30, 2020.

We support the guidance on Construction Loans; Origination Date, Valuation Date, Property Value,

and 90 Days Past Due; and Contemporaneous Property Values, which accurately reflects the

guidance the Working Group adopted in its June 30 and July 10, 2020 meetings.

We also support the proposed Net Operating Income (NOI) guidance and instructions on 2020 NOI

inputs for 2021, 2022, and 2023 risk-based capital reporting. We appreciate the engagement of

Working Group members discussing this proposal over a series of Working Group meetings. In fact,

regulator feedback from those discussions led industry to modify its initial NOI proposal (i.e., industry

lowered the 2020 NOI floor from 100% of 2019 NOI to 85% of 2019 NOI). Importantly, the proposal

will not provide risk-based capital relief to any loan that becomes delinquent as a result of the impacts

of COVID-19 or otherwise. We believe the resulting proposed adjustments to 2020 NOI inputs, where

applicable, will result in risk-based capital requirements that more reasonably reflect credit risk for

loans that continue to perform after the underlying properties experience a drop in NOI in 2020.

1 The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Its membership of over 2,300 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, credit unions, thrifts, REITs, Wall Street conduits, 70 life insurance companies engaged in real estate finance, and others in the mortgage lending field. For additional information, visit MBA’s website: www.mba.org

2 The American Council of Life Insurers (ACLI) is the leading trade association driving public policy and advocacy on behalf of the life insurance industry. 90 million American families rely on the life insurance industry for financial protection and retirement security. ACLI’s member companies are dedicated to protecting consumers’ financial wellbeing through life insurance, annuities, retirement plans, long-term care insurance, disability income insurance, reinsurance, and dental, vision and other supplemental benefits. ACLI’s 280 member companies represent 94 percent of industry assets in the United States. Learn more at www.acli.com


11/19/20


2

We also support the additional NOI guidance that instructs insurers that apply the adjustment to

2020 NOI inputs to retain actual 2020 NOI information in their workpapers so that the information

can be readily available to regulators. While this was not in industry’s proposal, we believe it is

reasonable additional guidance that would address regulator concerns about the future availability

to regulators of 2020 NOI information.

While the NOI guidance is exposed both in the form of guidance and changes to risk-based capital

reporting instructions, we would support the alternative of adopting the NOI guidance solely in the

form of guidance. We note that the Working Group adopted guidance for a comparable adjustment

to the reporting of Contemporary Property Value, which simplified the approval process.

We want to thank the members of the Working Group, and you, for the considerable time and

attention devoted to these and other efforts to address risk-based capital reporting in the context of

the COVID-19 pandemic. Please feel free to contact Bruce Oliver at [email protected] or 202-557-

2840 or Mike Monahan at [email protected] or 202-624-2324 for any additional information.

Sincerely,

Mike Flood Paul Graham

cc: Dave Fleming, NAIC Senior Insurance Reporting Analyst


11/19/20


Attachment Four-B Capital Adequacy (E) Task Force

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Draft: 11/11/20

Life Risk-Based Capital (E) Working Group Virtual Meeting

September 25, 2020 The Life Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Sept. 25, 2020. The following Working Group members participated: Philip Barlow, Chair (DC); Steve Ostlund (AL); Perry Kupferman (CA); Eric Unger (CO); Wanchin Chou (CT); Gilbert Moreau (FL); Vincent Tsang (IL); John Robinson (MN); William Leung (MO); Rhonda Ahrens (NE); Seong-min Eom (NJ); Bill Carmello (NY); Andrew Schallhorn (OK); and Mike Boerner (TX). 1. Exposed the Proposed RBC Mortgage Reporting Guidance Mr. Barlow said the request for risk-based capital (RBC) mortgage reporting guidance from the American Council of Life Insurers (ACLI) and the Mortgage Bankers Association (MBA), and specifically net operating income (NOI), was discussed briefly during the Working Group’s Sept. 11 meeting and asked if there is additional information that the industry would like to provide. John Waldeck (Pacific Life Insurance) said Pacific Life Insurance has talked to several of the state insurance regulators about outstanding concerns and would like to continue answering questions to clear up past confusion. Mr Waldeck said the proposal is for an NOI statistic that is 85% of the 2019 NOI or the greater of that and the actual 2020 NOI. He said the expectation is that many of the properties will be reporting the actual 2020 NOI. However, due to COVID-19 repressing the economy, he said he anticipates some properties will use the adjusted statistic of 85% of 2019 NOI. He said the 15% drop in NOI in a given year is historically almost three times as large as what was seen in 2001 and several times larger than that seen during 2008’seconomic recession. NOI is also a very common statistic used as a risk drop measure in the credit risk assessments on a property, and he said it is consistent with other agencies. He said it is also a very large impact that Pacific Life Insurance believes is appropriate as a floor rate for impacts for this year. The unique events of 2020 and the closure of the economy affects the design of RBC and the use of the RBC calculations for determining the risk category for each individual mortgage. Mr. Waldeck said Pacific Life Insurance surveyed a number of companies and found that applying a 15% drop in NOI in a single year would increase the RBC charge on commercial mortgages by 8%, which they believe is a reasonable increase given a one-time impact. He underscored the point that properties that continue to struggle or become non-performing loans are not affected by the proposed approach. Mr. Barlow said it sounds like assuming a 15% drop in NOI in a normal year, and assuming things return to normal, would result in an 8% increase in the RBC requirement and if the proposal is not put in place, that increase would be larger, which would mean the actual NOI would be less than 85%. Mr. Waldeck said that is correct. He said Pacific Life Insurance surveyed several companies that represent about 25% of the total outstanding balance of mortgages for life companies and applied a 15% drop to their 2019 NOI to understand what would happen across the entire portfolio. He said not every property is going to have an increase in RBC but, over the entire portfolio, the increase would be 8%. With respect to the concept of a 15% drop in NOI in a global financial crisis, he said the largest one-year drop in NOI was 3.15%, and in the 2001 recession, the largest drop was 5.91%, with the overall decline of 11.5% over multiple years. While an average NOI drop of 15% is large he said it is due to the financial crisis caused by the pandemic, and Pacific Life Insurance does not believe that represents the normal economic cycle intended in the RBC calculation. Curt Dawson (Metropolitan Life) said the expectation is for most companies to report their 2020 NOI in the RBC categorization. He said the properties that are most affected are the retail and hotel properties that were temporarily shut down. He said without this mitigation, properties that were closed could move significantly within RBC categories even though the fundamental credit profile of the property has not changed. These properties with low NOI were closed due to the pandemic and the geographic area it is in and not because it became uncompetitive. He said there are going to be changes in the commercial real estate space as a result of the pandemic. There are properties that are not going to come back while others are going to perform better than they did before. The performances of both will come through in the RBC categorization. He said the proposed change would only be to the 2020 NOI to be used in future years and would not affect the 2020 RBC calculation. However, he said there is an immediate impact, and it involves the investment decisions that companies are making today and the allocation of capital. Mr. Robinson asked if the actual 2020 NOI would be collected even though it is not used. Mr. Dawson said the intention is to expand the data collection to capture both the actual 2020 NOI and, if it is not used, the modified amount for review. Mr. Chou suggested instead of using a modified amount for the 2020 NOI, adjusting the weighting factors applied to each year used in the calculation as a way to ensure the integrity of the data. Mr. Dawson reiterated that Metropolitan Life believes that integrity

Attachment Four-B Capital Adequacy (E) Task Force

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can be maintained by capturing both in the workpapers that are available for examination. With respect to adjusting the weighting factors, he said this was considered, but the preference was to leave the structure in place as much as possible and changing those factors from one year to the next does not achieve the objective of trying to mitigate the RBC impact on properties that did not have a change in their credit profile. Ms. Eom asked for confirmation that the proposal keeps the 2020 NOI constant for the three years the 2020 value is used and asked if this value could be changed after the 2021 RBC calculation depending upon what happens. Mr. Dawson said this was considered and one of the challenges with doing that is determining the threshold for when a property has come back and that is dependent upon how quickly the economy reopens. Mr. Waldeck reiterated the fact that if a property does not perform going forward it will fall into the non-performing category and will not be using any of the NOI statistics. Mr. Chou asked about the new normal as a result of the pandemic where a hotel, for example, is only coming back at 75%. Mr. Dawson said there will be properties that do not come back and do not generate the NOI that was underwritten or that they had in previous years but this will be reflected in the RBC calculation because they will migrate to the higher categorizations. He said the properties that do come back will maintain their categorization with this proposal. Even though a property comes back and is only at 75% of where it used to be, Mr. Waldeck said it will still be performing, which will be reflected going forward. He added that what the proposal is doing is removing from the calculation the period where it was not allowed to operate. Mr. Tsang asked about the rationale for using 85% and whether using 80% or 90% would be better. Mr. Waldeck said Pacific Life Insurance looked at what other industry groups such as the Federal Housing Finance Agency (FHFA) are using in their risk assessments, and a 15% drop in NOI was used to test whether a property will survive during a very large economic impact. He said they also looked at historical drops in the National Council of Real Estate Investment Fiduciaries (NCREIF) data during past recessions and took a multiple of that to reflect both an extremely large reduction, as well as what is used as a stress test for making new investments. He said 80% would be more than double the decline over a multi-year period that occurred in the 2001 recession, which actually had a larger impact on properties than the 2008 recession. The Working Group agreed to expose the industry’s proposed changes to be incorporated into the 2021 instructions for a public comment period ending Oct. 7. 2. Discussed the Working Agenda Dave Fleming (NAIC) said he discussed with both the American Academy of Actuaries (Academy) and the ACLI potential changes needed due to the changes made to Life and Health Insurance Guaranty Association Model Act (#520). He said the life RBC charges based on guaranty funds are based on the maximum assessment, which has not changed, so it is not apparent that any change is needed. With respect to potential changes needed for credit risk and collateral, he said the Academy is working on a proposal for reinsurance that may be able to combine with this. He said he believes any changes needed can be done via the instructions or by line description changes. Mr. Barlow reminded the Working Group that items were added to the working agenda.These items come from the Investment Risk-Based Capital (E) Working Group to discuss both the bond factors and the real estate factors. He said he believes the ACLI is working on a proposal to bring to the Working Group on the bond factors. Paul Graham (ACLI) said the ACLI will be reaching out to the Working Group in the next week or so for its input on the selection of a third-party consultant to review the factors that the Academy has proposed, as well as to get input from the Working Group on what the state insurance regulators feel would be helpful to them. Mr. Barlow said he will assist in whatever way he can but would like to get this moved forward as it has been debated for quite some time. He said he wants to get this complete so the new bond factors, as well as the real estate factors, can be in place for 2021.. Having no further business, the Life Risk-Based Capital (E) Working Group adjourned. W:\National Meetings\2020\Fall\TF\Cap Adequacy\LifeRBC\9_25_20 Call

Attachment Four-C Capital Adequacy (E) Task Force

11/19/20


Draft: 11/9/20

Life Risk-Based Capital (E) Working Group Virtual Meeting

September 11, 2020 The Life Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Sept. 11, 2020. The following Working Group members participated: Philip Barlow, Chair (DC); Steve Ostlund (AL); Deborah Batista (CO); Wanchin Chou (CT); Vincent Tsang (IL); Fred Andersen (MN); Rhonda Ahrens (NE); Seong-min Eom (NJ); Bill Carmello (NY); Andrew Schallhorn (OK); Mike Boerner (TX); and Tomasz Serbinowski (UT). 1. Heard an Update from the American Academy of Actuaries’ C2 Mortality Risk Work Group Chris Trost (American Academy of Actuaries—Academy), chair of the Academy’s C2 Mortality Work Group, said the Work Group is looking for additional feedback from the presentation in March on a proposed additional component for unknown or emerging mortality risk and how it should be incorporated into the proposed modeling along with the possibility of developing separate factors by product. After getting this feedback and incorporating into the Work Group’s work, he said the Work Group would like to present a preliminary set of factors. Ryan Fleming (Academy) provided the update (Attachment Four-C1). He discussed the overall approach to C-2 mortality risk, which has additional details in the appendix slides. Mr. Tsang asked if the catastrophe risk component would be focused on a section of the population or across all populations. Mr. Fleming said that the catastrophe risk event the Work Group is using is applied as a mortality add-on for all ages, which is the type of event that would have the most material impact for most life insurance companies. He discussed the current risk-based capital (RBC) factors, which were developed in the early 1990s and vary by individual, group life and net amount at risk. These factors decrease as net amount at risk increases, which relates to the volatility and level risk, with smaller companies being more subject to these. Mr. Fleming then discussed in more detail the new catastrophe component as presented in slides five through eight. With respect to the 5% assumption for increased mortality in the second bullet point on slide seven, Mr. Ostlund asked why the modeling would use that assumption based on one event when two events are presented and neither of the events equated to that percentage. Mr. Fleming said both events were used in the calibration, but these were events affecting the U.S. general population as opposed to the insured population. Mr. Trost said the way that the events affected mortality is different at different age groups. He said the 5% represents the worst age group, and the assumption used is that this is the same across all age groups. He said the actual impacts to population mortality to date indicate that it is more likely half that amount. Mr. Fleming said the selection of 5% is based on what represents a meaningful impact to life insurers and incorporating what would be a worst-case event. Mr. Ostlund said he is still concerned with the mortality for all ages being at 2% and the use of 5% for the modeling. In building this unknown event, Mr. Trost said how the event will emerge is also an unknown and that includes whether there will be a significant difference between the general population and the insured population. The proposal incorporates an additional element of conservatism. Mr. Ostlund said his concern is more with the frequency of events, which might be increasing, and whether they can be underwritten. Mr. Trost said those are fair points and ones the Work Group can consider as it continues its work. Mr. Boerner asked about the time period, or the length of events, and the factor applied. Mr. Fleming said the assumption is that it lasts for the projection period but, generally, within 10 years. He discussed the proposed differentiation for individual life products. Mr. Trost said the data is not readily available and the categorization by companies of different products may be an issue in how to approach this aspect. Mr. Barlow said it sounds like there could be a high degree of subjectivity involved. Mr. Trost agreed and said this is an issue that the Work Group may be able to provide alternative approaches to. Mr. Tsang said it would be good to have this type of differentiation, but it may be premature at this point and suggested deferring this aspect. Mr. Barlow concurred and suggested it would be good if differentiations in the proposed approach could be focused on those that can be pulled directly from the annual statement if that is possible. Mr. Carmello asked about the time horizon and how it fit in with the other components of RBC. Mr. Trost said he believes RBC tends to be calibrated between five and 10 years, but the point of the projection is to ensure that the full risk cycle is covered. Mr. Carmello noted that the work on bonds is looking at 10 years and suggested that may be a good number. Mr. Fleming discussed the next steps and, with the feedback from the Working Group, the goal of finalizing the proposed approach on preliminary factors for the next presentation to the Working Group. 2. Continued Discussion of Industry’s Request for RBC Mortgage Reporting Guidance

Attachment Four-C Capital Adequacy (E) Task Force

11/19/20


Mr. Barlow said this was briefly discussed during the Working Group’s Aug. 21 meeting and can be continued at the beginning of its next meeting. Curt Dawson (Metropolitan Life) said he is speaking on behalf of the American Council of Life Insurers (ACLI) and the Mortgage Bankers Associations (MBA). He provided a brief summary of the proposal (Attachment Four-C2) and said for net operating income (NOI) coming from properties for 2020, the proposal would use the 2020 NOI in the RBC classification formula unless it is lower than 85% of the 2019 NOI, in which case, the 2019 NOI would be used. He said the reason for this is that the classification method treats drops in NOI resulting from temporary closures relating to the COVID-19 pandemic the same way it treats drops in NOI related to changes in the fundamental property performance even though the impacts on credit risk could be different. He said the state insurance regulator feedback was that even though the drop may be due to a temporary shutdown, it could have an impact on future credit risk. However, he noted that loans that are near the limits of a classification may move between categories even with the proposal in place. He said the proposal is not designed to mask properties that have suffered a longer-term reduction in their competitiveness or their ability to generate revenue, and if a property will truly be performing at a lower level due to impacts from the pandemic, this will be reflected in the calculation over time. He also noted that the proposal does nothing to change the current treatment of properties that become delinquent or go into foreclosure. He said they have been meeting with state insurance regulators individually to discuss the proposal and solicit feedback on areas of concern. Mr. Barlow said the Working Group will continue this discussion during its next meeting. Having no further business, the Life Risk-Based Capital (E) Working Group adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\LifeRBC\9_11_20 Call

© 2020 American Academy of Actuaries. All rights reserved.May not be reproduced without express permission.

Academy C-2 Mortality Work Group UpdateRyan Fleming, MAAA, FSAMember C-2 Mortality Work GroupAmerican Academy of Actuaries

Life Risk-Based Capital (E) Working Group (LRBCWG)—September 11, 2020© 2020 American Academy of Actuaries. All rights reserved.

May not be reproduced without express permission.

2

Agenda

Review C-2 overall approach and current risk-based capital (RBC)factorsSeeking regulator feedback:

Adding a new catastrophe component for a sustained mortality increase from an unknown riskDifferentiating factors for individual life products

Next stepsAppendix:

Methodology, assumption, and risk distribution comparisons


3

C-2 Mortality Overall ApproachC-2 requirement covers mortality risk up to the 95th percentile covering risk in excess of the riskcovered in statutory reserves

C-2 requirement includes mortality risks related to:Volatility Risk—natural statistical deviations in experienced mortalityLevel Risk—error in base mortality assumptionTrend Risk—adverse mortality trendCatastrophe Risk

Large temporary mortality increase from a severe event such as a pandemic or terrorismNew: sustained mortality increase from an unknown risk

Evaluate mortality risks using Monte Carlo simulation of projected statutory losses

Discount pre-tax cash flows (current assumption is 5%)

Express capital requirement using a factor-based approach(e.g., factor applied to Net Amount at Risk)


4

C-2 Life Mortality Risk-Based Capital

Current Pre-Tax RBC Factors

Per $1000 of NAR Individual Group

First $500M 2.23 1.75

Next $4.5B 1.46 1.16

Next $20B 1.17 0.87

>$25B 0.87 0.78


Attachment Four-C1 Capital Adequacy (E) Task Force

11/19/20


5

New Catastrophe Component for an Unknown Risk

As shared at the LRBCWG meeting during the December 2019 NAIC NationalMeeting, preliminary modeling indicates an estimated decline in factors versuscurrentFeedback from that meeting was that the C-2 Mortality Work Group shouldconsider an additional catastrophe component for an unknown riskC-2 Mortality Work Group developed a new catastrophe component informed byhistorical health events impacting the U.S. population

Component is intended to cover unknown risks that could materialize in the insured populationConceptually, the component assumes a low annual probability of a sustained severe mortality increase


6

New Catastrophe Component for an Unknown Risk—Historical Events

HIV and opioid abuse are twohistorical events impacting theU.S. population that can informthe development of acatastrophic unknown riskeventThe impact of these events toinsured population mortalityhas been lower than generalpopulation mortality


7

New Catastrophe Component for an Unknown Risk

Probability: assumed to be a 2.5% annual likelihood of the event occurringProvides for the likelihood of 1 sustained event over a 40-year periodWhile the impact of HIV and opioids abuse have occurred in the US population in the last 40 years, neither of these translated to an increase in insured population mortality at the magnitude assumed.

Magnitude: if the event occurs, assumed to be a 5% immediate and sustained mortality increaseHIV (1995) and opioids (2017) both increased U.S. population mortality by 2% across all ages.However, life insurers would most be affected by an increase in mortality at younger ages. The ages 35-44 data became the basis, representing the most severe impact to insurers.

Description (source: CDC mortality statistics for US) % Incr. to US Population Mortality Death rate per 100K

HIV mortality in peak year—1995, all ages +1.9% 16.4

HIV mortality in peak year—1995, ages 35-44 +5.0% 44.4

Estimated opioids mortality in highest year—2017, all ages +1.8% 15.8

Drug-induced mortality in highest year —2017, ages 35-44 +4.7% 40.6


8

New Catastrophe Component for an Unknown Risk—Historical and Modeled

Modeled catastrophe providesfor deaths in excess of similarhistorical events due toassuming the impact at theworst age band



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9

Individual Life Product DifferentiationThe C-2 Mortality Work Group is considering differentiating factors betweenproducts with near-term inforce pricing flexibility and those with minimalinforce pricing flexibilityThe impact on surplus is higher for products that have less inforce pricingflexibility

Products with less inforce pricing flexibility (e.g., longer level term and ULSG products)Modeled with a 10-year projection period

Products with more inforce pricing flexibility (e.g., permanent whole life, current assumption universal life, and annually renewable term)

Modeled with a 5-year projection period

Setting separate factors would require product specific data (e.g., faceamount and reserves to derive net amount at risk) not currentlyreported at this level of detail in the annual statements


10

Next Steps for the C-2 Mortality Work GroupReceive regulator feedback

Adding the unknown risk catastrophe componentDifferentiating factors by individual life products

Finalize model and assumptionsReview group life premium stabilization reserve creditReview mortality capital requirements in other solvency regimesReview aggregate model output, complete documentation, and peer reviewRecommend updated factors to Life RBC


11

Appendix: Method and Assumption Comparison

Item Original Work Current Review - Preliminary

General Method Monte Carlo Model – (Present Value (PV) of Death Benefits Monte Carlo Model – PV of Statutory Losses• Loss defined as death benefits minus reserves released

Capital Quantification PV[95th] – 105%*PV[Expected]105% represents assumed margin available to offset losses in excessof expected

GPVAD[95th] • Greatest present value of accumulated deficiencies (GPVAD)• 5% margin/load assumed in reserve mortality

Projection Period 5 years (3 years for Group)Assumed exposure past 5 years could be offset through managementactions (raise premium, etc.)

5-10 years for Individual Life3 years for Group Life

Discount rate 6% after tax 5% pre-tax (3.95% after tax)

Base Mortality 88% of 1975-1980 Male Basic Table15Y Select & Ultimate StructureMale/Female not explicitly modelledUnderwriting adjustments applied based on generation

2017 Unloaded Commissioners’ Standard Ordinary Table (CSO) for Individual Life

25Y Select & Ultimate structureGender distinct – Male/Female5 underwriting classes (3 non-smoker/2 smoker)

SOA 2016 Group Life Experience Study for Group LifeGender distinct – Male/Female

Base Improvement Unknown source1.00%

2017 Improvement Scale for AG-38Varies by gender and age


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Appendix: Risk Distribution Approach Comparison

Risk Original Work Current Review - Preliminary

Volatility Binomial(Policies, q) Binomial(Policies, q)

Level Implicit from Discrete Scenarios:7 Competitive Pressures scenarios – risk ofoveroptimistic pricing assumptions15 AIDS scenarios – early 90’s estimates of the impact ofAIDS on insured mortality (could fit in level, trend, orcatastrophe)

LR~N(0, Lev); = +Two independent components:• Credibility/statistical sampling volatility ( Cred)• True mortality volatility ( MVol)

Continuous normal distribution

Trend Discrete Distribution7 scenarios adjust mortality improvement assumption

[MI1, MI2, …, MIC6] ~ N( , )

6 gender/age group improvement variables (MIn)

Correlated normally distributed random variables

Catastrophe Discrete DistributionPandemic

3 Discrete DistributionsPandemic – calibrated from multiple sourcesTerrorism – 5% probability of additional 0.05 / 1KUnknown Risk – calibrated from historic US population events



11/19/20


Additional Questions, contact:

Questions?

Khloe Greenwood, Life Policy [email protected]



11/19/20

August 18, 2020

Philip A. Barlow, FSA, MAAA Chair, Life Risk-Based Capital (E) Working Group National Association of Insurance Commissioners 1100 Walnut Street, Suite 1500 Kansas City, MO 64106-2197

Re: Industry Recommendation for RBC Reporting of 2020 NOI

Dear Mr. Barlow:

The Mortgage Bankers Associations (MBA)1 and the American Council of Life Insurers (ACLI),2on behalf of our respective member insurers, respectfully submit to the Life Risk-Based Capital Working Group of the National Association of Insurance Commissioners (NAIC) the attached materials for upcoming August 21, 2020 call, in support of the Working Group’s consideration of industry’s proposal for RBC reporting of 2020 Net Operating Income (NOI).

We want to thank you and other regulators, and NAIC staff, for your considerable time and attention to this request. Please feel free to contact Bruce Oliver at [email protected] or 202-557-2840 or Mike Monahan at [email protected] or 202-624-2324 for any additionalinformation.

Sincerely,

Mike Flood Paul Graham

Attachment: Industry Recommendation for RBC Reporting of 2020 NOI

cc: Dave Fleming, NAIC Senior Insurance Reporting Analyst

1 The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Its membership of over 2,300 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, credit unions, thrifts, REITs, Wall Street conduits, 70 life insurance companies engaged in real estate finance, and others in the mortgage lending field. For additional information, visit MBA’s website: www.mba.org

2 The American Council of Life Insurers (ACLI) is the leading trade association driving public policy and advocacy on behalf of the life insurance industry. 90 million American families rely on the life insurance industry for financial protection and retirement security. ACLI’s member companies are dedicated to protecting consumers’ financial wellbeing through life insurance, annuities, retirement plans, long-term care insurance, disability income insurance, reinsurance, and dental, vision and other supplemental benefits. ACLI’s 280 member companies represent 94 percent of industry assets in the United States. Learn more at www.acli.com


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INDUSTRY RBC RECOMMENDATION FOR 2020 NOI

I. INTRODUCTION

Owners of certain properties that secure mortgage loans are experiencing decreases in 2020 income, including rent income, from mandatory shutdowns and other governmental actions taken to flatten the pandemic curve, and other impacts of the COVID-19 pandemic. This is especially the case for properties in the retail and hospitality sectors. As a result, their 2020 Net Operating Income (NOI) may be substantially lower than their 2019 NOI.

For at least some of those properties, however, that drop in income and NOI willprove to be temporary. As a result, loans secured by those properties will be performing loans in 2021, despite the 2020 drop in NOI.

The current treatment of 2020 NOI in life company RBC calculations for commercial mortgage loans (CMLs) does not contemplate such recovery and so it would generate an increase in RBC for loans that have recovered from 2020 that is not commensurate with their credit risk. Industry developed a proposed adjustment to the RBC reporting of 2020 NOI to better align RBC requirements for this set of loans with their credit risk in 2021, 2022, and 2023.

Notably, the proposal is intended to provide relief only to loans that were performing loans prior to the pandemic and that both (1) suffer a drop in NOI in 2020, and (2) are performing loans in 2021. The proposal is intended not to mask or shelter the increased riskiness of loans that suffer a severe drop in 2020 NOI that are not performing loans in 2021 or later years (e.g., loans that have become delinquent).

The proposal is designed to provide meaningful benefit only loans that suffer from reduced NOI for 2020 and are performing loans in 2021, 2022, and 2023.

II. DECISION ITEM: INDUSTRY RECOMMENDATION

To achieve the objectives described above, industry proposes the followingadjustment to the RBC reporting of 2020 NOI:

Where RBC Reporting Instructions specify 2020 NOI as an input into thecalculation of Rolling Average NOI for 2021, 2022, and 2023 RBCreporting, use the greater of—

o 2020 NOI; or

o 85% of 2019 NOI.

All loans with reduced 2020 NOI

Subset of those loans that are

performing loans in 2021


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INDUSTRY RBC RECOMMENDATION FOR 2020 NOIPage 2

III. BACKGROUND: NOI and RBC reporting

NOI is the net of all operating income from a property, less all operating expenses. Operating expenses excludes principal and interest payments on loans.

For performing loans, the CM category is based on a matrix of Debt Service Coverage (DSC) and Loan to Value (LTV). NOI affects RBC reporting because NOI is an element of DSC.

DSC =Net Operating Income (NOI)

RBC Debt Service

In 2013, regulators determined to dampen the direct impact of changes in NOI on RBC reporting by adopting a weighted rolling-average approach to applying NOI values, as follows:

50% of preceding year NOI30% of next preceding year NOI; and20% of next preceding year NOI.

IV. SUPPORT

A. The proposal would not shelter bad loans.

Regulators have raised concerns about whether the proposal would shelter or mask bad loans. The hypothetical scenarios below illustrate that the proposal would provide limited relief to loans that have recovered from 2020 – and that it also would not shelter loans that have not recovered from 2020.1 That is, loans that are delinquent would receive no benefit from the proposed adjustment to 2020 NOI.

Scenario 1: $10 million CM1 loan with 25% reduction in 2020 NOI

2021 loan status 2021 RBC without adjustment

2021 RBC with adjustment

Performing loan 1.75% 0.90%

Delinquent – not in foreclosure 18.00% 18.00%

Delinquent – in foreclosure 23.00% 23.00%

Assumes 60% LTV loan with 1.70x starting debt service ratio falling to 1.44x with adjustment and 1.27x without adjustment.

Scenario 2: $10 million CM2 loan with 50% reduction in 2020 NOI

2021 loan status 2021 RBC without adjustment

2021 RBC with adjustment

Performing loan 3.00% 1.75%

Delinquent – not in foreclosure 18.00% 18.00%

Delinquent – in foreclosure 23.00% 23.00%

Assumes 60% LTV loan with 1.25x starting debt service ratio falling to 1.06x with adjustment and 0.62x without adjustment.

1 These are simplified hypothetical scenarios. Other factors, e.g., 2018 and 2019 NOI amounts,would affect results.


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INDUSTRY RBC RECOMMENDATION FOR 2020 NOIPage 3

B. The proposal would increase aggregate RBC requirements.

Regulators have expressed a concern that the proposal might ignore the impacts of reduced 2020 NOI. While the scenarios above illustrate how the proposed adjustment can provide a benefit to individual loans, not all loans will necessarily benefit in this way. That is, while in many cases, the adjustment would result in no increase in RBC, in other cases, loans would be subject to a large increase in RBC despite the adjustment. The difference in impacts across loans would be a function of how close any loan is to the threshold to the next CM category (e.g., a CM1 loan (0.9%) that is close to the threshold for CM2 may become a CM2 loan (1.75%) despite the NOI adjustment).

To determine the aggregate RBC impact of the impacts across individual loans,industry asked companies to apply a hypothetical 15 percent reduction in NOI across their entire respective portfolio. One way to think about this exercise is to view it as a rough estimate of the RBC impact of a 15% reduction in NOI to an “average” life company commercial mortgage.

Specifically, companies were asked to apply a hypothetical 15 percent NOI shock across their entire mortgage portfolios. Companies were asked to provide their best estimates of actual 2020 RBC levels, and of hypothetical 2020 RBC levels if all property 2020 NOIs declined 15% from their 2019 levels.

Based on reporting representing nearly 25 percent of CML outstanding, for the average loan for which NOI is reduced by 15 percent, the average RBC capital charge would increase an average of about 8 percent. This indicates that the proposal to limit the 2020 NOI shock to 15 percent NOI for loans would still generally result in an aggregate increase in CML RBC in the range of about 8 percent, for loans subject to the proposed 85 percent floor, and so would effectively impose an additional RBC charge for the 2020 reduction in NOI.

C. Quarterly NOI data is not readily available for RBC purposes.

In response to regulator questions in the Working Group call of July 30 about the feasibility of developing a proposed treatment of 2020 NOI based on quarterly NOI data, industry conducted a survey to determine the ready availability of such data.

The survey asked for the number of loans each insurer held in portfolio and approximately how many of those loans require the borrower to provide, and the company routinely collects, quarterly operating statements.

Responses by 27 companies, with a total of approximately 23,000 loans, showed that quarterly operational information is both required and routinely collected on only about 7 percent of loans outstanding. Accordingly, any approach that relied on the use of quarterly NOI would not be operationally feasible for the industry.

IV. CONCLUSION

Industry believes the proposed adjustment to 2020 NOI is necessary to strike the right balance of preventing RBC from overstating the credit risk of a loan that has recovered from a reduced NOI in 2020, and recognizing the increased credit risk of the loans that have not recovered from a reduced NOI in 2020.

If large numbers of properties recover strongly and remain financially strong in 2021, the adjustment may apply to a relatively large pool of loans. Alternatively, ifsmaller numbers of those properties recover, the adjustment would apply to asmaller pool of loans.


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Attachment Four-D Capital Adequacy (E) Task Force

11/19/20


Draft: 11/10/20

Life Risk-Based Capital (E) Working Group Virtual Meeting August 21, 2020

The Life Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Aug. 21, 2020. The following Working Group members participated: Philip Barlow, Chair (DC); Steve Ostlund (AL); Perry Kupferman (CA); Deborah Batista (CO); Wanchin Chou (CT); Sean Collins (FL); Vincent Tsang (IL); John Robinson (MN); William Leung (MO); Rhonda Ahrens (NE); Seong-min Eom (NJ); Bill Carmello (NY); Andrew Schallhorn (OK); Mike Boerner (TX); and Tomasz Serbinowski (UT). 1. Heard an Update from the Academy C-3 Work Group Mr. Barlow said the American Academy of Actuaries (Academy) has been working on C-3 issues while the Working Group has been addressing other items, and the Academy is looking for feedback from the Working Group on how best to proceed. Link Richardson (Academy) provided a high-level review of the presentation, which he said is similar to one that was briefly given on the March 23 call, but more has been added with respect to specific steps to be taken in the course of field testing. He reminded the Working Group that the specific charge to the Academy was to update C-3 Phase I or C-3 Phase II to include indexed annuities. Originally, it was to be C-3 Phase I, but he said the Academy is suggesting that C-3 Phase II may make more sense, as it has equity scenarios defined, hedging guidance, and other items. Mr. Richardson said since the 2015 field test, C-3 Phase II has been updated, and the Academy is suggesting that the testing be done in the updated C-3 Phase II methodology. He presented the Academy’s update (Attachment Four-D1). The 2015 field test used the September 2014 models and scenarios, and it was included in the instructions for the March 2015 risk-based capital (RBC) filing. Mr. Richardson said the Academy suggested, if that route is chosen, using the June supplemental update due to year-end time constraints. He said the analysis that was done on the results was not extensive, and the Academy is asking for a clearer analysis and basis for drawing conclusions. He highlighted the changes that have occurred since 2015 and the key differences that still exist between C-3 Phase I and C-3 Phase II. Mr. Tsang asked about the first bullet point on slide six on the key differences and the prescribed use of default costs in VM-20, Requirements for Principle-Based Reserves for Life Products, included on the previous page. Instead of C-1 charges, Mr. Richardson said the first bullet under key differences should refer to the assumed default costs instead. He discussed the scenario considerations; the Academy’s high-level recommendations; and the Academy’s suggested steps for a field test, as outlined on slide nine where one major framework change or assumption at a time could be considered to see what the effects are. He said the Academy has created a field test vision subgroup of VM-22, Statutory Maximum Valuation Interest Rates for Income Annuities, and it suggested coordination with that subgroup. Mr. Robinson asked if there would need to be another round of field testing done after VM-22 is done and, if so, when that would be scheduled for. Mr. Richardson said this is something that will need to be considered, as it determines what business VM-22 applies to. He said one of the things the Academy’s C3 Life and Annuities Work Group envisions doing next, if this high-level recommendation is acceptable, is to proceed with developing more specifics but, along with that, they suggest specific results analysis consideration, as outlined on slide ten. Mr. Barlow asked about the VM-22 field testing timeline. Mr. Tsang said the VM-22 field test is targeted for the middle of 2021, which would likely involve iterations, so it would likely be expected to be done sometime in 2022 with an implementation date of Jan. 1, 2023. Although, he suggested that a 2024 implementation may be more realistic. Mr. Barlow asked if the consensus is that the only way to get the necessary data is through the use of a field test. Mr. Richardson said it would be helpful to see the effects of the major changes in order to make those apparent and gather comments. He also noted that the RBC requirement of including an impact study for significant changes and a field test would seem to be the best way to gather meaningful information that would come from actual models and products. Mr. Barlow suggested that perhaps a more specific proposal from the Academy, depending on the work burden and its coordination, would be a goal of the Working Group. Mr. Richardson said the C3 Life and Annuities Work Group would continue its coordination, and it will take its 2014 report and update it to incorporate the specifics in this presentation.

Attachment Four-D Capital Adequacy (E) Task Force

11/19/20


2. Adopted a Revised 2020 Life RBC Newsletter Mr. Barlow said the newsletter (Attachment Four-D2) was revised due to changes made to the 2019 C-3 instructions and C-3 guidance that were omitted. Mr. Boerner made a motion, seconded by Mr. Kupferman, to adopt the revised newsletter. The motion passed unanimously. 3. Discussed Other Matters Mr. Barlow said another call will be scheduled to continue discussion of the industry’s request for mortgage reporting guidance. Having no further business, the Life Risk-Based Capital (E) Working Group adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\LifeRBC\8_21_20 Call

© 2020 American Academy of Actuaries. All rights reserved. May not be reproduced without express permission.

C-3 Work Group Update

Life Risk-Based Capital (E) Working Group – August 21, 2020

Link Richardson, MAAA, FSA Chairperson, C-3 Work Group American Academy of Actuaries


2

Discussion Topic

The Academy C-3 Life and Annuities Work Group (C-3 WG) has a requestfrom the NAIC Life Risk-Based Capital (E) Working Group (LRBC) to“Update the current C-3 Phase I or C-3 Phase II methodology to includeIndexed Annuities.”

The C-3 WG has developed high-level conceptual recommendations withrespect to this request and would like to discuss them with the Life Risk-Based Capital Working Group (LRBC) before proceeding to develop thespecifics of the recommendations.


3

Discussion Outline

2015 C-3 Phase 1 (C-3 P1) Field Test Recap

Highlights of C-3 Phase 2 (C-3 P2) changes since 2015

Key remaining differences—C-3 P1 versus C-3 P2

Scenario considerations

High-level recommendations and steps

Analysis considerations

Key questions for LRBC


4

C-3 Phase 1 Field Test Recap

2015 Field Test used 9/30/2014 models and scenarios, and essentially tested Phase 1 in thethen-current C-3 Phase 2 framework

Participation was made mandatory for large companies via Risk-Based Capital (RBC)Instructions, with results due in the February RBC filing

Tested 200 “VM-20” interest rate scenarios

Key difference was Mean Reversion Point (MRP) of 4.00%, down from 6.55%

Resulting C-3 requirements were significantly higher, likely due to reinvestment effects forlong-duration products, from lower MRP

Also tested conditional tail expectation (CTE) 90 metric, versus 92nd through 98th percentile(with heaviest weight at 95th)

Change in metric made little difference to results

Attachment Four-D1 Capital Adequacy (E) Task Force

11/19/20



5

C-3 Phase 2—Highlights of Changes since 2015 Field Test

Interest rate scenarios now prescribed

CTE 90 metric changed to 25% of (CTE 98 minus CTE 70), from same distribution, except for tax adjustment

C-3 Phase 2 was silent on default costs before the Field Test. The use of expected defaults and no AVR for Phase 2

was made explicit at the time of the Field Test. Default costs are now prescribed using VM-20 assumptions at CTE 70

levels

RBC Standard Scenario eliminated, but Reserve Additional Standard Projection Amount (ASPA) doesn’t reduce RBC

Working Reserve (WR) set to zero, instead of Cash Surrender Value (CSV)

Lower Error Factors allowed for implicit method of reflecting hedging

Smoothing now applies to RBC instead of (CTE 90 – CSV)

SSAP 108 allows hedge accounting for derivatives hedging VA guarantees


6

C-3 Phase 1 Versus Updated Phase 2—Key Differences

C-1 charges at expected levels vs. CTE 70

Economic Scenario Generator (ESG) Mean Reversion Point (MRP) 6.55%vs. formulaic currently 3.50%

Capital requirement based on approximately CTE 90 vs. 25% of(CTE 98 minus CTE 70)

Surplus in projections based on reserves vs. WR of zero

Minimum RBC is 50% of factor-based amount vs. implicit floor. As apractical matter, C3P2 = 25% of (CTE 98 minus CTE 70) will always bepositive, because the values come from the same distribution.


7

Scenario Considerations

The 2015 Field Test specified 200 identical interest rate scenarios for all companies. Most companies run 1,000 scenarios for C-3 P2. A two-dimensional stratification (interest rates and equity returns) was developed for the 2015 Field Test, but not used because Indexed Annuities were excluded, which eliminated the need for equity scenarios.

Use of the two-dimensional 200-scenario framework is recommended, and would allow for comparisons to both the current 50-scenario C-3 P1 framework and the typical 1,000 scenarios for C-3 P2.


8

High-Level Recommendations Repeat the 2015 C-3 Phase 1 Field Test, in 2021 for 9/30/2020 models, but using the updated C-3 Phase 2 framework and including Indexed Annuities along with all products currently inscope for C-3 P1.

Continue mandatory participation, but change the timing to occur after year-end work is largely complete. Results could be due with the June RBC filing instead of February.

Model hedging as it is modeled for cash flow testing (CFT), until VM 22 hedging guidance is available.

Develop specific recommendation for treatment of reserves not equal to a CTE 70 basis. The Total Asset Requirement (TAR) framework is suited to handling differing levels of reserve conservatism but is complicated by the change to 25% of (CTE 98 minus CTE 70).

Consider a more comprehensive PBR and C-3 Field Test including all products, once a new ESG is available.


11/19/20



9

Field Test Steps Gather C-3 Phase 1 model results from 9/30/2020, under the current framework, as a basis forcomparison

Run all 200 scenarios instead of just 50. Compute the current metric and CTE 98, 90 and 70 metrics foreach step

Run 200 scenarios from the current NAIC ESG, with two-dimensional stratification (interest rates andequity returns)

Use CTE 70 default costs from VM-20

Use VM-21 discounting or direct iteration

Set Working Reserves to zero

Run Indexed Annuities incorporating steps above and using CFT approaches for other remaining elementssuch as hedging

Some companies may be able to run 1,000 scenarios for the final step, as well as the 200

Analyze results and develop a final recommendation© 2020 American Academy of Actuaries. All rights reserved.

May not be reproduced without express permission.

10

Results Analysis Considerations Regulators and the Academy WG should develop a useful set of filing requirements and questions tofacilitate and elicit participants’ comments on their own results. For example:

Results by model or product group would be helpful to analysis efforts.

Present values of ending surplus can be a useful indicator of the potential margin beforedeficiencies would develop, for scenarios where there is no deficiency.

Results with projected reserves, and with working reserves equal zero, can help with analysis of the significance of this choice.

Confidentiality was provided via the RBC filing approach in 2015, and would likely be suitable again,if NAIC staff and regulators can perform work on summarization and aggregation of results.

If the High-Level Recommendations and Analysis Considerations are acceptable, the Academy C-3WG can begin drafting of proposed Instructions.


11

Key Remaining Questions

Should Field Test be mandatory?

Who will collect and analyze submissions, and how will confidentiality be addressed?

How to resolve differences among C-3 Phase 1 and Phase 2 default costs and C-1 Bond proposal Risk Premia?

How to resolve differences between VM-21 and VM-22?

Are formulaic reserves appropriate for use in the C3 calculation: 25% of (CTE 98 minus Reserve)?


12

Questions?

Link Richardson, MAAA, FSAChairperson, C-3 Work GroupAmerican Academy of Actuaries

Contact: American Academy of Actuaries – Devin Boerm,[email protected]


11/19/20


NAIC Life Risk Based Capital Newsle er August 2020 Volume 26

What RBC Pages Should Be Submitted?

For year-end 2020 life and fraternal risk-based capital (RBC), submit hard copies of pages LR001 through LR049 to any state that requests a hard copy in addition to the electronic filing. Starting with year-end 2007 RBC, a hardcopy was not required to be submitted to the NAIC. However, a portable document format (PDF) file repre-senting the hard copy filing is part of the electronic filing.

If any actuarial certifications are required per the RBC instructions, those should be included as part of the hard copy filing. Starting with year-end 2008 RBC, the actuar-ial certifications were also part of the electronic RBC filing as PDF files, similar to the financial annual state-ment actuarial opinion.

Other pages, such as the mortgage and real estate work-sheets, do not need to be submitted. However, they still need to be retained by the company as documentation.

Bond Designation Structure The Capital Adequacy (E) Task Force adopted proposal 2019-16-CA to incorporate the 20 designation catego-ries for bonds into the life and fraternal RBC formula to be used in conducting an impact analysis study for year-end 2020 reporting during its April 30, 2020 conference call. The 20 bond designation categories were incorpo-rated into the Bonds page (LR002), Asset Concentration page (LR010) and Off Balance Sheet Collateral page (LR017),.

Longevity Risk As a result of the adoption of proposal 2019-13-L by the Capital Adequacy (E) Task Force on its April 30, 2020 conference call, changes developed by the Longevity Risk (E/A) Subgroup and recommended to the Life Risk-Based Capital (E) Working Group to implement the structure for a longevity risk charge were incorporated into the life RBC formula. On it’s June 30, 2020 conference call, the Task Force adopted the instructions with proposal 2020-06-L, which includes factors of zero for 2020. The structure adopted will provide information to be used in the ultimate determination of factors for 2021 reporting.

Capitation Tables The Capital Adequacy (E) Task Force adopted proposal 2018-17-CA to capture the Capitation Tables electronically through the file submission of the life RBC formula during its June 28, 2019 conference call.

RBC Preamble As a result of the adoption of proposal 2019-07-CA by the Capital Adequacy (E) Task Force at the 2019 Fall Nation-al Meeting, the Risk-Based Capital Preamble was added to the RBC instructions to provide a clear understanding of the purpose of RBC and goals of RBC as the Capital Adequacy (E) Task Force and RBC Working Groups re-view referrals and proposals.

Overview and Table of Contents As a result of the adoption of proposal 2020-05-CA by the Capital Adequacy (E) Task Force during its June 30, 2020 conference call, the page iv instructions were modified to insert the word “Overview” in the page heading and the Table of Contents were modified to include only the page heading and delete references to the individual sections of the Overview.

C-3 Instructions and C-3 GuidanceAs a result of the adoption of proposal 2020-03-L by the Capital Adequacy (E) Task Force during its 2020 Summer National Meeting, C-3 instructions specific to the yearend 2019 RBC filing were deleted and the associated guidance adopted.

In This Issue: What RBC Pages to Submit .......................................... 1 Bond Designation Structure .......................................... 1 Longevity Risk .............................................................. 1 Capitation Tables .......................................................... 1 RBC Preamble ............................................................... 1 Overview and Table of Contents ................................... 1 RBC Forecasting & Instructions ................................... 2 Contact Information ...................................................... 2


11/19/20


Life Risk-Based Capital Newsletter Page 2

© 2020 National Association of Insurance Commissioners

Life Risk-Based Capital Newsletter Volume 26. Published annually or whenever needed by the NAIC for insurance regulators, professionals and consumers.

Direct correspondence to: Dave Fleming, RBC Newslet-ters, NAIC, 1100 Walnut Street, Suite 1500, Kansas City, MO 64106-2197. Phone: (816) 783-8121. Email: [email protected]. Address corrections requested. Please mail the old address label with the correction to: NAIC Publications Department, 1100 Walnut Street, Suite 1500, Kansas City, MO 64106-2197. Phone: (816) 783-8300. Email: [email protected].

RBC Forecasting and Instructions The Life and Fraternal RBC forecasting spreadsheet calculates RBC using the same formula presented in the 2020 NAIC Life and Fraternal Risk-Based Capital Forecasting & Instructions for Companies, and is available to download from NAIC Account Manager. The 2020 Life and Fraternal Risk-Based Capital Forecasting & Instructions for Com-panies publication is available for purchase in hardcopy or electronic format through the NAIC Publications Depart-ment. This publication is available on or about Nov. 1 each year. The User Guide is no longer included in the Fore-casting & Instructions. WARNING: The RBC Forecasting Spreadsheet CANNOT be used to meet the year-end RBC electronic filing re-quirement. RBC filing software from an annual statement software vendor should be used to create the electronic fil-ing. If the forecasting worksheet is sent instead of an electronic filing, it will not be accepted and the RBC will not have been filed.


11/19/20


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Attachment Four-E Capital Adequacy (E) Task Force

11/19/20

Attachment Five Capital Adequacy (E) Task Force

11/19/20


Draft: 11/12/20

Property and Casualty Risk-Based Capital (E) Working Group and Catastrophe Risk (E) Subgroup E-Vote

November 11, 2020 The Property and Casualty Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force conducted an e-vote with the Catastrophe Risk (E) Subgroup of the Property and Casualty Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force that concluded Nov. 11, 2020. The following Working Group members participated: Tom Botsko, Chair (OH); Mitchell Bronson (CO); Wanchin Chou (CT); Judy Mottar (IL); Anna Krylova (NM); Sak-man Luk (NY); Will Davis (SC); Miriam Fisk (TX); and Randy Milquet (WI). The following Subgroup members participated: Wanchin Chou, Chair (CT); Mitchell Bronson (CO); Judy Mottar (IL); Gordon Hay (NE); Anna Krylova (NM); Sak-man Luk (NY); Tom Botsko (OH); Andrew Schallhorn (OK); Will Davis (SC); and Miriam Fisk (TX). 1. Adopted the 2020 U.S. and Non-U.S. Catastrophe Risk Event Lists The Working Group and the Subgroup conducted an e-vote to consider adoption of the updated 2020 U.S. and non-U.S. catastrophe risk event lists. Mr. Bronson made a motion, seconded by Mr. Schallhorn, to adopt the 2020 U.S. and non-U.S. catastrophe risk event lists. (Attachment Five-A) The motion passed unanimously. Having no further business, the Property and Casualty Risk-Based Capital (E) Working Group and the Catastrophe Risk (E) Subgroup adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\PCRBC\Att01_11-11propertycatsg.doc

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aias

2020

Sout

heas

t, M

id-A

tlant

ic, N

orth

east

>3

billi

onH

urric

ane

Laur

a20

20Pl

ains

, Sou

thea

st, M

id-A

tlant

ic>

4 bi

llion

Hur

rican

eSa

lly20

20So

uthe

ast (

Ala

bam

a, M

issi

ssip

pi, L

ouis

iana

)>

1 bi

llion

Trop

ical

Sto

rmB

eta

2020

Plai

ns, S

outh

east

25+

mill

ion

Hur

rican

eD

elta

2020

Gul

f Coa

st o

f Uni

ted

Stat

es, S

outh

east

, Nor

thea

st

(AL,

GA

, NC

, SC

, MS,

LA

, TX

)>

2 bi

llion

Hur

rican

eZe

ta20

20G

ulf c

oast

of t

he U

nite

d St

ates

, Sou

thea

ster

n U

nite

d St

ates

, Mid

-Atla

ntic

>1.

5 bi

llion


Attachment Five-A Capital Adequacy (E) Task Force

11/19/20

Non

U.S

. List

of C

atas

trop

hes F

or U

se in

Rep

ortin

g Ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

Year

Even

t Typ

eB

egin

End

Even

tC

ount

ryAf

fect

ed A

rea

(Det

ail)

Mun

ich

Re

Nat

CAT

Serv

ice

Insu

red

loss

es (

in

orig

inal

val

ues,

US$

m)

Crit

eria

: ins

ured

lo

sses

equ

al/g

reat

er

US$

25m

. Trie

s to

re

flect

non

-US

loss

es

only

Swis

s R

e Si

gma:

In

sure

d Lo

ss E

st.

US$

m (m

id p

oint

sh

own

if ra

nge

give

n)

Mos

tly re

flect

tota

l US

and

nonU

S lo

sses

co

mbi

ned.

2011

Trop

ical

Cyc

lone

20/0

9/20

1122

/09/

2011

Typh

oon

Rok

e (O

nyok

), flo

ods

1200

1210

2011

Trop

ical

Cyc

lone

22/0

8/20

1102

/09/

2011

Hur

rican

e Ire

neC

arib

bean

Isla

nds

and

East

ern

Can

ada

300

5300

2011

Earth

quak

e13

/06/

2011

13/0

6/20

11Ea

rthqu

ake

New

Zeal

and

Sout

h Is

land

, Can

terb

ury,

Chr

istc

hurc

h,

Lytte

lton

800

2000

2011

Earth

quak

e11

/03/

2011

11/0

3/20

11Ea

rthqu

ake

Japa

n

Hon

shu,

Aom

ori,

Toho

ku; M

iyagi

, Se

ndai

; Fuk

ushi

ma,

Mito

; Iba

raki

; To

chig

i, U

tsun

omiya

; Iw

ate,

Mor

ioka

; Ya

mag

ata,

Chi

ba; T

okyo

3500

035

000

2011

Trop

ical

Cyc

lone

09/0

2/20

1109

/03/

2011

Trop

ical

Sto

rm T

alas

N/A

470

2011

Earth

quak

e22

/02/

2011

22/0

2/20

11Ea

rthqu

ake

New

Zeal

and

Sout

h Is

land

, Can

terb

ury,

Chr

istc

hurc

h,

Lytte

lton

1300

012

000

2011

Trop

ical

Cyc

lone

02/0

2/20

1107

/02/

2011

Cyc

lone

Yas

i

Que

ensl

and,

Tul

ly, T

owns

ville

, Mis

sion

Be

ach,

Car

dwel

l, G

iru, I

ngha

m,

Inni

sfai

l, C

asso

war

y C

oast

Shi

re,

Cai

rns,

Bed

arra

and

Dun

k is

land

s

1430

1360

2012

Earth

quak

e29

/05/

2012

29/0

5/20

12Ea

rthqu

ake

Italy

Emilia

-Rom

agna

, San

Fel

ice

del

Pana

ro, C

avez

zo, R

over

eto

di N

ovi,

Car

pi, C

onco

rdia

, Bol

ogna

, Mai

land

, Ao

sta

Valle

y, V

enic

e, M

irand

ola

1600

N/A

2013

Trop

ical

Cyc

lone

08/1

1/20

1312

/11/

2013

Typh

oon

Hai

yan

Philli

ppin

es, V

ietn

am, C

hina

700

N/A

2014

Earth

quak

e07

/07/

2014

Earth

quak

eM

exic

o, G

uate

mal

aN

/AN

/A25

+milio

n

2014

Earth

quak

e04

/01/

14Ea

rthqu

ake

Chi

leN

/AN

/A10

0+m

ilion

2014

Earth

quak

e12

/02/

2014

Earth

quak

eC

hina

N/A

N/A

350+

milio

n20

14Ea

rthqu

ake

05/0

4/20

14Ea

rthqu

ake

Chi

naN

/AN

/A80

+milio

n20

14Ea

rthqu

ake

05/0

5/20

14Ea

rthqu

ake

Thai

land

N/A

N/A

62+m

ilion

2014

Earth

quak

e05

/24/

14Ea

rthqu

ake

Chi

naN

/AN

/A60

+milio

n20

14Tr

opic

al S

torm

06/1

4/14

06/1

6/14

TS H

agib

isC

hina

N/A

N/A

131+

milio

n20

14Su

per T

ypho

on07

/08/

1407

/11/

14ST

Y N

eogu

riJa

pan

N/A

N/A

100+

milio

n20

14Su

per T

ypho

on07

/15/

1407

/20/

14ST

Y R

amm

asun

Philip

pine

s, C

hina

, Vie

tnam

N/A

N/A

570+

milio

n20

14Ty

phoo

n07

/22/

1407

/24/

14TY

Mat

mo

Taiw

an, C

hina

, Phi

lippi

nes

N/A

N/A

570+

milio

n20

14C

yclo

ne01

/10/

1401

/12/

14C

Y Ia

nTo

nga

N/A

N/A

48+m

ilion

2014

Cyc

lone

04/1

0/14

04/1

4/14

CY

ItaAu

stra

liaN

/AN

/A1+

billio

n20

15H

urric

ane

08/1

6/92

08/2

8/92

Hur

rican

And

rew

Baha

mas

Baha

mas

> 25

milli

on20

15H

urric

ane

10/2

0/15

10/2

4/15

Hur

rican

e Pa

trici

aC

entra

l Am

eric

a, M

exic

oN

/AN

/A>

25 m

illion

2015

Typh

oon

06/2

6/15

07/1

3/15

Typh

oon

Cha

n-ho

m

(Fal

con)

Gua

m, N

orth

ern

Mar

iana

Isla

nds,

Ph

ilippi

nes,

Jap

an, T

aiw

an, C

hian

, Ko

rea,

Rus

sian

Far

Eas

tN

/AN

/A>

25 m

illion

2015

Seve

re T

ropi

cal

Stor

m

07/0

1/15

07/1

0/15

Seve

re T

ropi

cal S

torm

Li

nfa

(Ega

y)Ph

ilippi

nes,

Tai

wan

, Chi

naN

/AN

/A>

25 m

illion

2015

Typh

oon

07/0

2/15

07/1

8/15

Typh

oon

Nan

gka

Mar

shal

l Isl

ands

, Mar

iana

Isla

nds

and

Japa

nN

/AN

/A>

25 m

illion

2015

Typh

oon

07/2

9/15

08/1

2/15

Typh

oon

Soud

elor

(H

anna

)

Mar

iana

Isla

nds,

Jap

an, P

hilip

pine

s,

Taiw

an, E

aste

rn C

hina

and

Sou

th

Kore

aN

/AN

/A>

25 m

illion

2015

Typh

oon

08/1

3/15

08/3

0/15

Typh

oon

Gon

i (In

eng)

Mar

iana

Isla

nds,

Jap

an, P

hilip

pine

s,

Taiw

an, C

hina

, Rus

sia

and

Kore

aN

/AN

/A>

25 m

illion

2015

Seve

re T

ropi

cal

Stor

m

09/0

6/15

09/1

1/15

Seve

re T

ropi

cal S

torm

Et

auJa

pan,

Rus

sian

Far

Eas

tN

/AN

/A>

25 m

illion



11/19/20

Non

U.S

. List

of C

atas

trop

hes F

or U

se in

Rep

ortin

g Ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

2015

Typh

oon

09/1

9/15

09/3

0/15

Typh

oon

Duj

uan

(Jen

ny)

Ryu

kyu

Isla

nds,

Tai

wan

, Eas

t Chi

naN

/AN

/A>

25 m

illion

2015

Typh

oon

09/3

0/15

10/0

5/15

Typh

oon

Muj

igae

(K

abay

an)

Philip

pine

s, V

ietn

am a

nd C

hina

N/A

N/A

> 25

milli

on

2015

Typh

oon

10/1

2/15

10/2

1/15

Typh

oon

Kopp

u (L

ando

)N

orth

ern

Mar

iana

Isla

nds,

Phi

lippi

nes,

Ta

iwan

, Ryu

kyu

Isla

nds

N/A

N/A

> 25

milli

on

2015

Typh

oon

12/0

3/15

12/0

8/15

Stor

m D

esm

ond

Irela

nd, I

sle

of M

an, U

nite

d Ki

ngdo

m,

Icel

and,

Nor

way

and

Sw

eden

N/A

N/A

> 25

milli

on

2015

Hur

rican

e09

/28/

1510

/15/

15H

urric

ane

Joaq

uin

Car

ibbe

an Is

land

s, P

ortu

gal

N/A

N/A

> 25

milli

on20

15Ea

rthqu

ake

04/2

7/15

Earth

quak

eN

epal

N/A

N/A

> 25

milli

on20

15Ea

rthqu

ake

09/2

2/15

Earth

quak

eC

hile

N/A

N/A

> 25

milli

on

2016

Hur

rican

e08

/28/

1609

/06/

16H

urric

ane

Her

min

eD

omin

ican

Rep

ublic

, Cub

a, T

he

Baha

mas

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

02/1

6/16

02/2

2/16

TC W

inst

onSo

uth

Paci

fic Is

land

sN

/AN

/A>

25 m

illion

2016

Earth

quak

e02

/06/

16Ea

rthqu

ake

Taiw

anAs

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e01

/03/

16Ka

ohsi

ung

EQIn

dia,

Ban

glad

esh,

M

yanm

arAs

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e02

/14/

16C

hris

tchu

rch

EQN

ew Z

eala

ndO

cean

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e04

/14/

1604

/16/

16Ku

mam

oto

EQs

Japa

nAs

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e04

/16/

16Ec

uado

r EQ

Ecua

dor

Sout

h Am

eric

aN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

05/1

4/16

05/2

3/16

CY

Roa

nuSr

i Lan

ka, i

ndia

, Ba

ngla

desh

, Chi

naAs

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e08

/24/

16Ita

ly EQ

Italy

Euro

peN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

09/1

4/16

09/1

6/16

STY

Mer

anti

Chi

na, T

aiw

an,

Philip

pine

sAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

07/0

8/16

07/1

2/16

STY

Nep

arta

kC

hina

, Tai

wan

Asia

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

09/2

6/16

09/2

9/16

TY M

egi

Taiw

an, C

hina

Asia

N/A

N/A

> 25

milli

on

2016

Earth

quak

e09

/10/

16Ka

gera

EQ

Tanz

ania

, Uga

nda

Afric

aN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

08/2

9/16

09/0

1/16

TY L

ionr

ock

Chi

na, J

apan

, Sou

th

Kore

aAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

09/1

9/16

09/2

2/16

TY M

alak

asJa

pan,

Chi

naAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

08/1

8/16

08/2

0/16

TS D

ianm

uC

hina

, Vie

tnam

Asia

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

07/3

1/16

08/0

3/16

TY N

idia

Chi

na, P

hillip

pine

s Vi

etna

mAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

08/0

2/16

08/1

0/16

HU

Ear

lBe

lize,

Mex

ico,

C

arrib

bean

Isla

nds

Car

ibbe

an Is

land

s, M

exic

o an

d C

entra

l Am

eric

aN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

08/2

2/16

08/2

3/16

TS M

indu

lleJa

pan

Asia

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

09/0

6/16

09/0

8/16

HU

New

ton

Mex

ico

Nor

th A

mer

ica

(non

-U.S

.)N

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

10/0

4/16

10/0

7/16

STY

Cha

baJa

pan,

Kor

eaAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

10/1

6/16

10/2

2/16

STY

Hai

ma

Philli

pine

s, C

hina

Asia

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

10/1

4/16

10/2

0/16

TY S

arik

aPh

illipi

nes,

Chi

na,

Viet

anm

Asia

N/A

N/A

> 25

milli

on

2016

Earth

quak

e10

/26/

16C

entra

l Ita

ly EQ

Italy

Euro

peN

/AN

/A>

25 m

illion

2016

Earth

quak

e10

/27/

16C

entra

l Ita

ly EQ

Italy

Euro

peN

/AN

/A>

25 m

illion

2016

Earth

quak

e10

/21/

16To

ttori

Japa

nAs

iaN

/AN

/A>

25 m

illion

2016

Hur

rican

e09

/28/

1610

/10/

16H

urric

ane

Mat

thew

Car

ribbe

an Is

land

s an

d Ea

ster

n C

anad

aN

/AN

/A>

25 m

illion

2016

Hur

rican

e08

/28/

1609

/06/

16H

urric

ane

Her

min

eD

omin

ican

Rep

ublic

, Cub

a, T

he

Baha

mas

N/A

N/A

> 25

milli

on

2017

Earth

quak

e01

/18/

17Ea

rthqu

ake

Italy

Euro

peN

/AN

/A>

25 m

illion

2017

Earth

quak

e01

/28/

17Ea

rthqu

ake

Chi

naAs

iaN

/AN

/A>

25 m

illion

2017

Earth

quak

e02

/10/

17Ea

rthqu

ake

Philip

pine

sAs

iaN

/AN

/A>

25 m

illion

2017

Earth

quak

e03

/27/

17Ea

rthqu

ake

Chi

naAs

iaN

/AN

/A>

25 m

illion

2017

Cyc

lone

03/2

8/17

04/0

5/17

CY

Deb

bie

Aust

ralia

Que

ensl

and,

New

Sou

th W

ales

, New

Ze

alan

dN

/AN

/A>

25 m

illion



11/19/20

Non

U.S

. List

of C

atas

trop

hes F

or U

se in

Rep

ortin

g Ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

2017

Earth

quak

e05

/11/

17Ea

rthqu

ake

Chi

naAs

iaN

/AN

/A>

25 m

illion

2017

Typh

oon

07/2

9/17

07/3

1/17

TY N

esat

& T

S H

aita

ngC

hina

, Tai

wan

, Ph

ilippi

nes

Asia

N/A

N/A

> 25

milli

on

2017

Typh

oon

08/0

7/17

08/0

9/17

Typh

oon

Nor

uJa

pan

Asia

N/A

N/A

> 25

milli

on20

17Ea

rthqu

ake

08/0

8/17

Earth

quak

eC

hina

Asia

N/A

N/A

> 25

milli

on20

17Ty

phoo

n08

/23/

1708

/24/

17TY

Hat

oC

hina

Mac

au, H

ong

Kong

N/A

N/A

> 25

milli

on20

17Ty

phoo

n08

/25/

1708

/28/

17TY

Pak

har

Chi

naAs

iaN

/AN

/A>

25 m

illion

2017

Hur

rican

e08

/25/

1709

/02/

17H

urric

ane

Har

vey

Car

ibbe

an Is

land

s an

d C

entra

l Am

eric

aN

/AN

/A>

25 m

illion

2017

Hur

rican

e08

/30/

1709

/16/

17H

urric

ane

Irma

Car

ibbe

an Is

land

s an

d C

ape

Verd

eN

/AN

/A>

25 m

illion

2017

Hur

rican

e09

/05/

1709

/26/

17H

urric

ane

Jose

Car

ibbe

an Is

land

s an

d Ea

ster

n C

anad

aN

/AN

/A>

25 m

illion

2017

Hur

rican

e09

/16/

1710

/03/

17H

urric

ane

Mar

iaC

arib

bean

Isla

nds,

UK,

Fra

ncs

and

Spai

nN

/AN

/A>

25 m

illion

2017

Earth

quak

e09

/07/

17Ea

rthqu

ake

Mex

ico,

Gua

tem

ala

N/A

N/A

> 25

milli

on20

17Ea

rthqu

ake

09/1

9/17

Earth

quak

eM

exic

oM

exic

o C

ity>2

00N

/A>

25 m

illion

2017

Hur

rican

e10

/04/

17H

urric

ane

Nat

eC

entra

l Am

eric

a, C

aym

an Is

land

s,

Cub

a Yu

cata

n Pe

nins

ula

N/A

N/A

> 25

milli

on

2018

Earth

quak

e02

/06/

18Ea

rthqu

ake

Taiw

an>

25 m

illion

2018

Earth

quak

e02

/16/

18Ea

rthqu

ake

Mex

ico

> 25

milli

on

2018

Cyc

lone

02/0

9/18

02/2

0/18

CY

Gita

Tong

a, F

iji, S

amoa

, N

ew Z

eala

nd>

25 m

illion

2018

Earth

quak

e02

/26/

18Ea

rthqu

ake

Papu

a N

ew G

uine

a>

25 m

illion

2018

Earth

quak

e03

/05/

18Ea

rthqu

ake

Papu

a N

ew G

uine

a>

25 m

illion

2018

Cyc

lone

03/1

7/18

CY

Mar

cus

> 25

milli

on

2018

Trop

ical

Sto

rm05

/23/

1805

/27/

18Tr

opic

al S

torm

Mek

unu

Yam

en, O

man

, Sa

udi A

rabi

a>

25 m

illion

2018

Trop

ical

Sto

rm06

/02/

1806

/07/

18Tr

opic

al S

torm

Ew

inia

rVi

etna

m, C

hina

, Ta

iwan

, Phi

lippi

nes

and

Ryu

kyu

Isla

nds

Gua

ngdo

ng P

rovi

nce,

Jia

ngxi

, Fuj

ian,

Zh

ejia

ng P

rovi

nces

, and

Hai

nan

Isla

nd.

> 25

milli

on

2018

Earth

quak

e06

/18/

18Ea

rthqu

ake

Japa

n>

25 m

illion

2018

Supe

r Typ

hoon

07/1

0/18

07/1

2/18

STY

Mar

iaC

hina

, Tai

wan

, G

uam

and

Jap

anFu

jian

prov

ince

, Yan

tze

Riv

er B

asin

, Ja

pan'

s R

yuky

u Is

land

s>

25 m

illion

2018

Trop

ical

Sto

rm07

/17/

1807

/24/

18TS

Son

h-Ti

nhVi

etna

m, C

hina

, Lo

asJa

pan,

Rus

sian

Far

Eas

t>

25 m

illion

2018

Trop

ical

Sto

rm07

/22/

1807

/25/

15TS

Am

pil

Chi

naJi

angs

u, Z

hejia

ng, S

hand

ong,

and

H

ebei

> 25

milli

on

2018

Typh

oon

07/2

7/18

08/0

3/18

TY J

ongd

ari

Japa

n, C

hina

> 25

milli

on20

18Ea

rthqu

ake

08/0

5/15

08/0

9/18

Earth

quak

eIn

done

sia

> 25

milli

on

2018

Trop

ical

Sto

rm08

/09/

1808

/15/

18TS

Yag

iPh

ilippi

nes,

Chi

naZh

ejia

ng, A

nhui

, Jia

ngsu

and

Sh

ando

ng P

rovi

nces

.>

25 m

illion

2018

Trop

ical

Sto

rm08

/13/

1808

/19/

18TS

Beb

inca

Chi

naH

ong

Kong

, Gua

ngdo

ng a

nd H

aina

n>

25 m

illion

2018

Typh

oon

08/1

6/18

08/1

8/18

TY R

umbi

aC

hina

Shan

ghai

, Jia

ngsu

, Zhe

hian

g, A

nhui

, Sh

ando

ng a

nd H

enan

> 25

milli

on

2018

Typh

oon

08/2

3/18

08/2

5/18

TY S

oulik

Japa

n, S

outh

Kor

ea,

Chi

na a

nd R

ussi

aH

aena

m C

ount

y, S

outh

Jeo

lla P

rovi

nce

> 25

milli

on

2018

Typh

oon

09/0

4/18

09/0

5/18

RY

Jebi

Japa

n, M

aria

na

Isla

nds,

Tai

wan

, Ja

pan,

Rus

sian

Far

Ea

st a

nd A

rtic

> 25

milli

on



11/19/20

Non

U.S

. List

of C

atas

trop

hes F

or U

se in

Rep

ortin

g Ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

2018

Earth

quak

e09

/06/

18Ea

rthqu

ake

Japa

nH

okka

ido

> 25

milli

on

2018

Supe

r Typ

hoon

09/1

5/18

0918

/18

STY

Man

gkhu

tN

. Mar

iana

Isla

nds,

Philip

pine

s, C

hina

an

d H

ong

Kong

> 25

milli

on

2018

Hur

rican

eLe

slie

09/2

3/18

Hur

rican

e Le

slie

Azor

es, B

erm

uda,

Eu

rope

Azor

es, B

erm

uda,

Mad

eira

, Ibe

rian

Peni

nsul

a, F

ranc

e>

25 m

illion

2018

Hur

rican

e10

/07/

1810

/16/

18H

urric

ane

Mic

hael

Cen

tral A

mer

ican

, Yu

cata

n Pe

nins

ula,

C

aym

an Is

land

s,

Cub

a, A

tlant

ic,

Can

ad

> 25

milli

on

2019

Cyc

lone

05/0

3/19

05/0

5/19

Cyc

lone

Fan

iIn

dia,

Ban

glad

esh

>500

milli

on20

19Ea

rthqu

ake

06/1

7/19

Earth

quak

eC

hina

> 25

milli

on20

19Tr

opic

al S

torm

08/0

1/19

08/0

8/19

Trop

ical

Sto

rm W

ipha

Chi

na, V

ietn

am>

25 m

illion

2019

Typh

oon

08/0

9/19

08/1

1/19

Typh

oon

Leki

ma

Chi

na>

855

milli

on20

19Ty

phoo

n08

/15/

1908

/16/

19Ty

phoo

n Kr

osa

Japa

n>2

5 m

illion

2019

Hur

rican

e08

/31/

1909

/07/

19H

urric

ane

Dor

ian

Car

ibbe

an,

Baha

mas

, Can

ada

>1 b

illion

2019

Typh

oon

09/0

5/19

09/0

8/19

Typh

oon

Ling

ling

Japa

n, C

hina

, Kor

ea>5

.78

billio

n

2019

Typh

oon

09/0

8/19

09/0

9/19

Typh

oon

Faxa

iJa

pan

> 7

billio

n20

19H

urric

ane

09/1

9/19

09/2

2/19

Hur

rican

e H

umbe

rtoBe

rmud

a>2

5+ m

illion

2019

Hur

rican

e09

/17/

1909

/26/

19H

urric

ane

Lore

nzo

Portu

gal

>25+

milli

on20

19Ea

rthqu

ake

11/2

6/19

Earth

quak

eAl

bani

a>2

5+ m

illion

2019

Cyc

lone

11/0

8/19

11/1

1/19

Cyc

lone

Mat

mo

(Bul

bul)

Indi

a, B

angl

ades

h>2

5+ m

illion

2019

Typh

oon

10/0

1/19

10/0

2/19

Typh

oon

Hag

ibis

Japa

n>

7 bi

llion

2019

Earth

quak

e12

/18/

19Ea

rthqu

ake

Philip

pine

s>2

5+ m

illion

2020

Earth

quak

e03

/22/

20Ea

rthqu

ake

Cro

atia

>25+

milli

on

04/0

1/20

04/1

1/20

Cyc

lone

Har

old

Solo

mon

Isla

nds,

C

anua

tu, F

iji, T

onga

> 25

+ m

illion

2020

Trop

ical

Sto

rm05

/31/

20Tr

opic

al S

torm

Am

anda

El S

alva

dor,

Gua

tem

ala,

H

ondu

ras

> 25

+ m

illion

2020

Trop

ical

Sto

rm06

/01/

2006

/05/

20Tr

opic

al S

torm

Cris

toba

lM

exic

o, G

uate

mal

a,

El S

alva

dor

150

milli

on

2020

Hur

rican

e07

/25/

2007

/27/

20H

urric

ane

Han

naM

exic

o35

0 m

illion

2020

Hur

rican

e07

/28/

2008

/01/

20H

urric

ane

Isai

asC

arib

bean

, Can

ada

> 3

billio

n20

20H

urric

ane

08/2

2/20

08/2

5/20

Hur

rican

e La

ura

Car

ibbe

an>

4 bi

llion

2020

Typh

oon

05/1

5/20

05/2

2/20

Typh

oon

Amph

anIn

dia,

Ban

glad

esh,

Sr

i Lan

ka15

billi

on

2020

Trop

ical

Sto

rm06

/03/

2006

/04/

20Tr

opic

al S

torm

Nis

arga

Indi

a>

25+

milli

on20

20Ty

phoo

n08

/03/

2008

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20Ty

phoo

n H

agup

itC

hina

, Tai

wan

> 10

0+ m

illion

2020

Hur

rican

e10

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2010

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20H

urric

ane

Del

taJa

mai

ca, N

icar

agua

, C

aym

an Is

land

, Yu

cata

n Pe

nins

ula

> 2

billio

n

2020

Hur

rican

e10

/24/

2010

/30/

20H

urric

ane

Zeta

Cay

man

Isla

nds,

Ja

mai

ca, C

entra

l Am

eric

a, Y

ucat

an

Peni

nsul

a, Ir

elan

d,

Uni

ted

King

dom

> 1.

5 bi

llion

2020

Cyc

lone

04/0

1/20

04/1

1/20

Cyc

lone

Har

old

Solo

mon

Isla

nds,

C

anua

tu, F

iji, T

onga

> 25

+ m

illion

Sour

ce:

Mun

ich

Re'

s NA

T C

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Serv

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iss R

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and

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11/19/20

Draft Pending Adoption Attachment Six

Capital Adequacy (E) Task Force 11/19/20


Draft: 11/3/20

Property and Casualty Risk-Based Capital (E) Working Group Virtual Meeting (in lieu of meeting at the 2020 Fall National Meeting)

October 27, 2020 The Property and Casualty Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Oct. 27, 2020. The following Working Group members participated: Tom Botsko, Chair, and Dale Bruggeman (OH); Richard Ford (AL); Mitchell Bronson, Rolf Kaumann and Eric Unger (CO); Wanchin Chou (CT); Robert Ridenour (FL); Judy Mottar (IL); Anna Krylova (NM); Sak-man Luk (NY); Miriam Fisk (TX); and Randy Milquet (WI). 1 Adopted the Report of the Catastrophe Risk (E) Subgroup Mr. Chou said the Catastrophe Risk (E) Subgroup met Oct. 19 and took the following action: 1) adopted its Summer National Meeting minutes; 2) exposed proposal 2020-08-CR (Clarification to PR027 Interrogatories); 3) discussed the possibility of adding wildfire peril to the Rcat component; 4) discussed the internal catastrophe model evaluation process; and 5) discussed the additional internal and commercial models evaluation process. He stated that the Subgroup also met July 29 and took the following action: 1) adopted its Feb. 3 joint minutes with the Working Group; 2) heard a presentation from Karen Clark & Company (KCC) on its catastrophe model; 3) discussed the possibility of allowing additional third-party commercial vendor models; and 4) discussed the internal catastrophe model evaluation process. Mr. Chou made a motion, seconded by Ms. Krylova, to adopt the report of the Catastrophe Risk (E) Subgroup (Attachment Six-A). The motion passed unanimously. 2. Adopted its Summer National Meeting Minutes Mr. Chou made a motion, seconded by Ms. Krylova, to adopt the Working Group’s July 30 minutes (see NAIC Proceedings – Summer 2020, Capital Adequacy (E) Task Force). The motion passed unanimously. 2. Exposed Proposal 2020-11-CR (Remove Operational Risk Factor from Rcat) Mr. Botsko said the operational risk is now separately addressed in the risk-based capital (RBC) formula as a stand-alone capital add-on. The purpose of this proposal is to remove the embedded 3% operational risk charge in the Rcat component to avoid double counting of the charge. Scott Williamson (Reinsurance Association of America—RAA) said the RAA supports this proposal. He also stated that the embedded operational risk is duplicative and is inadvertently being applied to the Rcat component. The Working Group agreed to expose proposal 2020-11-CR for a 35-day public comment period ending Dec. 1. 3. Discussed Ref #2019-49: Retroactive Reinsurance Exception from the Statutory Accounting Principles (E) Working Group Mr. Botsko said the Casualty Actuarial and Statistical (C) Task Force has organized a small group tasked with responding to the referral from the Statutory Accounting Principles (E) Working Group regarding Ref #2019-49: Retroactive Reinsurance Exceptions (Attachment Six-B) to clarify the accounting and reporting for retroactive reinsurance that meets the Statement of Statutory Accounting Principles (SSAP) No. 62R—Property Casualty Reinsurance exceptions to be accounted for as prospective reinsurance. He said the small group is receiving assistance from the Statutory Accounting Principles (E) Working Group staff. In addition, Mr. Botsko summarized an update by Gordon Hay (NE) at the last Casualty Actuarial and Statistical (C) Task Force meeting. It was stated that the small group is currently reviewing SSAP No. 62R holistically, with emphasis on retroactive agreements that receive prospective accounting treatment. It was also stated that the small group intends to expand SSAP No. 62R, clarifying Annual Statement, Schedule P expectations when retroactive agreements receive prospective accounting treatment. This work may imply some change to prospective reinsurance accounting prescriptions in SSAP No. 62R paragraphs 30–32 and 49–54 (cedants’ accounting and credit taken) and/or paragraphs 42–48 (reinsurers’ accounting).

Draft Pending Adoption Attachment Six

Capital Adequacy (E) Task Force 11/19/20


4. Discussed a Referral from the Restructuring Mechanisms (E) Subgroup Mr. Botsko said a response from the Restructuring Mechanisms (E) Subgroup to request for extension was received earlier. He stated that the Subgroup requests a response by the 2021 Summer National Meeting to allow the Subgroup adequate time to review and incorporate the Working Group’s response into its work product. Mr. Botsko also indicated that the Subgroup requests a short progress update at the 2021 Spring National Meeting. He said that the completion date for the Property and Casualty Risk-Based Capital (E) Working Group would need to be updated to the 2021 Summer National Meeting to accommodate the Subgroup’s deadline. Mr. Milquet said he is concerned about who should be the one to identify whether a company is in runoff status or not. Mr. Williamson said he thinks state insurance regulators may consider using the Annual Statement Jurat page and the Schedule F to identify those companies. Mr. Chou said asking NAIC staff to provide data to assist the discussion will be a good starting point. Ralph Blanchard (Travelers) asked the Working Group to consider dividing the runoff companies into voluntary basis versus involuntary basis. Mr. Botsko said he believes that creating an ad hoc group to discuss this issue would speed up the entire process. The Working Group agreed with Mr. Botsko. He encouraged interested parties to join the ad hoc group so this project will be completed in time. 5. Discussed its 2020 Working Agenda Mr. Botsko summarized the changes to the Working Group’s 2020 working agenda: 1) removed “Evaluate the RBC impact on the modification of the installment fees and expenses reporting guidance” as the Ref #2019-40: Reporting of Installment Fees and Expenses was adopted by the Statutory Accounting Principles (E) Working Group on March 18; and 2) added “modify instructions to PR027 Interrogatories that clarify how insurers with no gross exposure to earthquake or hurricane should complete the interrogatories” and “remove the embedded 3% operational risk component contained in the reinsurance contingent credit risk factor of Rcat” in the new items section. He stated that both items have been exposed for a 30- and 35-day comment period, respectively. Mr. Chou made a motion, seconded by Mr. Luk, to adopt the Working Group’s 2020 working agenda. The motion passed unanimously. 6. Discussed Line 1 Underwriting Risk Reserves and Premiums Methodology Mr. Botsko said as the Working Group discussed during the Summer National Meeting, some state insurance regulators asked the Working Group to determine the impact to the industry RBC result if the weighted average approach calculation were used across all lines. He said some industry parties are concerned that using a weighted average approach could distort the industry experience adjustment if a large entity did a retroactive with prospective reinsurance treatment. He recommended the Working Group consider using the weighted average approach across all lines and monitoring the result closely on any material distortion. Mr. Botsko asked the American Academy of Actuaries (Academy) to determine the impact on line 4 by using the consistent approach with line 1 and share comments with the Working Group during its upcoming meeting. Lauren Cavanaugh (Academy) recommended the Working Group consider using other alternatives, such as filtering based on the company sizes or pools. She said the Academy will be able to provide the necessary information to accomplish this project. 7. Discussed Other Matters Mr. Botsko said the Working Group is still reviewing the possibility of adding an equivalent reinsurer designation column in the NAIC Listing of Companies. Currently, the NAIC Legal Division and the Securities Valuation Office (SVO) are investigating different issues regarding this matter. Thoughts and findings will be provided during the Working Group’s upcoming meetings. Having no further business, the Property and Casualty Risk-Based Capital (E) Working Group adjourned. W:\National Meetings\2020\Fall\TF\CapAdequacy\PCRBC\Att01_10_27propertyrbcwg.doc

Attachment Six-A Capital Adequacy (E) Task Force

11/19/20


Draft: 10/22/20

Catastrophe Risk (E) Subgroup Virtual Meeting (in lieu of meeting at the 2020 Fall National Meeting)

October 19, 2020 The Catastrophe Risk (E) Subgroup of the Property and Casualty Risk-Based Capital (E) Working Group of the Capital Adequacy (E) Task Force met Oct. 19, 2020. The following Subgroup members participated: Tom Botsko, Chair (OH); Robert Ridenour, Vice Chair, and Robert X. Lee (FL); Susan Bernard (CA); Eric Unger (CO); Wanchin Chou (CT); Anna Krylova (NM); Sak-man Luk (NY); Andrew Schallhorn (OK); and Miriam Fisk (TX). 1. Adopted its Summer National Meeting Minutes Mr. Botsko said the Subgroup met July 29 and took the following action: 1) adopted its Feb. 3 minutes; 2) heard a presentation from Karen Clark & Company (KCC) on its catastrophe model; 3) discussed the possibility of allowing additional third-party commercial vendor models; and 4) discussed the internal catastrophe model evaluation process. Mr. Chou made a motion, seconded by Mr. Ridenour, to adopt the Subgroup’s July 29 minutes (see NAIC Proceedings – Summer 2020, Capital Adequacy (E) Task Force). The motion passed unanimously. 2. Exposed Proposal 2020-08-CR (Clarification to PR027 Interrogatories) Mr. Botsko said some insurers with minimal or no gross earthquake and/or hurricane exposure did not file PR027A or PR027B, and the Interrogatories on PR027 will create some validation issues in the catastrophe risk component. He said the purpose of this proposal is to add instructions to PR027 Interrogatories that clarify how insurers with minimal or no gross exposure to the catastrophe risk should complete the interrogatories. The Subgroup agreed to expose proposal 2020-08-CR for a 30-day public comment period ending Nov. 18. 3. Discussed the Possibility of Adding Wildfire Peril to Rcat Component Mr. Chou said he developed an outline to lay out the approach to develop charges for additional perils. With some minor modifications in the document, Mr. Chou believed that the outline could serve as a roadmap to develop a new peril or perils in the Rcat component. He encouraged the interested parties to review the outline and provide suggestions during an upcoming conference call. Ralph Blanchard (Travelers) asked the Subgroup to consider including the distinction between the use of average annual loss versus tail analysis in the evaluation process. Mr. Chou agreed that the Subgroup should consider including Mr. Blanchard’s suggestion in the outline. Mr. Lee said the Florida Modeling Commission is currently in the process of reviewing the KCC hurricane model. He stated that Florida is willing to share the document in terms of the reviewing standard with the Subgroup. Mr. Botsko said the document recommended that the Subgroup consider flood and/or wildfire to be the next possible candidates for developing charges. He suggested that the Subgroup focus on wildfire for now and evaluate flood upon completion of the wildfire peril. The Subgroup agreed to the approach. 4. Discussed the Internal Catastrophe Model Evaluation Process Mr. Chou said he believes that the definition of the internal catastrophe model should include: 1) internal catastrophe models for different natural perils; 2) vendor catastrophe models with certain adjustments; and 3) derivative models based on vendors’ catastrophe models. However, he said he believes that the current NAIC risk-based capital (RBC) instructions do not cover the entire definition of the internal catastrophe model. He recommended that the Subgroup consider modifying the RBC instructions to cover the definition he mentioned. He also suggested that the Subgroup use the following as some of the possible references on modifying the current RBC instructions: 1) the Actuarial Standard of Practice (ASOP) No.56—Modeling, which provides guidance to actuaries when performing actuarial services with respect to designing, developing, selecting, modifying, using, reviewing and evaluating models; 2) model validation from the company’s state of domicile; and 3) field exams. Glen Daraskevich (KCC) believed that this is an important subject to discuss in this Subgroup. He said KCC is willing to provide educational materials regarding this matter to the Subgroup in the near future. Scott Williamson (Reinsurance

Attachment Six-A Capital Adequacy (E) Task Force

11/19/20


Association of America—RAA) said having industry-funded third parties to review the catastrophe models will be one of the alternatives to resolve this issue. Mr. Botsko recommended that the Subgroup consider seeking assistance from other NAIC groups regarding this issue. He also welcomed comments and thoughts from the interested parties prior to the next Subgroup meeting. 5. Discussed the Additional Internal and Commercial Models Evaluation Process Jeff Czajkowski (NAIC) said as underlying wildfire risk increases, the cost of insurance increases, but the availability of coverage decreases. He stated that the American Academy of Actuaries (Academy) Extreme Events and Property Lines Committee released a paper on wildfires earlier, “Wildfire: An Issue Paper – Lessons Learned from the 2017–2018 California Events.” It indicated that: 1) no regulatory body has thoroughly reviewed any of the wildfire models; 2) vendors are critical partners in educating the insurance industry and state insurance regulators on wildfire models; and 3) state insurance regulators should be encouraged to become more familiar with and consider the benefits of wildfire models. Mr. Czajkowski said the goals for the research project are to: 1) provide an educational summary of the latest wildfire science and catastrophe modeling approach, including mitigation techniques; and 2) evaluate models in a regulatory setting. Eli Russo (NAIC) said the NAIC Center for Insurance Policy and Research (CIPR) will be able to assist the Subgroup on: 1) educating and validating the wildfire models and methodology; 2) engaging with catastrophe modeling vendors and insurers that have internally developed wildfire models to understand individual models; 3) advising on the design of the Rcat charge; and 4) drafting review questions and the process to permit the use of wildfire models for Rcat purposes. She also stated that the Climate & Resiliency (EX) Task Force was set up after the NAIC Summer National Meeting. She believed that the work of the Subgroup will be influenced by the recommendations provided by this Task Force. She also indicated that the Task Force will discuss its 2021 workplan on its Nov. 3 meeting. Mr. Botsko asked the Subgroup to review the materials and provide thoughts in the next conference call. 6. Discussed Other Matters Mr. Botsko said the Subgroup plans to expose the 2020 Catastrophe Event Lists for a seven-day public comment period on Nov. 1. An email vote to adopt the list will be conducted on Nov. 9. Lastly, Mr. Botsko said he will step down as chairman and resume his member role in the Subgroup after this meeting. He was pleased to announce that Mr. Chou will assume the chairman responsibility of the Subgroup. Having no further business, the Catastrophe Risk (E) Subgroup adjourned. W:\National Meetings\2029\Fall\TF\CapAdequacy\PCRBC\Att01_10-19propertycatsg.doc

TO: Phil Vigliaturo, chair representative of Steve Kelley, Chair, (MN), of the Casualty Actuarial and Statistical (C) Task Force Tom Botsko, OH), Chair of the Property and Casualty Risk Based Capital Working Group

FROM: Dale Bruggeman (OH), Chair of the Statutory Accounting Principles (E) Working Group

DATE: January 7, 2020

RE: Ref #2019-49: Retroactive Reinsurance Exception

This referral has been provided to notify the Casualty Actuarial and Statistical (C) Task Force of a current Statutory Accounting Principles (E) Working Group agenda item to allow for ongoing coordination. This agenda item is to address a request from the Committee on Property and Liability Financial Reporting (COPLFR) of the American Academy of Actuaries Working Group. The request, which was also received by the Task Force, was to clarify the accounting and reporting for retroactive reinsurance which meets the SSAP No. 62R—Property and Casualty Reinsurance exceptions to be accounted for as prospective reinsurance. The comment deadline for the public exposure is January 31, 2020, but the Working Group is primarily notifying the Task Force of the project and requesting volunteers.

During the 2019 Fall National Meeting, the Statutory Accounting Principles (E) Working Group exposed agenda item 2019-49: Retroactive Reinsurance Exception which includes a request for comments and for industry and regulator volunteers to assist with developing guidance. The goal is to clarify both the accounting and reporting for retroactive contracts which are accounted for prospectively, including:

• Both the ceding entity and assuming entity, where both are members of the same group and areconsolidated in the same Combined Annual Statement.

• The reporting method to be used if the ceding entity and assuming entity are not in the same group.

Comments are specially requested regarding the preferred approaches to reporting and the advantages and disadvantages to each approach being used, including both the Schedule P (and related loss analysis) and risk-based capital impacts.

Because the items under discussion can have impact on information reported in Schedule P, the Working Group directed notification of the exposure to seek your input. Please contact, Robin Marcotte, NAIC staff [email protected] of the Statutory Accounting Principles (E) Working Group with any questions or volunteers.

Cc: Julie Gann, Robin Marcotte, Fatima Sediqzad, Jake Stultz, Jim Pinegar, Kris DeFrain, Eva Yeung; Jane Barr

G:\FRS\DATA\Stat Acctg\1. Statutory\E. Referrals\2019\2019-49 SAPWG to Castf pcrbc.doc

Attachment Six-B Capital Adequacy (E) Task Force

11/19/20




February 27, 2020

Dale Bruggeman, Chair Statutory Accounting Principles (E) Working Group National Association of Insurance Commissioners

Via email

Dear Mr. Bruggeman:

I am writing on behalf of the American Academy of Actuaries1 Committee on Property and Liability Financial Reporting (COPLFR). We are following up on previous correspondence regarding Schedule P Instructions for Retroactive Reinsurance between Affiliates and Non-Affiliates.

COPLFR appreciates that the Statutory Accounting Principles Working Group (SAPWG) is looking into certain inconsistencies that were identified in our May 21, 2019, letter to you. In July, Julie Lederer, acting in her capacity as a member of the Casualty Actuarial and Statistical (C) Task Force, posed several questions about specific details in our initial comment letter. Her comments and COPLFR’s replies are presented here.

Julie Lederer’s Comment

1. I’m not sure what Allianz/Allianz Re agreement the letter is referring to. The letter suggests thatthis agreement was enacted in 2015 and that the accounting changed between year-ends 2015and 2016, but Allianz Re’s 2018 MD&A (which is said to be included as an attachment toCOPLFR’s letter but is not) suggests that the agreements between Allianz and Allianz Reweren’t enacted until 2016. Allianz Re did assume retroactive business from a different entity,Fireman’s Fund, in 2015:

1 The American Academy of Actuaries is a 19,500-member professional association whose mission is to serve the public and the U.S. actuarial profession. For more than 50 years, the Academy has assisted public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States.


11/19/20


http://www.actuary.org/


a. There’s hardly any workers comp data in Allianz’s 2015 Schedule P. There’s a lot of WCdata at year-end 2016, which appears to be due to the addition of Firemen’s Fund to thepooling agreement.

b. When I compare Allianz Re’s 2015 and 2016 Schedule Ps, I don’t see major changes.There is significant assumed premium reported in CY 2015 in both statements, and bothstatements show assumed reserves only for AYs 2012 and prior. I think this is related toAllianz Re’s transaction with FFIC (as mentioned in the MD&A above), not withAllianz.

COPLFR’s Response

The May 21, 2019, COPLFR letter is referring to the July 1, 2015, reinsurance agreement between FFIC and Allianz Reinsurance America (“Allianz Re”), where Allianz Re agreed to reinsure certain workers’ compensation (WC) and construction defect liabilities. The 2015 Schedule P, Part 1 of Allianz Re (page 4 of the May 21 letter PDF) shows $1.1 billion of 2015 accident year direct and assumed WC earned premium, presumably this Loss Portfolio Transfer. The 2016 Schedule P of Allianz Global Risk US Ins Co. (“Allianz or FFIC”) (page 7 of the May 21 letter PDF) shows $1.1 billion of 2015 accident year WC ceded earned premium, about equal to the assumptions of the Allianz Re premium discussed in the prior sentence. Allianz Global Risk US is synonymous with FFIC, as we understand it.

In our May 21, 2019, letter, we did state that “Initially, as of December 31, 2015, Allianz included all of the ceded losses in accident year (‘AY’) 2015.” We did only include the 2016 Allianz Schedule P; it would have been clearer to include the 2015 Allianz Schedule P as well, which we have attached as page 15 of the May 21 letter PDF (Attachment A). We agree with the comment in a. above that the additional data is due to the addition of Fireman’s Fund in the pooling agreement. Similarly, for b., we only show Allianz Re’s 2015 Schedule P.; we should additionally obtain Allianz Re’s 2016 Schedule P. We would not expect much change from the 2015 to 2016 Schedule P. Finally, our comments were not intended to suggest that the agreement between Allianz and Allianz Re was not enacted until 2016. We did, however, want to point out that as of Dec. 31, 2015, Allianz included all of the ceded losses in AY 2015, and in the following year, as of Dec. 31, 2016, Allianz recorded the ceded losses across the subject AYs 2012 and prior, as shown in Schedule P, Part 2 of Allianz (see page 8 of the PDF).


2. I believe some of the attachments noted in the letter are missing:


11/19/20




a. The letter includes Allianz Re’s 2015 Schedule P and Allianz’s 2016 Schedule P, but thetext of the letter suggests that Allianz’s 2015 and 2016 Schedule Ps are included.

i. Regardless, it’s pretty hard to compare Allianz’s 2015 and 2016 Schedule Psanyway, since Fireman’s Fund was added to the intercompany pool in 2016 andthe historical AYs in Allianz’s 2016 Schedule P were adjusted accordingly.

ii. When I compare Allianz Re’s 2015 and 2016 Schedule Ps, I don’t see majorchanges. The assumed premium is reported in CY 2015 in both statements, andboth statements show assumed reserves only for AYs 2012 and prior.

b. Attachment A1SAO (Allianz Re’s 2018 SAO) is missing. I looked up the SAO myselfand found this passage, which is rather vague, doesn’t name the counterparties, anddoesn’t discuss the accounting for the agreements:

c. Attachment A2MDA (Allianz Re’s 2018 MD&A) is missing. I looked this up myself andincluded a relevant passage above in item #1.

COPLFR’s Response The attachments were in the Academy’s submission to the CASTF and were in the CASTF materials for a call in June, but apparently were omitted by NAIC staff in materials provided for subsequent calls and referrals.

We too consider the excerpt you provided to be vague. To help clarify the issue, we are attaching MD&As from 2015 and 2016 that include Fireman’s Fund Insurance Company in their scope (attachments B and C). One of the difficulties in tracking this issue is the series of actions taken by Allianz since 2015.


3. GEICO’s Note 21, included as an attachment, is useful, but it’s not clear what we should takeaway from GEICO’s 2014 Schedule P alone. It might have been useful to attach the 2013Schedule P as well. By comparing the 2013 and 2014 Schedule Ps, it’s clear that GEICO madesignificant cessions in 2014 and that these were spread among older AYs.

COPLFR’s Response


11/19/20




Our takeaway from GEICO’s 2014 Schedule P alone is that Schedule P, Part 2 (page 13 of the PDF) shows $3.3 billion of decreased development. This is a distortion as we understand it and is supported by the 2013 and 2014 comparison noted above. That distortion would carry over to the RBC filings of the respective entities (based on our understanding of the RBC formula and related instructions). Industry Schedule P data can also be distorted based on what is and is not included in industry totals based on the data scrubbing performed.

We believe that this additional information clarifies our original comments and will help SAPWG to move forward with its own analysis. If you have additional questions, contact Marc Rosenberg, the Academy’s senior casualty policy analyst, at 202-785-7865 or [email protected].

Sincerely,

Kathy Odomirok, MAAA, FCAS Chairperson, COPLFR American Academy of Actuaries

3 attachments


11/19/20




Capital Adequacy (E) Task Force RBC 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: 03/02/2020

CONTACT PERSON: Crystal Brown

TELEPHONE: 816-783-8146

EMAIL ADDRESS: [email protected]

ON BEHALF OF: Health RBC (E) Working Group

NAME: Steve Drutz

TITLE: Chief Financial Analyst/Chair

AFFILIATION: WA Office of Insurance Commissioner

ADDRESS: 5000 Capitol Blvd SE

Tumwater, WA 98501

FOR NAIC USE ONLY

Agenda Item # 2020-02-CA Year 2021

DISPOSITION

[ ] ADOPTED

[ ] REJECTED

[ ] DEFERRED TO

[ ] REFERRED TO OTHER NAIC GROUP

[ x ] EXPOSED Sept. 4, 2020

[ ] OTHER (SPECIFY)

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

[ x ] Health RBC Blanks [ x ] Health RBC Instructions [ ] Other ___________________

[ x ] Life and Fraternal RBC Blanks [ x ] Life and Fraternal RBC Instructions

[ x ] Property/Casualty RBC Blanks [ x ] Property/Casualty RBC Instructions

DESCRIPTION OF CHANGE(S) Delete the ACA Fee Sensitivity Test from each formula.

REASON OR JUSTIFICATION FOR CHANGE ** The purpose of the proposal is to delete the ACA Fee Sensitivity test from each formula as a result of the repeal of the ACA HIT tax for 2021. The SAP Working Group is also drafting a Form A to remove the disclosures of the ACA fee in 2021.

Additional Staff Comments: 07-30-20 cgb HRBCWG referred proposal 2020-02-CA to the Capital Adequacy (E) Task Force for 30-day exposure withcomments to come back to the Working Group.08-05-20 cgb The Capital Adequacy Task Force exposed the proposal for a 30-day public comment period ending on Sept. 4,2020 with comments to come back to the Health RBC (E) Working Group.11-11-20 cgb No comments were received. ___________________________________________________________________________________________________** This section must be completed on all forms. Revised 11-2013

Attachment Seven Capital Adequacy (E) Task Force

11/19/20


HEA

LTH

TO

TAL

AD

JUST

ED C

API

TAL

XR

025

Tota

l Adj

uste

d Ca

pita

l (TA

C) i

nclu

des t

he st

atut

ory

capi

tal a

nd su

rplu

s/to

tal n

et w

orth

of t

he re

porti

ng e

ntity

plu

s adj

ustm

ents.

Adj

ustm

ents

are m

ade i

n re

cogn

ition

of

stat

utor

y ac

coun

ting

conv

entio

ns th

at te

nd to

und

ersta

te th

e ac

tual

cap

ital a

nd su

rplu

s tha

t a c

ompa

ny p

osse

sses

in c

ase

of li

quid

atio

n.

Ther

e ar

e ad

ditio

ns to

TA

C fo

r the

Ass

et V

alua

tion

Rese

rve

and

half

of th

e di

vide

nd li

abili

ty o

f any

Life

/Hea

lth su

bsid

iary

. The

se re

serv

es u

nder

state

the

surp

lus

of th

e su

bsid

iary

and

mus

t be

adde

d ba

ck to

the

pare

nt’s

TA

C. T

he a

nnua

l sta

tem

ent a

mou

nt o

f any

Life

/Hea

lth su

bsid

iary

’s A

VR

shou

ld b

e re

porte

d on

Lin

e (2

), pr

orat

ed fo

r per

cent

of o

wne

rshi

p. D

ivid

end

liabi

lity

for l

ife in

sura

nce

subs

shou

ld b

e re

porte

d on

Lin

e (3

). Th

e po

rtion

of t

he A

VR

that

can

be

coun

ted

as c

apita

l is

lim

ited

to th

e am

ount

not

util

ized

in a

sset

ade

quac

y te

sting

in su

ppor

t of t

he A

ctua

rial O

pini

on fo

r res

erve

s.

Subs

idia

ry a

mou

nts a

re in

clud

ed, a

s app

ropr

iate

, rec

ogni

zing

that

the

subs

idia

ry’s

sur

plus

is in

clud

ed w

ithin

the

surp

lus o

f the

par

ent.

For P

rope

rty a

nd C

asua

lty

subs

idia

ries,

ther

e is

a re

duct

ion

in T

AC

equa

l to

non-

tabu

lar d

iscou

nts

and

med

ical

disc

ount

s re

porte

d as

tabu

lar t

hat t

he s

ubsid

iary

may

cla

im. D

isco

untin

g of

lo

ss re

serv

es is

not

wid

ely

prac

ticed

in P

rope

rty/C

asua

lty a

ccou

ntin

g. T

here

fore

, any

of t

hese

dis

coun

ts b

eing

use

d by

a P

rope

rty/C

asua

lty su

bsid

iary

to b

olste

r the

su

bsid

iary

’s su

rplu

s mus

t be

rem

oved

to e

nsur

e a

leve

l pla

ying

fiel

d am

ong

com

pani

es su

bjec

t to

RBC

. If t

he re

porti

ng e

ntity

ow

ns a

Pro

perty

/Cas

ualty

subs

idia

ry

that

has

non

-tabu

lar d

isco

unts

or m

edic

al d

isco

unts

repo

rted

as ta

bula

r, th

e fu

ll am

ount

of t

he re

serv

e di

scou

nt sh

ould

be

ente

red

on L

ines

(4) a

nd (5

). N

onta

bula

r re

serv

e di

scou

nts r

epor

ted

in L

ine

(5) c

ome

from

the

subs

idia

ry’s

Sch

edul

e P

Part

1. T

abul

ar re

serv

es in

Lin

e (4

) com

e fro

m th

e N

otes

to th

e Fi

nanc

ial S

tate

men

t of

the

affil

iate

’s a

nnua

l sta

tem

ent.

Line

s (7

) thr

ough

(11)

are

use

d fo

r a s

ensit

ivity

test.

The

sen

sitiv

ity te

st pr

ovid

es a

“w

hat i

f” s

cena

rio e

limin

atin

g de

ferre

d ta

x as

sets

and

defe

rred

tax

liabi

litie

s fr

om th

e ca

lcul

atio

n of

Tot

al A

djus

ted

Capi

tal.

The

sens

itivi

ty te

st h

as n

o ef

fect

on

the

risk-

base

d ca

pita

l am

ount

s rep

orte

d in

the

annu

al st

atem

ent.

DTA

shou

ld in

clud

e on

ly th

e ad

mitt

ed p

ortio

n of

the

DTA

insi

de a

mou

nt, f

or L

ine

(7).

Line

(9) s

houl

d on

ly in

clud

e th

e ad

mitt

ed p

ortio

n of

insu

ranc

e su

bsid

iarie

s de

ferre

d ta

x as

sets

that

are

subj

ect t

o R

BC

and

who

se R

BC

form

ula

excl

udes

DTA

s and

DTL

s fro

m th

e TA

C ca

lcul

atio

n.

Line

s (16

) thr

ough

(19)

are

use

d fo

r the

fede

ral A

CA

fee

sens

itivi

ty te

st. T

he A

CA

fee

sens

itivi

ty te

st pr

ovid

es a

“w

hat i

f” sc

enar

io e

limin

atin

g th

e A

CA

fee

from

th

e Ca

lcul

atio

n of

Tot

al A

djus

ted

Capi

tal.

The

AC

A fe

e in

clud

ed o

n Li

ne (1

6) is

the

estim

ated

dat

a ye

ar a

mou

nt th

at is

to b

e pa

id in

the

fee

year

. The

AC

A fe

e se

nsiti

vity

test

has

no

effe

ct o

n th

e ris

k-ba

sed

capi

tal a

mou

nts r

epor

ted

in th

e an

nual

stat

emen

t. C

olum

n (2

), Li

ne (1

6) sh

ould

equ

al th

e an

nual

stat

emen

t Not

es to

Fi

nanc

ial S

tate

men

t, N

ote

22B,

Col

umn

1.


11/19/20


LIFE

C

ALC

ULA

TIO

N O

F TO

TAL

AD

JUST

ED C

API

TAL

(Inc

ludi

ng T

otal

Adj

uste

d Ca

pita

l Tax

Sen

sitiv

ity T

est)

LR03

3

The

follo

win

g in

stru

ctio

ns fo

r the

Cal

cula

tion

of T

otal

Adj

uste

d C

apita

l will

rem

ain

effe

ctiv

e in

depe

nden

t of t

he s

tatu

s of

the

suns

et p

rovi

sion

, Sec

tion

8, o

f AG

48

in a

par

ticul

ar s

tate

or j

uris

dict

ion.

Thi

s in

stru

ctio

n w

ill b

e co

nsid

ered

for

cha

nge

once

the

amen

dmen

t ref

eren

ced

in A

G 4

8, S

ectio

n 8,

reg

ardi

ng c

redi

t for

re

insu

ranc

e, is

ado

pted

by

the

NA

IC.

Det

ail E

limin

ated

to C

onse

rve

Spac

e

Line

(14)

Li

ne 1

4 sh

ould

incl

ude

only

the

adm

itted

por

tion

of d

efer

red

tax

asse

ts fo

r ins

uran

ce su

bsid

iarie

s tha

t are

subj

ect t

o R

BC.

Line

s (22

) thr

ough

(25)

are

use

d fo

r the

AC

A se

nsiti

vity

test.

The

AC

A se

nsiti

vity

test

pro

vide

s a “

wha

t if”

scen

ario

elim

inat

ing

the

AC

A fe

e fr

om th

e Ca

lcul

atio

n of

Tot

al A

djus

ted

Capi

tal.

The

AC

A fe

e in

clud

ed o

n Li

ne (2

2) is

the

estim

ated

dat

a ye

ar a

mou

nt th

at is

to b

e pa

id in

the

fee

year

. The

AC

A fe

e se

nsiti

vity

test

has

no e

ffect

on

the

risk-

base

d ca

pita

l am

ount

s rep

orte

d in

the a

nnua

l sta

tem

ent.

Col

umn

(2),

Line

(22)

shou

ld eq

ual t

he a

nnua

l sta

tem

ent N

otes

to F

inan

cial

Sta

tem

ent,

Not

e 22

B, C

olum

n 1.


11/19/20


PRO

PER

TY/C

ASU

ALT

Y

PR02

9 - C

alcu

latio

n of

Tot

al A

djus

ted

Capi

tal

This

is co

mpu

ted

by su

btra

ctin

g th

e fu

ll va

lue

of th

e no

n-ta

bula

r dis

coun

t fou

nd in

Sch

edul

e P,

Par

t 1 –

Sum

mar

y, L

12 C

32 a

nd C

33 p

lus a

ny d

isco

unt o

n m

edic

al

rese

rves

incl

uded

in C

24 fo

r the

com

pany

and

its a

ffilia

tes f

rom

its c

apita

l and

sur

plus

from

P3

C1

L37,

and

then

add

ing

back

the

AV

R an

d ha

lf of

any

div

iden

d lia

bilit

y of

any

of t

he c

ompa

ny’s

life

insu

ranc

e af

filia

tes.

The

porti

on o

f th

e A

VR

that

can

be

coun

ted

as c

apita

l is

limite

d to

the

amou

nt n

ot u

tiliz

ed in

ass

et

adeq

uacy

testi

ng in

sup

port

of th

e A

ctua

rial O

pini

on fo

r res

erve

s. A

ll th

e af

filia

te a

mou

nts

shou

ld b

e ad

juste

d by

per

cent

age

of o

wne

rshi

p be

fore

ent

erin

g. A

ll U

.S. l

ife, p

rope

rty &

cas

ualty

and

inve

stmen

t affi

liate

s sho

uld

be in

clud

ed.

If a

com

pany

has

no

affil

iate

s, th

en T

otal

Adj

uste

d Ca

pita

l is e

qual

to it

s cap

ital a

nd

surp

lus a

djus

ted

for n

on-ta

bula

r dis

coun

ts.

Line

s (13

.1) t

hrou

gh (1

3.4)

Th

ese

lines

cal

cula

te th

e cr

edit

to T

otal

Adj

uste

d C

apita

l for

the

insu

rer’

s qua

lifyi

ng c

apita

l not

es. T

he c

alcu

latio

n on

Lin

e (1

3.2)

lim

its th

e cr

edit

for c

apita

l not

es

so th

e to

tal a

mou

nt o

f cap

ital a

nd su

rplu

s not

es in

clud

ed in

Tot

al A

djus

ted

Cap

ital i

s not

mor

e th

an o

ne-h

alf o

f Tot

al A

djus

ted

Cap

ital f

rom

oth

er so

urce

s. Th

is is

eq

uiva

lent

to a

lim

it of

one

-third

of T

otal

Adj

uste

d C

apita

l fro

m a

ll so

urce

s inc

ludi

ng th

e ca

pita

l and

surp

lus n

otes

them

selv

es.

The

TAC

is re

porte

d in

the

annu

al st

atem

ent’s

Fiv

e-Y

ear H

istor

ical

Exh

ibit

on L

ine

28, T

otal

Adj

uste

d C

apita

l.

The

Sens

itivi

ty te

st p

rovi

des

a “w

hat i

f” s

cena

rio e

limin

atin

g de

ferre

d ta

x as

sets

and

def

erre

d ta

x lia

bilit

ies

from

the

calc

ulat

ion

of T

otal

Adj

uste

d C

apita

l. Th

e se

nsiti

vity

test

has n

o ef

fect

on

the

risk-

base

d ca

pita

l am

ount

s rep

orte

d in

the

annu

al st

atem

ent.

Incl

ude

only

the

adm

itted

por

tion

of th

e de

ferr

ed ta

x as

set f

or L

ine

(15)

. Li

ne (1

6) sh

ould

incl

ude

only

the

adm

itted

por

tion

of in

sura

nce

subs

idia

ries’

def

erre

d ta

x as

sets

.

Line

s (22

) thr

ough

(25)

are

use

d fo

r the

AC

A se

nsiti

vity

test.

The

AC

A se

nsiti

vity

test

pro

vide

s a “

wha

t if”

scen

ario

elim

inat

ing

the

AC

A fe

e fro

m th

e Ca

lcul

atio

n of

Tot

al A

djus

ted

Cap

ital.

The

AC

A fe

e in

clud

ed o

n Li

ne (2

2) is

the

estim

ated

dat

a ye

ar a

mou

nt th

at is

to b

e pa

id in

the

fee

year

. The

AC

A fe

e se

nsiti

vity

test

has

no e

ffect

on

the

risk-

base

d ca

pita

l am

ount

s rep

orte

d in

the a

nnua

l sta

tem

ent.

Colu

mn

(2),

Line

(22)

shou

ld e

qual

the

annu

al st

atem

ent N

otes

to F

inan

cial

Sta

tem

ent,

Not

e 22

B, C

olum

n 1.


11/19/20


CA

LCU

LATI

ON

OF

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L A

DJU

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ivity

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l Adj

uste

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erre

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horiz

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el R

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paris

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est

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hori

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trol

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el R

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al A

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ted

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ital t

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ased

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e po

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imite

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tiliz

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et a

dequ

acy

test

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ppor

t of t

he A

ctua

rial O

pini

on fo

r res

erve

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enot

es it

ems t

hat m

ust b

e m

anua

lly e

nter

ed o

n fil

ing

softw

are.


11/19/20


CA

LCU

LATI

ON

OF

TOTA

L A

DJU

STED

CA

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R03

3)(In

clud

ing

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l Adj

uste

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sitiv

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ual S

tate

men

t Sou

rce

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emen

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ueFa

ctor

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uste

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ompa

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usPa

ge 3

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umn

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ne 3

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et V

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erve

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Den

otes

item

s tha

t mus

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ually

ent

ered

on

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filin

g so

ftwar

e.


11/19/20


(1)

(2)

Ann

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tate

men

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alue

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port

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n th

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le d

olla

rs.

Den

otes

item

s tha

t mus

t be

man

ually

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ered

on

the

filin

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ftwar

e.§

The

porti

on o

f the

AV

R th

at c

an b

e co

unte

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cap

ital i

s Iim

ited

to th

e am

ount

not

util

ized

in a

sset

ade

quac

y te

stin

g in

supp

ort o

f the

Act

uaria

l Opi

nion

for r

eser

ves.

CA

LCU

LATI

ON

OF

TOTA

L A

DJU

STED

CA

PITA

L P

R02

9


11/19/20



[ ] Capital Adequacy (E) Task Force [ x ] 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: 04/01/2020


TELEPHONE: 816-783-8146



NAME: Steve Drutz




Tumwater, WA 98501

FOR NAIC USE ONLY

Agenda Item # 2020-04-H Year 2021

DISPOSITION

[ x ] ADOPTED 7-30-20 WG

[ ] REJECTED

[ ] DEFERRED TO


[ ] EXPOSED ________________

[ ] OTHER (SPECIFY)


[ x ] Health RBC Blanks [ ] Health RBC Instructions [ ] Other ___________________

[ ] Life and Fraternal RBC Blanks [ ] Life and Fraternal RBC Instructions

[ ] Property/Casualty RBC Blanks [ ] Property/Casualty RBC Instructions

DESCRIPTION OF CHANGE(S) Add a MAX function to the calculation of Line 17 – RBC Safe Growth Safe Harbor on Page XR021 to match the validation and start the calculation at 0.

REASON OR JUSTIFICATION FOR CHANGE **

NAIC staff received an inquiry from a software vendor on an inconsistency between the HRBC formula within the forecasting file and the validation for the MAX function in the validation of line 17 of the excessive growth charge. The attachment shows how the current calculation in the formula of the forecasting file is working without the MAX function while the validation includes the MAX function which will convert a negative amount to 0. The last screen shot shows the difference in the charge if the MAX function were incorporated into the formula within the forecasting file. The MAX function is included within other parts of the HRBC formula, while it is specifically excluded from the Underwriting portion on page XR012.

Additional Staff Comments: 4-3-2020 – cgb – exposed for comment until 5-4-20207-8-2020 – cgb – no comments received during comment period.7-30-2020 – cgb – The Health RBC Working Group adopted the proposal the Virtual Summer National Meeting. ___________________________________________________________________________________________________** This section must be completed on all forms. Revised 11-2013


Attachment Eight Capital Adequacy (E) Task Force

11/19/20

XR02

1 –

Busin

ess R

isk –

Pro

pose

d Ch

ange


Attachment Eight Capital Adequacy (E) Task Force

11/19/20


[ ] Capital Adequacy (E) Task Force [ x ] 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: 08/31/2020


TELEPHONE: 816-783-8146



NAME: Steve Drutz




Tumwater, WA 98501

FOR NAIC USE ONLY

Agenda Item # 2020-07-H Year 2021

DISPOSITION

[ x ] ADOPTED HRBCWG adopted 10/29/20

[ ] REJECTED

[ ] DEFERRED TO


[ x ] EXPOSED Exposed until Oct. 12

[ ] OTHER (SPECIFY)


[ x ] Health RBC Blanks [ x ] Health RBC Instructions [ ] Other ___________________

[ ] Life and Fraternal RBC Blanks [ ] Life and Fraternal RBC Instructions

[ ] Property/Casualty RBC Blanks [ ] Property/Casualty RBC Instructions

DESCRIPTION OF CHANGE(S) Split the Bonds and Misc. Fixed Income Assets into separate pages (Page XR007 and XR008).

REASON OR JUSTIFICATION FOR CHANGE **

Currently the Bonds and Misc. Fixed Income Assets are included on page XR007 of the Health RBC formula. With the implementation of the 20 bond designations and the electronic only tables, the Bonds and Misc. Fixed Income Assets were split between two tabs in the excel file for use of the electronic only tables and ease of printing. However, for increased transparency and system requirements, it is suggested that these pages be split into separate page numbers beginning with year-2021. Bonds would remain on page XR007 and Misc. Fixed Income Assets would move to page XR008. All remaining page numbers and references to the page numbers would be incorporated into the Blank an instructions.

Additional Staff Comments: 9-11-20 cgb The Health RBC WG exposed the proposal for 30 days with comments due back on Oct. 12.

10-12-20 cgb No comments received.10-29-20 cgb The Health RBC WG adopted the proposal on it 10/29/20 call. ___________________________________________________________________________________________________** This section must be completed on all forms. Revised 11-2013

Attachment Nine Capital Adequacy (E) Task Force

11/19/20


TABL

E O

F C

ON

TEN

TS

Ris

k-B

ased

Cap

ital P

ream

ble

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

... i

Ove

rvie

w o

f the

NA

IC H

ealth

Risk

-Bas

ed C

apita

l Rep

ort .

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

iv

Affi

liate

d St

ocks

– X

R00

2–X

R00

4 ....

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

... 1

Off-

Bal

ance

She

et a

nd O

ther

Item

s – X

R00

5 ....

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

6 O

ff-B

alan

ce S

heet

Sec

urity

Len

ding

Col

late

ral a

nd S

ched

ule

DL,

Par

t 1 A

sset

s – X

R00

6 ....

......

......

......

......

......

......

......

......

......

......

......

......

......

..... 7

Fi

xed

Inco

me

Ass

ets –

Bon

ds –

XR

007 .

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

..... 8

R

eplic

atio

n (S

ynth

etic

Ass

et) T

rans

actio

ns a

nd M

anda

tory

Con

verti

ble

Secu

ritie

sFix

ed In

com

e A

sset

s – M

isce

llane

ous –

XR

008 .

......

......

......

.. 910

FIX

ED IN

CO

ME

ASS

ETS

XR

007

AN

D X

R00

8

The

RB

C re

quire

men

t for

fixe

d in

com

e as

sets

is la

rgel

y dr

iven

by

the

defa

ult r

isk

on th

ose

asse

ts. T

here

are

two

maj

or su

bcat

egor

ies:

Bon

ds a

nd M

iscel

lane

ous.

Bon

ds a

re o

blig

atio

ns is

sued

by

busin

ess u

nits

, gov

ernm

enta

l uni

ts, a

nd c

erta

in n

onpr

ofit

units

, hav

ing

a fix

ed sc

hedu

le fo

r one

or m

ore

futu

re p

aym

ents

of m

oney

. Th

is de

finiti

on in

clud

es c

omm

erci

al p

aper

, neg

otia

ble

certi

ficat

es o

f dep

osit,

repu

rcha

se a

gree

men

ts, a

nd e

quip

men

t tru

st ce

rtific

ates

. Misc

ella

neou

s fix

ed in

com

e as

sets

are

oth

er a

sset

s with

fixe

d re

paym

ents

sche

dule

s, su

ch a

s mor

tgag

es a

nd c

olla

tera

l loa

ns.

BON

DS

The

bond

fac

tors

are

bas

ed o

n ca

sh f

low

mod

elin

g us

ing

hist

oric

ally

adj

uste

d de

faul

t rat

es f

or e

ach

bond

cat

egor

y. F

or e

ach

of 2

,000

tria

ls, a

nnua

l eco

nom

ic

cond

ition

s wer

e ge

nera

ted

for t

he te

n-ye

ar m

odel

ing

perio

d. E

ach

bond

of a

400

-bon

d po

rtfol

io w

as a

nnua

lly te

sted

for d

efau

lt (b

ased

on

a “r

oll o

f the

dic

e”) w

here

th

e de

faul

t pro

babi

lity

varie

s by

des

igna

tion

cate

gory

and

that

yea

r’s

econ

omic

env

ironm

ent.

Whe

n a

defa

ult t

akes

pla

ce, t

he a

ctua

l los

s co

nsid

ers

the

expe

cted

pr

inci

pal l

oss b

y ca

tego

ry, t

he ti

me

until

the

sale

act

ually

occ

urs,

and

the

assu

med

tax

cons

eque

nces

. Onl

y de

faul

t ris

k is

reco

gniz

ed in

the

RB

C fa

ctor

s be

caus

e,

unde

r sta

tuto

ry a

ccou

ntin

g, b

onds

are

gen

eral

ly c

arrie

d at

thei

r am

ortiz

ed v

alue

on

the

stat

utor

y an

nual

sta

tem

ent,

so c

hang

es in

the

mar

ket v

alue

of t

he b

onds

fo

llow

ing

swin

gs in

inte

rest

rate

s do

not,

as a

gen

eral

rule

, affe

ct th

e ca

pita

l and

surp

lus o

f the

regu

late

d en

titie

s unl

ess t

he b

onds

are

act

ually

sold

. The

acc

ount

ing

for r

epor

ting

entit

ies c

an b

e su

bsta

ntia

lly d

iffer

ent f

rom

oth

er re

gula

ted

entit

ies,

but t

he R

BC fo

rmul

a co

ntin

ues t

o re

cogn

ize

only

def

ault

risk.

Ther

e is

no R

BC

requ

irem

ent f

or b

onds

gua

rant

eed

by th

e fu

ll fa

ith a

nd c

redi

t of t

he U

nite

d St

ates

bec

ause

ther

e is

virtu

ally

no

defa

ult r

isk

asso

ciat

ed w

ith th

ese

secu

ritie

s.

The

fact

or fo

r NA

IC 0

6 bo

nds r

ecog

nize

s tha

t the

boo

k/ad

just

ed c

arry

ing

valu

e of

thes

e bo

nds r

efle

cts a

loss

of v

alue

upo

n de

faul

t by

bein

g m

arke

d to

mar

ket.

The

book

/adj

uste

d ca

rryi

ng v

alue

of a

ll bo

nds a

nd re

late

d fix

ed in

com

e in

vestm

ents

shou

ld b

e re

porte

d in

Col

umn

(1).

The

bond

s are

split

into

seve

n di

ffere

nt ri

sk

clas

sific

atio

ns. T

hese

risk

cla

ssifi

catio

ns a

re b

ased

on

the

NA

IC d

esig

natio

ns a

ssig

ned.

For

long

-term

bon

ds, t

hese

cla

ssifi

catio

ns a

re fo

und

on L

ines

11.

1 th

roug

h 11

.6 le

ss th

e hy

brid

s Lin

es 7

.1 th

roug

h 7.

6 of

Sch

edul

e D

, Par

t 1A

, Sec

tion

1 of

the

annu

al st

atem

ent.

Det

ail E

limin

ated

to C

onse

rve

Spac

e


11/19/20


Ente

r th

e bo

ok/a

djus

ted

carr

ying

val

ue o

f the

bon

ds, b

y N

AIC

des

igna

tion

cate

gory

, in

Col

umn

(1).

The

RB

C re

quire

men

t will

be

auto

mat

ical

ly c

alcu

late

d in

C

olum

n (2

).

MIS

CEL

LAN

EOU

S FI

XED

INC

OM

E A

SSET

S

The

fact

or fo

r cas

h is

0.3

per

cent

. It i

s re

cogn

ized

that

ther

e is

a s

mal

l ris

k re

late

d to

pos

sible

inso

lven

cy o

f the

ban

k w

here

cas

h de

posit

s ar

e he

ld. T

his

fact

or,

equi

vale

nt to

an

unaf

filia

ted

NA

IC 0

1 bo

nd, r

efle

cts t

he s

hort-

term

nat

ure

of th

is ri

sk. T

he re

quire

d ris

k-ba

sed

capi

tal f

or c

ash

will

not

be

less

than

zer

o, e

ven

if th

e co

mpa

ny’s

cas

h po

sitio

n is

neg

ativ

e.

The

Shor

t-Ter

m In

vestm

ents

to b

e in

clud

ed in

this

sect

ion

are

thos

e sh

ort-t

erm

inve

stmen

ts n

ot re

flect

ed e

lsew

here

in th

e fo

rmul

a. T

he 0

.3 p

erce

nt fa

ctor

is e

qual

to

the

fact

or fo

r cas

h. T

he a

mou

nt e

nter

ed h

ere

shou

ld e

qual

the

tota

l sho

rt-te

rm in

vestm

ents

foun

d in

Sch

edul

e D

A, P

art 1

, Col

umn

7, L

ine

8399

999

less

bon

ds

that

are

con

tain

ed in

Sch

edul

e D

, Par

t 1A

, Sec

tion

1.

Col

late

ral l

oans

and

mor

tgag

e lo

ans

are

gene

rally

a s

mal

l por

tion

of th

e to

tal p

ortfo

lio v

alue

. A f

acto

r of

5 p

erce

nt is

con

siste

nt w

ith o

ther

ris

k-ba

sed

capi

tal

form

ulas

stud

ied

by th

e w

orki

ng g

roup

.

The

book

adj

uste

d ca

rryi

ng v

alue

of N

AIC

01

and

02 W

orki

ng C

apita

l Fin

ance

Inve

stm

ents

, Lin

es (2

3) a

nd (2

4), s

houl

d eq

ual t

he N

otes

to F

inan

cial

Sta

tem

ent,

Line

s 5M

(01a

) and

5M

(01b

), C

olum

n 3

of th

e an

nual

stat

emen

t.

Oth

er L

ong-

Term

Inve

sted

Ass

ets a

re th

ose

that

are

liste

d in

Sch

edul

e B

A a

nd a

re so

mew

hat m

ore

spec

ulat

ive

and

risky

than

mos

t oth

er in

vestm

ents.

The

refo

re, a

20

per

cent

fact

or is

con

siste

nt w

ith o

ther

risk

-bas

ed c

apita

l for

mul

as st

udie

d by

the

wor

king

gro

up.

Low

inco

me

hous

ing

tax

cred

it in

vest

men

ts ar

e re

porte

d in

Col

umn

(1) i

n ac

cord

ance

with

SSA

P No

. 93—

Low

Inco

me

Hou

sing

Tax

Cre

dit P

rope

rty

Inve

stmen

ts.

Fede

ral G

uara

ntee

d Lo

w-I

ncom

e H

ousin

g Ta

x C

redi

t (LI

HTC

) inv

estm

ents

are

to b

e in

clud

ed in

Lin

e (2

6). T

here

mus

t be a

n al

l-inc

lusi

ve g

uara

ntee

from

an

AR

O-

rate

d en

tity

that

gua

rant

ees t

he y

ield

on

the

inve

stmen

t.

Fede

ral N

on-G

uara

ntee

d LI

HTC

inve

stmen

ts w

ith th

e fo

llow

ing

risk

miti

gatio

n fa

ctor

s are

to b

e in

clud

ed in

Lin

e (2

7):

a)A

leve

l of l

ever

age

belo

w 5

0 pe

rcen

t. Fo

r a L

IHTC

Fun

d, th

e le

vel o

f lev

erag

e is

mea

sure

d at

the

fund

leve

l.b)

Ther

e is a

tax

cred

it gu

aran

tee a

gree

men

t fro

m g

ener

al p

artn

er o

r man

agin

g m

embe

r. Th

is ag

reem

ent r

equi

res t

he g

ener

al p

artn

er o

r man

agin

g m

embe

r to

reim

burs

e in

vest

ors

for a

ny s

hortf

alls

in ta

x cr

edits

due

to e

rror

s of

com

plia

nce,

for t

he li

fe o

f the

par

tner

ship

. For

an

LIH

TC fu

nd, a

tax

cred

itgu

aran

tee

is re

quire

d fro

m th

e de

velo

pers

of t

he lo

wer

-tier

LIH

TC p

rope

rties

to th

e up

per-t

ier p

artn

ersh

ip.

Stat

e G

uara

ntee

d LI

HTC

inve

stmen

ts th

at a

t a m

inim

um m

eet t

he fe

dera

l req

uire

men

ts fo

r gua

rant

eed

LIH

TC in

vestm

ents

are

to b

e in

clud

ed in

Lin

e (2

8).

Stat

e N

on-G

uara

ntee

d LI

HTC

inve

stmen

ts th

at a

t a m

inim

um m

eet t

he fe

dera

l req

uire

men

ts fo

r non

-gua

rant

eed

LIH

TC in

vest

men

ts a

re to

be

incl

uded

on

Line

(2

9).

All

Oth

er L

IHTC

inve

stmen

ts, st

ate

and

fede

ral L

IHTC

inve

stm

ents

that

do

not m

eet t

he re

quire

men

ts o

f Lin

es (2

7) th

roug

h (3

0) w

ould

be

repo

rted

on L

ine

(30)

.

Det

ail E

limin

ated

to C

onse

rve

Spac

e


11/19/20


FIX

ED IN

CO

ME

ASS

ETS

BON

DS

(1A

)(1

)(2

)

Elec

troni

c O

nly

Tabl

es S

ourc

eB

ook/

Adj

uste

d C

arry

ing

Val

ueA

nnua

l Sta

tem

ent S

ourc

e:

Sch

D P

t 1A

Sn

1B

ook/

Adj

uste

d C

arry

ing

Val

ueFa

ctor

RB

C R

equi

rem

ent

(1)

NA

IC 1

.A -

U.S

. Gov

ernm

ent -

Dire

ct a

nd G

uara

ntee

d an

d N

AIC

U.S

. Dire

ct

Obl

igat

ions

/Ful

l Fai

th a

nd C

redi

t Exe

mpt

Mon

ey M

arke

t Fun

ds L

ist

Tabl

e A

Col

umn

(4) L

ine

(1)

0C

olum

n 7,

Lin

e 1.

10

0.00

000

(2)

NA

IC D

esig

natio

n C

ateg

ory

1.A

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (2

)0

(3)

NA

IC D

esig

natio

n C

ateg

ory

1.B

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (3

)0

(4)

NA

IC D

esig

natio

n C

ateg

ory

1.C

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (4

)0

(5)

NA

IC D

esig

natio

n C

ateg

ory

1.D

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (5

)0

(6)

NA

IC D

esig

natio

n C

ateg

ory

1.E

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (6

)0

(7)

NA

IC D

esig

natio

n C

ateg

ory

1.F

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (7

)0

(8)

NA

IC D

esig

natio

n C

ateg

ory

1.G

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (8

)0

(9)

Tota

l NA

IC 0

1 B

onds

Sum

of L

ines

(1) t

hrou

gh (8

)0

Col

umn

7, L

ines

11.

1 - 7

.10

(9A

)To

tal O

ther

NA

IC 0

1 B

onds

xxx

Line

s (9)

- (1

)0

0.00

300

(10)

NA

IC D

esig

natio

n C

ateg

ory

2.A

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (9

)0

(11)

NA

IC D

esig

natio

n C

ateg

ory

2.B

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (1

0)0

(12)

NA

IC D

esig

natio

n C

ateg

ory

2.C

Bon

dsTa

ble

A C

olum

n (4

) Lin

e (1

1)0

(13)

Tota

l NA

IC 0

2 B

onds

Sum

of L

ines

(10)

thro

ugh

(12)

0C

olum

n 7,

Lin

es 1

1.2

- 7.2

00.

0100

0(1

4)N

AIC

Des

igna

tion

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11/19/20


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8


11/19/20



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

DATE: 11/3/2019

CONTACT PERSON: Eva Yeung

TELEPHONE: 816-783-8407


ON BEHALF OF: Catastrophe Risk (E) Subgroup

NAME: Wanchin Chou

TITLE: Chair

AFFILIATION: Connecticut Department of Insurance

ADDRESS: 153 Market St,

Hartford, CT 06103

FOR NAIC USE ONLY

Agenda Item # 2020-12-CR

Year 2020

DISPOSITION

[ ] ADOPTED

[ ] REJECTED

[ ] DEFERRED TO


[ x ] EXPOSED 11/3/20

[ ] OTHER (SPECIFY)


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

[ ] Fraternal RBC Blanks [ ] Health RBC Instructions [ ] Property/Casualty RBC Instructions [ ] Life RBC Blanks [ ] Fraternal RBC Instructions [ x ] OTHER __Cat Event Lists___

DESCRIPTION OF CHANGE(S) 2020 U.S. and non-U.S. Catastrophe Event Lists

REASON OR JUSTIFICATION FOR CHANGE ** New events were determined based on the sources from Swiss Re and Aon Benfield.

Additional Staff Comments:

11/3/20 – The Cat Risk SG and the PCRBC WG exposed the 2020 Cat Event Lists for 7 days ending 11/9/20. 11/11/20 – The Cat Risk SG and the PCRBC WG adopted the 2020 Cat Event Lists.

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

Attachment Ten Capital Adequacy (E) Task Force

11/19/20


U.S.

List

of C

atas

trop

hes f

or U

se in

Rep

ortin

g ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

Type

of E

vent

Nam

eD

ate

Loca

tion

Ove

rall

loss

es w

hen

occu

rred

Hur

rican

eIr

ene

2011

4,30

0,00

0,00

0$

Trop

ical

Sto

rmLe

e20

1131

5,00

0,00

0$

Hur

rican

eSa

ndy

2012

50,0

00,0

00,0

00$

Hur

rican

eIs

aac

2012

970,

000,

000

$Tr

opic

al S

torm

Deb

by20

1210

5,00

0,00

0$

Earth

quak

e20

14C

alifo

rnia

25+

mill

ion

Hur

rican

ePa

trici

a20

1525

+ m

illio

nH

urric

ane

Joaq

uin

2015

25+

mill

ion

Hur

rican

eM

atth

ew20

16Fl

orid

a, N

orth

Car

olin

a, S

outh

Car

olin

a, G

eorg

ia a

nd V

irgin

ia2,

698,

400,

000

$

Hur

rican

eH

erm

ine

2016

Flor

ida,

Nor

th C

arol

ina,

Sou

th C

arol

ina,

Geo

rgia

and

Virg

inia

245,

640,

000

$H

urric

ane

Har

vey

2017

Texa

s, Lo

usia

na 2

5+ m

illio

n H

urric

ane

Jose

2017

East

Coa

st o

f the

Uni

ted

Stat

es 2

5+ m

illio

n H

urric

ane

Irm

a20

17Ea

ster

n U

nite

d St

ates

25+

mill

ion

Hur

rican

eM

aria

2017

Sout

heas

tern

Uni

ted

Stat

es, M

id-A

tlant

ic S

tate

s 2

5+ m

illio

n

Hur

rican

eN

ate

2017

Loui

sian

a, M

issi

ssip

pi, A

laba

ma,

Ten

ness

ee a

nd

East

ern

Uni

ted

Stat

es 2

5+ m

illio

n

Trop

ical

Sto

rmA

lber

to20

18So

uthe

ast,

Mid

wes

t 2

5+ m

illio

n H

urric

ane

Lane

2018

Haw

aii

25+

mill

ion

Trop

ical

Sto

rmG

ordo

n20

18So

uthe

ast,

Gul

f coa

st o

f the

Uni

ted

Stat

es,

Ark

ansa

s and

Mis

sour

i 2

5+ m

illio

n

Hur

rican

eFl

oren

ce20

18So

uthe

ast,

Mid

-Atla

ntic

25+

mill

ion

Hur

rican

eM

icha

el20

18So

uthe

aste

rn a

nd E

ast C

oast

s of U

nite

d St

ates

25+

mill

ion

Hur

rican

eD

oria

n20

19So

uthe

ast,

Mid

-Atla

ntic

500+

mill

ion

Hur

rican

eB

arry

2019

Sout

heas

t, M

idw

est,

Nor

thea

st30

0+ m

illio

nTr

opic

al S

torm

Imel

da20

19Pl

ains

, Sou

thea

st25

+ m

illio

nTr

opic

al S

torm

Nes

tor

2019

Sout

heas

t25

+ m

illio

nH

urric

ane

Lore

nzo

2019

Loui

sian

a, M

issi

ssip

pi, T

exas

and

Ark

ansa

s25

+ m

illio

nTr

opic

al S

torm

Cris

toba

l20

20So

uthe

ast,

Plai

ns, M

idw

est

150

mill

ion

Trop

ical

Sto

rmFa

y20

20So

uthe

ast,

Nor

thea

st40

0 m

illio

nH

urric

ane

Han

na20

20Te

xas

350

mill

ion

Hur

rican

eIs

aias

2020

Sout

heas

t, M

id-A

tlant

ic, N

orth

east

>3

billi

onH

urric

ane

Laur

a20

20Pl

ains

, Sou

thea

st, M

id-A

tlant

ic>

4 bi

llion

Hur

rican

eSa

lly20

20So

uthe

ast (

Ala

bam

a, M

issi

ssip

pi, L

ouis

iana

)>

1 bi

llion

Trop

ical

Sto

rmB

eta

2020

Plai

ns, S

outh

east

25+

mill

ion

Hur

rican

eD

elta

2020

Gul

f Coa

st o

f Uni

ted

Stat

es, S

outh

east

, Nor

thea

st

(AL,

GA

, NC

, SC

, MS,

LA

, TX

)>

2 bi

llion

Hur

rican

eZe

ta20

20G

ulf c

oast

of t

he U

nite

d St

ates

, Sou

thea

ster

n U

nite

d St

ates

, Mid

-Atla

ntic

>1.

5 bi

llion


11/19/20


Non

U.S.

List

of C

atas

trop

hes F

or U

se in

Rep

ortin

g Ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

Year

Even

t Typ

eBe

gin

End

Even

tCo

untr

yAf

fect

ed A

rea

(Det

ail)

Mun

ich

Re

NatC

ATSe

rvic

e In

sure

d lo

sses

(in

or

igin

al v

alue

s, U

S$m

) C

riter

ia: i

nsur

ed

loss

es e

qual

/gre

ater

US

$ 25

m. T

ries

to

refle

ct n

on-U

S lo

sses

on

ly

Swis

s R

e Si

gma:

In

sure

d Lo

ss E

st.

US$m

(mid

poi

nt

show

n if

rang

e gi

ven)

M

ostly

refle

ct to

tal U

S an

dno

nUS

loss

es

com

bine

d.20

11Tr

opic

al C

yclo

ne20

/09/

2011

22/0

9/20

11Ty

phoo

n R

oke

(Ony

ok),

flood

s12

0012

10

2011

Trop

ical

Cyc

lone

22/0

8/20

1102

/09/

2011

Hur

rican

e Ire

neC

arib

bean

Isla

nds

and

East

ern

Can

ada

300

5300

2011

Earth

quak

e13

/06/

2011

13/0

6/20

11Ea

rthqu

ake

New

Zeal

and

Sout

h Is

land

, Can

terb

ury,

Chr

istc

hurc

h,

L ytte

lton

800

2000

2011

Earth

quak

e11

/03/

2011

11/0

3/20

11Ea

rthqu

ake

Japa

n

Hon

shu,

Aom

ori,

Toho

ku; M

iyagi

, Se

ndai

; Fuk

ushi

ma,

Mito

; Iba

raki

; To

chig

i, U

tsun

omiya

; Iw

ate,

Mor

ioka

; Ya

mag

ata,

Chi

ba; T

okyo

3500

035

000

2011

Trop

ical

Cyc

lone

09/0

2/20

1109

/03/

2011

Trop

ical

Sto

rm T

alas

N/A

470

2011

Earth

quak

e22

/02/

2011

22/0

2/20

11Ea

rthqu

ake

New

Zeal

and

Sout

h Is

land

, Can

terb

ury,

Chr

istc

hurc

h,

Lytte

lton

1300

012

000

2011

Trop

ical

Cyc

lone

02/0

2/20

1107

/02/

2011

Cyc

lone

Yas

i

Que

ensl

and,

Tul

ly, T

owns

ville

, Mis

sion

Be

ach,

Car

dwel

l, G

iru, I

ngha

m,

Inni

sfai

l, C

asso

war

y C

oast

Shi

re,

Cai

rns,

Bed

arra

and

Dun

k is

land

s

1430

1360

2012

Earth

quak

e29

/05/

2012

29/0

5/20

12Ea

rthqu

ake

Italy

Emilia

-Rom

agna

, San

Fel

ice

del

Pana

ro, C

avez

zo, R

over

eto

di N

ovi,

Car

pi, C

onco

rdia

, Bol

ogna

, Mai

land

, Ao

sta

Valle

y, V

enic

e, M

irand

ola

1600

N/A

2013

Trop

ical

Cyc

lone

08/1

1/20

1312

/11/

2013

Typh

oon

Hai

yan

Philli

ppin

es, V

ietn

am, C

hina

700

N/A

2014

Earth

quak

e07

/07/

2014

Earth

quak

eM

exic

o, G

uate

mal

aN

/AN

/A25

+milio

n

2014

Earth

quak

e04

/01/

14Ea

rthqu

ake

Chi

leN

/AN

/A10

0+m

ilion

2014

Earth

quak

e12

/02/

2014

Earth

quak

eC

hina

N/A

N/A

350+

milio

n20

14Ea

rthqu

ake

05/0

4/20

14Ea

rthqu

ake

Chi

naN

/AN

/A80

+milio

n20

14Ea

rthqu

ake

05/0

5/20

14Ea

rthqu

ake

Thai

land

N/A

N/A

62+m

ilion

2014

Earth

quak

e05

/24/

14Ea

rthqu

ake

Chi

naN

/AN

/A60

+milio

n20

14Tr

opic

al S

torm

06/1

4/14

06/1

6/14

TS H

agib

isC

hina

N/A

N/A

131+

milio

n20

14Su

per T

ypho

on07

/08/

1407

/11/

14ST

Y N

eogu

riJa

pan

N/A

N/A

100+

milio

n20

14Su

per T

ypho

on07

/15/

1407

/20/

14ST

Y R

amm

asun

Philip

pine

s, C

hina

, Vie

tnam

N/A

N/A

570+

milio

n20

14Ty

phoo

n07

/22/

1407

/24/

14TY

Mat

mo

Taiw

an, C

hina

, Phi

lippi

nes

N/A

N/A

570+

milio

n20

14C

yclo

ne01

/10/

1401

/12/

14C

Y Ia

nTo

nga

N/A

N/A

48+m

ilion

2014

Cyc

lone

04/1

0/14

04/1

4/14

CY

ItaAu

stra

liaN

/AN

/A1+

billio

n20

15H

urric

ane

08/1

6/92

08/2

8/92

Hur

rican

And

rew

Baha

mas

Baha

mas

> 25

milli

on20

15H

urric

ane

10/2

0/15

10/2

4/15

Hur

rican

e Pa

trici

aC

entra

l Am

eric

a, M

exic

oN

/AN

/A>

25 m

illion

2015

Typh

oon

06/2

6/15

07/1

3/15

Typh

oon

Cha

n-ho

m

(Fal

con)

Gua

m, N

orth

ern

Mar

iana

Isla

nds,

Ph

ilippi

nes,

Jap

an, T

aiw

an, C

hian

, Ko

rea ,

Rus

sian

Far

Eas

tN

/AN

/A>

25 m

illion

2015

Seve

re T

ropi

cal

Stor

m

07/0

1/15

07/1

0/15

Seve

re T

ropi

cal S

torm

Li

nfa

(Ega

y)Ph

ilippi

nes,

Tai

wan

, Chi

naN

/AN

/A>

25 m

illion

2015

Typh

oon

07/0

2/15

07/1

8/15

Typh

oon

Nan

gka

Mar

shal

l Isl

ands

, Mar

iana

Isla

nds

and

Japa

nN

/AN

/A>

25 m

illion

2015

Typh

oon

07/2

9/15

08/1

2/15

Typh

oon

Soud

elor

(H

anna

)

Mar

iana

Isla

nds,

Jap

an, P

hilip

pine

s,

Taiw

an, E

aste

rn C

hina

and

Sou

th

Kore

aN

/AN

/A>

25 m

illion

2015

Typh

oon

08/1

3/15

08/3

0/15

Typh

oon

Gon

i (In

eng)

Mar

iana

Isla

nds,

Jap

an, P

hilip

pine

s,

Taiw

an, C

hina

, Rus

sia

and

Kore

aN

/AN

/A>

25 m

illion

2015

Seve

re T

ropi

cal

Stor

m

09/0

6/15

09/1

1/15

Seve

re T

ropi

cal S

torm

Et

auJa

pan,

Rus

sian

Far

Eas

tN

/AN

/A>

25 m

illion


11/19/20


Non

U.S.

List

of C

atas

trop

hes F

or U

se in

Rep

ortin

g Ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

2015

Typh

oon

09/1

9/15

09/3

0/15

Typh

oon

Duj

uan

(Jen

ny)

Ryu

kyu

Isla

nds,

Tai

wan

, Eas

t Chi

naN

/AN

/A>

25 m

illion

2015

Typh

oon

09/3

0/15

10/0

5/15

Typh

oon

Muj

igae

(K

abay

an)

Philip

pine

s, V

ietn

am a

nd C

hina

N/A

N/A

> 25

milli

on

2015

Typh

oon

10/1

2/15

10/2

1/15

Typh

oon

Kopp

u (L

ando

)N

orth

ern

Mar

iana

Isla

nds,

Phi

lippi

nes,

Ta

iwan

, Ryu

kyu

Isla

nds

N/A

N/A

> 25

milli

on

2015

Typh

oon

12/0

3/15

12/0

8/15

Stor

m D

esm

ond

Irela

nd, I

sle

of M

an, U

nite

d Ki

ngdo

m,

Icel

and,

Nor

way

and

Sw

eden

N/A

N/A

> 25

milli

on

2015

Hur

rican

e09

/28/

1510

/15/

15H

urric

ane

Joaq

uin

Car

ibbe

an Is

land

s, P

ortu

gal

N/A

N/A

> 25

milli

on20

15Ea

rthqu

ake

04/2

7/15

Earth

quak

eN

epal

N/A

N/A

> 25

milli

on20

15Ea

rthqu

ake

09/2

2/15

Earth

quak

eC

hile

N/A

N/A

> 25

milli

on

2016

Hur

rican

e08

/28/

1609

/06/

16H

urric

ane

Her

min

eD

omin

ican

Rep

ublic

, Cub

a, T

he

Baha

mas

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

02/1

6/16

02/2

2/16

TC W

inst

onSo

uth

Paci

fic Is

land

sN

/AN

/A>

25 m

illion

2016

Earth

quak

e02

/06/

16Ea

rthqu

ake

Taiw

anAs

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e01

/03/

16Ka

ohsi

ung

EQIn

dia,

Ban

glad

esh,

M

yanm

arAs

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e02

/14/

16C

hris

tchu

rch

EQN

ew Z

eala

ndO

cean

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e04

/14/

1604

/16/

16Ku

mam

oto

EQs

Japa

nAs

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e04

/16/

16Ec

uado

r EQ

Ecua

dor

Sout

h Am

eric

aN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

05/1

4/16

05/2

3/16

CY

Roa

nuSr

i Lan

ka, i

ndia

, Ba

ngla

desh

, Chi

naAs

iaN

/AN

/A>

25 m

illion

2016

Earth

quak

e08

/24/

16Ita

ly EQ

Italy

Euro

peN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

09/1

4/16

09/1

6/16

STY

Mer

anti

Chi

na, T

aiw

an,

Philip

pine

sAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

07/0

8/16

07/1

2/16

STY

Nep

arta

kC

hina

, Tai

wan

Asia

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

09/2

6/16

09/2

9/16

TY M

egi

Taiw

an, C

hina

Asia

N/A

N/A

> 25

milli

on

2016

Earth

quak

e09

/10/

16Ka

gera

EQ

Tanz

ania

, Uga

nda

Afric

aN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

08/2

9/16

09/0

1/16

TY L

ionr

ock

Chi

na, J

apan

, Sou

th

Kore

aAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

09/1

9/16

09/2

2/16

TY M

alak

asJa

pan,

Chi

naAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

08/1

8/16

08/2

0/16

TS D

ianm

uC

hina

, Vie

tnam

Asia

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

07/3

1/16

08/0

3/16

TY N

idia

Chi

na, P

hillip

pine

s Vi

etna

mAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

08/0

2/16

08/1

0/16

HU

Ear

lBe

lize,

Mex

ico,

C

arrib

bean

Isla

nds

Car

ibbe

an Is

land

s, M

exic

o an

d C

entra

l Am

eric

aN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

08/2

2/16

08/2

3/16

TS M

indu

lleJa

pan

Asia

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

09/0

6/16

09/0

8/16

HU

New

ton

Mex

ico

Nor

th A

mer

ica

(non

-U.S

.)N

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

10/0

4/16

10/0

7/16

STY

Cha

baJa

pan,

Kor

eaAs

iaN

/AN

/A>

25 m

illion

2016

Trop

ical

Cyc

lone

10/1

6/16

10/2

2/16

STY

Hai

ma

Philli

pine

s, C

hina

Asia

N/A

N/A

> 25

milli

on

2016

Trop

ical

Cyc

lone

10/1

4/16

10/2

0/16

TY S

arik

aPh

illipi

nes,

Chi

na,

Viet

anm

Asia

N/A

N/A

> 25

milli

on

2016

Earth

quak

e10

/26/

16C

entra

l Ita

ly EQ

Italy

Euro

peN

/AN

/A>

25 m

illion

2016

Earth

quak

e10

/27/

16C

entra

l Ita

ly EQ

Italy

Euro

peN

/AN

/A>

25 m

illion

2016

Earth

quak

e10

/21/

16To

ttori

Japa

nAs

iaN

/AN

/A>

25 m

illion

2016

Hur

rican

e09

/28/

1610

/10/

16H

urric

ane

Mat

thew

Car

ribbe

an Is

land

s an

d Ea

ster

n C

anad

aN

/AN

/A>

25 m

illion

2016

Hur

rican

e08

/28/

1609

/06/

16H

urric

ane

Her

min

eD

omin

ican

Rep

ublic

, Cub

a, T

he

Baha

mas

N/A

N/A

> 25

milli

on

2017

Earth

quak

e01

/18/

17Ea

rthqu

ake

Italy

Euro

peN

/AN

/A>

25 m

illion

2017

Earth

quak

e01

/28/

17Ea

rthqu

ake

Chi

naAs

iaN

/AN

/A>

25 m

illion

2017

Earth

quak

e02

/10/

17Ea

rthqu

ake

Philip

pine

sAs

iaN

/AN

/A>

25 m

illion

2017

Earth

quak

e03

/27/

17Ea

rthqu

ake

Chi

naAs

iaN

/AN

/A>

25 m

illion

2017

Cyc

lone

03/2

8/17

04/0

5/17

CY

Deb

bie

Aust

ralia

Que

ensl

and,

New

Sou

th W

ales

, New

Ze

alan

dN

/AN

/A>

25 m

illion


11/19/20


Non

U.S.

List

of C

atas

trop

hes F

or U

se in

Rep

ortin

g Ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

2017

Earth

quak

e05

/11/

17Ea

rthqu

ake

Chi

naAs

iaN

/AN

/A>

25 m

illion

2017

Typh

oon

07/2

9/17

07/3

1/17

TY N

esat

& T

S H

aita

ngC

hina

, Tai

wan

, Ph

ili ppi

nes

Asia

N/A

N/A

> 25

milli

on

2017

Typh

oon

08/0

7/17

08/0

9/17

Typh

oon

Nor

uJa

pan

Asia

N/A

N/A

> 25

milli

on20

17Ea

rthqu

ake

08/0

8/17

Earth

quak

eC

hina

Asia

N/A

N/A

> 25

milli

on20

17T y

phoo

n08

/23/

1708

/24/

17TY

Hat

oC

hina

Mac

au, H

ong

Kong

N/A

N/A

> 25

milli

on20

17Ty

phoo

n08

/25/

1708

/28/

17TY

Pak

har

Chi

naAs

iaN

/AN

/A>

25 m

illion

2017

Hur

rican

e08

/25/

1709

/02/

17H

urric

ane

Har

vey

Car

ibbe

an Is

land

s an

d C

entra

l Am

eric

aN

/AN

/A>

25 m

illion

2017

Hur

rican

e08

/30/

1709

/16/

17H

urric

ane

Irma

Car

ibbe

an Is

land

s an

d C

a pe

Verd

eN

/AN

/A>

25 m

illion

2017

Hur

rican

e09

/05/

1709

/26/

17H

urric

ane

Jose

Car

ibbe

an Is

land

s an

d Ea

ster

n C

anad

aN

/AN

/A>

25 m

illion

2017

Hur

rican

e09

/16/

1710

/03/

17H

urric

ane

Mar

iaC

arib

bean

Isla

nds,

UK,

Fra

ncs

and

Spai

nN

/AN

/A>

25 m

illion

2017

Earth

quak

e09

/07/

17Ea

rthqu

ake

Mex

ico,

Gua

tem

ala

N/A

N/A

> 25

milli

on20

17Ea

rthqu

ake

09/1

9/17

Earth

quak

eM

exic

oM

exic

o C

ity>2

00N

/A>

25 m

illion

2017

Hur

rican

e10

/04/

17H

urric

ane

Nat

eC

entra

l Am

eric

a, C

aym

an Is

land

s,

Cub

a Yu

cata

n Pe

nins

ula

N/A

N/A

> 25

milli

on

2018

Earth

quak

e02

/06/

18Ea

rthqu

ake

Taiw

an>

25 m

illion

2018

Earth

quak

e02

/16/

18Ea

rthqu

ake

Mex

ico

> 25

milli

on

2018

Cyc

lone

02/0

9/18

02/2

0/18

CY

Gita

Tong

a, F

iji, S

amoa

, N

ew Z

eala

nd>

25 m

illion

2018

Earth

quak

e02

/26/

18Ea

rthqu

ake

Papu

a N

ew G

uine

a>

25 m

illion

2018

Earth

quak

e03

/05/

18Ea

rthqu

ake

Papu

a N

ew G

uine

a>

25 m

illion

2018

Cyc

lone

03/1

7/18

CY

Mar

cus

> 25

milli

on

2018

Trop

ical

Sto

rm05

/23/

1805

/27/

18Tr

opic

al S

torm

Mek

unu

Yam

en, O

man

, Sa

udi A

rabi

a>

25 m

illion

2018

Trop

ical

Sto

rm06

/02/

1806

/07/

18Tr

opic

al S

torm

Ew

inia

rVi

etna

m, C

hina

, Ta

iwan

, Phi

lippi

nes

and

Ryu

kyu

Isla

nds

Gua

ngdo

ng P

rovi

nce,

Jia

ngxi

, Fuj

ian,

Zh

ejia

ng P

rovi

nces

, and

Hai

nan

Isla

nd.

> 25

milli

on

2018

Earth

quak

e06

/18/

18Ea

rthqu

ake

Japa

n>

25 m

illion

2018

Supe

r Typ

hoon

07/1

0/18

07/1

2/18

STY

Mar

iaC

hina

, Tai

wan

, G

uam

and

Jap

anFu

jian

prov

ince

, Yan

tze

Riv

er B

asin

, Ja

pan'

s R

yuky

u Is

land

s>

25 m

illion

2018

Trop

ical

Sto

rm07

/17/

1807

/24/

18TS

Son

h-Ti

nhVi

etna

m, C

hina

, Lo

asJa

pan,

Rus

sian

Far

Eas

t>

25 m

illion

2018

Trop

ical

Sto

rm07

/22/

1807

/25/

15TS

Am

pil

Chi

naJi

angs

u, Z

hejia

ng, S

hand

ong,

and

H

ebei

> 25

milli

on

2018

Typh

oon

07/2

7/18

08/0

3/18

TY J

ongd

ari

Japa

n, C

hina

> 25

milli

on20

18Ea

rthqu

ake

08/0

5/15

08/0

9/18

Earth

quak

eIn

done

sia

> 25

milli

on

2018

Trop

ical

Sto

rm08

/09/

1808

/15/

18TS

Yag

iPh

ilippi

nes,

Chi

naZh

ejia

ng, A

nhui

, Jia

ngsu

and

Sh

ando

n g P

rovi

nces

.>

25 m

illion

2018

Trop

ical

Sto

rm08

/13/

1808

/19/

18TS

Beb

inca

Chi

naH

ong

Kong

, Gua

ngdo

ng a

nd H

aina

n>

25 m

illion

2018

Typh

oon

08/1

6/18

08/1

8/18

TY R

umbi

aC

hina

Shan

ghai

, Jia

ngsu

, Zhe

hian

g, A

nhui

, Sh

ando

ng a

nd H

enan

> 25

milli

on

2018

Typh

oon

08/2

3/18

08/2

5/18

TY S

oulik

Japa

n, S

outh

Kor

ea,

Chi

na a

nd R

ussi

aH

aena

m C

ount

y, S

outh

Jeo

lla P

rovi

nce

> 25

milli

on

2018

Typh

oon

09/0

4/18

09/0

5/18

RY

Jebi

Japa

n, M

aria

na

Isla

nds,

Tai

wan

, Ja

pan,

Rus

sian

Far

Ea

st a

nd A

rtic

> 25

milli

on


11/19/20


Non

U.S.

List

of C

atas

trop

hes F

or U

se in

Rep

ortin

g Ca

tast

roph

e Da

ta in

PR0

36 a

nd P

R100

+

2018

Earth

quak

e09

/06/

18Ea

rthqu

ake

Japa

nH

okka

ido

> 25

milli

on

2018

Supe

r Typ

hoon

09/1

5/18

0918

/18

STY

Man

gkhu

tN

. Mar

iana

Isla

nds,

Philip

pine

s, C

hina

an

d H

ong

Kong

> 25

milli

on

2018

Hur

rican

eLe

slie

09/2

3/18

Hur

rican

e Le

slie

Azor

es, B

erm

uda,

Eu

rope

Azor

es, B

erm

uda,

Mad

eira

, Ibe

rian

Peni

nsul

a, F

ranc

e>

25 m

illion

2018

Hur

rican

e10

/07/

1810

/16/

18H

urric

ane

Mic

hael

Cen

tral A

mer

ican

, Yu

cata

n Pe

nins

ula,

C

aym

an Is

land

s,

Cub

a, A

tlant

ic,

Can

ad

> 25

milli

on

2019

Cyc

lone

05/0

3/19

05/0

5/19

Cyc

lone

Fan

iIn

dia,

Ban

glad

esh

>500

milli

on20

19Ea

rthqu

ake

06/1

7/19

Earth

quak

eC

hina

> 25

milli

on20

19Tr

o pic

al S

torm

08/0

1/19

08/0

8/19

Trop

ical

Sto

rm W

ipha

Chi

na, V

ietn

am>

25 m

illion

2019

Typh

oon

08/0

9/19

08/1

1/19

Typh

oon

Leki

ma

Chi

na>

855

milli

on20

19T y

phoo

n08

/15/

1908

/16/

19T y

phoo

n Kr

osa

Japa

n>2

5 m

illion

2019

Hur

rican

e08

/31/

1909

/07/

19H

urric

ane

Dor

ian

Car

ibbe

an,

Baha

mas

, Can

ada

>1 b

illion

2019

Typh

oon

09/0

5/19

09/0

8/19

Typh

oon

Ling

ling

Japa

n, C

hina

, Kor

ea>5

.78

billio

n

2019

Typh

oon

09/0

8/19

09/0

9/19

Typh

oon

Faxa

iJa

pan

> 7

billio

n20

19H

urric

ane

09/1

9/19

09/2

2/19

Hur

rican

e H

umbe

rtoBe

rmud

a>2

5+ m

illion

2019

Hur

rican

e09

/17/

1909

/26/

19H

urric

ane

Lore

nzo

Portu

gal

>25+

milli

on20

19Ea

rthqu

ake

11/2

6/19

Earth

quak

eAl

bani

a>2

5+ m

illion

2019

Cyc

lone

11/0

8/19

11/1

1/19

Cyc

lone

Mat

mo

(Bul

bul)

Indi

a, B

angl

ades

h>2

5+ m

illion

2019

T yph

oon

10/0

1/19

10/0

2/19

T yph

oon

Hag

ibis

Japa

n>

7 bi

llion

2019

Earth

quak

e12

/18/

19Ea

rthqu

ake

Philip

pine

s>2

5+ m

illion

2020

Earth

quak

e03

/22/

20Ea

rthqu

ake

Cro

atia

>25+

milli

on

04/0

1/20

04/1

1/20

Cyc

lone

Har

old

Solo

mon

Isla

nds,

C

anua

tu, F

iji, T

onga

> 25

+ m

illion

2020

Trop

ical

Sto

rm05

/31/

20Tr

opic

al S

torm

Am

anda

El S

alva

dor,

Gua

tem

ala,

H

ondu

ras

> 25

+ m

illion

2020

Trop

ical

Sto

rm06

/01/

2006

/05/

20Tr

opic

al S

torm

Cris

toba

lM

exic

o, G

uate

mal

a,

El S

alva

dor

150

milli

on

2020

Hur

rican

e07

/25/

2007

/27/

20H

urric

ane

Han

naM

exic

o35

0 m

illion

2020

Hur

rican

e07

/28/

2008

/01/

20H

urric

ane

Isai

asC

arib

bean

, Can

ada

> 3

billio

n20

20H

urric

ane

08/2

2/20

08/2

5/20

Hur

rican

e La

ura

Car

ibbe

an>

4 bi

llion

2020

Typh

oon

05/1

5/20

05/2

2/20

Typh

oon

Amph

anIn

dia,

Ban

glad

esh,

Sr

i Lan

ka15

billi

on

2020

Tro p

ical

Sto

rm06

/03/

2006

/04/

20Tr

opic

al S

torm

Nis

arga

Indi

a>

25+

milli

on20

20T y

phoo

n08

/03/

2008

/04/

20Ty

phoo

n H

agup

itC

hina

, Tai

wan

> 10

0+ m

illion

2020

Hur

rican

e10

/05/

2010

/12/

20H

urric

ane

Del

taJa

mai

ca, N

icar

agua

, C

aym

an Is

land

, Yu

cata

n Pe

nins

ula

> 2

billio

n

2020

Hur

rican

e10

/24/

2010

/30/

20H

urric

ane

Zeta

Cay

man

Isla

nds,

Ja

mai

ca, C

entra

l Am

eric

a, Y

ucat

an

Peni

nsul

a, Ir

elan

d,

Uni

ted

Kin g

dom

> 1.

5 bi

llion

2020

Cyc

lone

04/0

1/20

04/1

1/20

Cyc

lone

Har

old

Solo

mon

Isla

nds,

C

anua

tu, F

iji, T

onga

> 25

+ m

illion

Sour

ce:

Mun

ich

Re'

s NA

T C

AT

Serv

ice,

Sw

iss R

e Si

gma

and

Aon

Ben

field


11/19/20


Cap

ital A

dequ

acy

(E) T

ask

Forc

eC

API

TAL

AD

EQU

AC

Y (E

) TA

SK F

OR

CE

WO

RK

ING

AG

END

A IT

EMS

FOR

CA

LEN

DA

R Y

EAR

202

0

Expe

cted

2020

2020

Com

plet

ion

#O

wne

rPr

iori

tyD

ate

Wor

king

Age

nda

Item

Sour

ceC

omm

ents

Ong

oing

Item

s – L

ife R

BC1

Life

RB

C

WG

Ong

oing

Ong

oing

Mak

e te

chni

cal c

orre

ctio

ns to

Life

RB

C in

stru

ctio

ns, b

lank

and

/or m

etho

ds to

pr

ovid

e fo

r con

sist

ent t

reat

men

t am

ong

asse

t typ

es a

nd a

mon

g th

e va

rious

co

mpo

nent

s of t

he R

BC

cal

cula

tions

for a

sing

le a

sset

type

. 2

Life

RB

C

WG

120

21 o

r lat

er1.

Mon

itor t

he im

pact

of t

he c

hang

es to

the

varia

ble

annu

ities

rese

rve

fram

ewor

k an

dris

k-ba

sed

capi

tal (

RB

C) c

alcu

latio

n an

d de

term

ine

if ad

ditio

nal r

evis

ions

nee

d to

be

mad

e.2.

Dev

elop

and

reco

mm

end

appr

opria

te c

hang

es in

clud

ing

thos

e to

impr

ove

accu

racy

an

d cl

arit y

of v

aria

ble

annu

ity (V

A) c

apita

l and

rese

rve

requ

irem

ents

.

CA

TFB

eing

add

ress

ed b

y th

e V

aria

ble

Ann

uitie

s Cap

ital a

nd R

eser

ve (E

/A)

Subg

roup

3Li

fe R

BC

W

G1

2021

or l

ater

Prov

ide

reco

mm

enda

tions

for r

ecog

nizi

ng lo

ngev

ity ri

sk in

stat

utor

y re

serv

es a

nd/o

r R

BC

, as a

ppro

pria

te.

New

Jers

eyB

eing

add

ress

ed b

y th

e Lo

ngev

ity (E

/A)

Subg

roup

Car

ry-O

ver

Item

s Cur

rent

ly b

eing

Add

ress

ed –

Life

RBC

4Li

fe R

BC

W

G1

2021

or l

ater

Upd

ate

the

curre

nt C

-3 P

hase

I o

r C-3

Pha

se II

met

hodo

logy

to in

clud

e in

dexe

d an

nuiti

es w

ith c

onsid

erat

ion

of c

ontin

gent

def

erre

d an

nuiti

es a

s wel

lA

AA

5Li

fe

RBC

W

G

220

21 o

r la

ter

Dev

elop

gui

danc

e, fo

r in

clus

ion

in th

e pr

opos

ed N

AIC

con

tinge

nt d

efer

red

annu

ity (C

DA

) gui

delin

es, f

or st

ates

as t

o ho

w c

urre

nt r

egul

atio

ns g

over

ning

ri

sk-b

ased

cap

ital r

equi

rem

ents

, inc

ludi

ng C

-3 P

hase

II, s

houl

d be

app

lied

to

cont

inge

nt d

efer

red

annu

ities

(CD

As)

. Rec

omm

end

a pr

oces

s for

rev

iew

ing

capi

tal a

dequ

acy

for

insu

rers

issu

ing

CD

As a

nd p

repa

re cl

arify

ing

guid

ance

, if

nece

ssar

y, d

ue to

diff

eren

t nom

encl

atur

e th

en u

sed

with

reg

ard

to C

DA

s. Th

e de

velo

pmen

t of t

his g

uida

nce

does

not

pre

clud

e th

e W

orki

ng G

roup

from

re

view

ing

CD

As a

s par

t of a

ny o

ngoi

ng o

r fu

ture

cha

rges

whe

re a

pplic

able

and

is

mad

e w

ith th

e un

ders

tand

ing

that

this

guid

ance

cou

ld c

hang

e as

a r

esul

t of

such

a r

evie

w.

10/2

1/13

Ref

erra

l fr

om A

C

omm

ittee

It is

impo

rtan

t to

cons

ider

the

impl

icat

ions

of w

ork

bein

g do

ne b

y th

e C

DA

and

VA

Issu

es W

orki

ng

Gro

ups t

o en

sure

con

siste

ncy

in

addr

essin

g th

ese

char

ges.

The

W

orki

ng G

roup

is m

onito

ring

the

prog

ress

of t

hat w

ork.

6Li

fe

RBC

W

G

120

21R

evie

w a

nd e

valu

ate

com

pany

subm

issio

ns fo

r th

e R

BC S

hort

fall

sche

dule

and

co

rres

pond

ing

adju

stm

ent t

o To

tal A

djus

ted

Cap

ital.

10/1

6/20

15

7Li

fe

RBC

W

G

120

21R

evie

w a

nd e

valu

ate

com

pany

subm

issio

ns fo

r th

e Pr

imar

y Se

curi

ty S

hort

fall

sche

dule

and

cor

resp

ondi

ng a

djus

tmen

t to

Aut

hori

zed

Con

trol

Lev

el.

10/1

6/20

15

8Li

fe

RBC

W

G

120

21 C

ontin

ue c

onsid

erat

ion

impa

cts a

nd m

odifi

catio

ns n

eces

sary

due

to th

e Fe

dera

l Tax

Cut

s and

Job

s Act

and

dev

elop

gui

danc

e fo

r us

ers o

f RBC

on

thos

e im

pact

s.

3/24

/201

8

9 5

Life

RB

C

WG

120

21D

eter

min

e if

any

adju

stm

ent i

s nee

ded

to th

e X

XX

/AX

XX

RB

C S

hortf

all

calc

ulat

ion

to a

ddre

ss su

rplu

s not

es is

sued

by

capt

ives

.11

/1/1

7 R

efer

ral

from

the

Rei

nsur

ance

(E)

Task

For

ce

3/24

/201

8

10 6

Life

RB

C

WG

120

21D

eter

min

e if

any

adju

stm

ent i

s nee

ded

due

to th

e ch

ange

s mad

e to

the

Life

and

H

ealth

Gua

rant

y As

soci

atio

n M

odel

Act

, Mod

el #

520.

9/1/

2018

11 7

Life

RB

C

WG

120

21D

eter

min

e if

any

adju

stm

ent i

s nee

ded

to th

e re

insu

ranc

e cr

edit

risk

in li

ght o

f ch

ange

s rel

ated

to c

olla

tera

l and

the

chan

ges m

ade

to th

e pr

oper

ty R

BC

form

ula.

9/1/

2018

12 8

Life

RB

C

WG

120

21D

iscu

ss a

nd d

eter

min

e th

e bo

nd fa

ctor

s for

the

20 d

esig

natio

ns.

Ref

erra

l fro

m

Inve

stm

ent R

BC

Ju

ly/2

020

Dat

e A

dded

to

Age

nda

Prio

rity

1 –

Hig

h pr

iorit

y Pr

iorit

y 2

– M

ediu

m p

riorit

y Pr

iorit

y 3

– Lo

w p

riorit

y

1©

201

9 N

atio

nal A

ssoc

iatio

n of

Insu

ranc

e C

omm

issi

oner

s

Attachment Eleven Capital Adequacy (E) Task Force

11/19/20


Cap

ital A

dequ

acy

(E) T

ask

Forc

eC

API

TAL

AD

EQU

AC

Y (E

) TA

SK F

OR

CE

WO

RK

ING

AG

END

A IT

EMS

FOR

CA

LEN

DA

R Y

EAR

202

0

Expe

cted

2020

2020

Com

plet

ion

#O

wne

rPr

iori

tyD

ate

Wor

king

Age

nda

Item

Sour

ceC

omm

ents

Dat

e A

dded

to

Age

nda

Prio

rity

1 –

Hig

h pr

iorit

y Pr

iorit

y 2

– M

ediu

m p

riorit

y Pr

iorit

y 3

– Lo

w p

riorit

y

13 9

Life

RB

C

WG

120

21D

iscu

ss a

nd d

eter

min

e th

e ne

ed to

adj

ust t

he re

al e

stat

e fa

ctor

s.R

efer

ral f

rom

In

vest

men

t RB

C

July

/202

0N

ew It

ems –

Life

14 1

0Li

fe

RBC

W

G

120

21 o

r la

ter

Wor

k w

ith th

e Li

fe A

ctua

rial

(A) T

ask

Forc

e an

d C

onni

ng to

dev

elop

the

econ

omic

scen

ario

gen

erat

or fo

r im

plem

enta

tion.

Car

ry-O

ver

Item

s Cur

rent

ly b

eing

Add

ress

ed –

P&

C R

BCC

ontin

ue d

evel

opm

ent o

f RB

C fo

rmul

a re

visi

ons t

o in

clud

e a

risk

char

ge b

ased

on

cata

stro

phe

mod

el o

utpu

t: Y

ear-e

nd

2020

a)Ev

alua

te o

ther

cat

astro

phe

risks

for p

ossi

ble

incl

usio

n in

the

char

ge-d

eter

min

e w

heth

er to

reco

mm

end

deve

lopi

ng c

harg

es fo

r any

add

ition

al p

erils

,an

d w

hich

per

ils o

r per

ils th

ose

shou

ld b

e.

The

SG a

gree

d on

add

ing

Wild

fire

Peri

l to

Rca

t.10

/19/

2020

12P&

C

RB

C W

G1

Yea

r-end

20

20 o

r lat

er Ev

alua

te a

) the

cur

rent

gro

wth

risk

met

hodo

logy

whe

ther

it is

ade

quat

ely

refle

cts

both

ope

ratio

nal r

isk

and

unde

rwrit

ing

risk;

b) t

he p

rem

ium

and

rese

rve

base

d gr

owth

risk

fact

ors e

ither

as a

stan

d-al

one

task

or i

n co

njun

ctio

n w

ith th

e on

goin

g un

derw

ritin

g ris

k fa

ctor

revi

ew w

ith c

onsi

dera

tion

of th

e op

erat

iona

l ris

k co

mpo

nent

of

exc

essi

ve g

row

th; c

) whe

ther

the

appl

icat

ion

of th

e gr

owth

fact

ors t

o N

ET p

roxi

es

adeq

uate

ly a

ccou

nts f

or g

row

th ri

sk th

at is

ced

ed to

rein

sure

s tha

t do

not t

rigge

r gr

owth

risk

inth

eiro

wn

right

.

Ref

er fr

om

Ope

ratio

nal R

isk

Subg

roup

1)Se

nt a

refe

rral t

o th

e A

cade

my

on6/

14/1

8 co

nfer

ence

cal

l.1/

25/2

018

13P&

C

RB

C W

G1

2020

Su

mm

er

Mee

ting

or

late

r

Con

tinue

dev

elop

men

t of R

BC

form

ula

revi

sion

s bas

ed o

n th

e C

over

ed A

gree

men

t:a)

cons

ider

elim

inat

ing

the

diffe

rent

trea

tmen

t of u

ncol

late

raliz

ed re

insu

ranc

e re

cove

rabl

e fro

m a

utho

rized

ver

sus u

naut

horiz

ed, u

nrat

ed re

insu

rers

;b)

cons

ider

whe

ther

the

fact

or fo

r unc

olla

tera

lized

, unr

ated

rein

sure

rs, r

unof

f and

capt

ive

com

pani

es sh

ould

be

adju

sted

;c)

Eval

uate

the

poss

ibili

ty o

f usi

ng N

AIC

as a

cen

traliz

ed lo

catio

n fo

r rei

nsur

erde

sign

atio

ns.

12/5

/19

- The

WG

exp

osed

Pro

posa

l 20

18-1

9-P

(Vul

nera

ble

6 or

unr

ated

risk

ch

arge

) for

a 3

0-da

y ex

posu

re p

erio

d.2/

3/20

- Th

e W

G a

dopt

ed P

ropo

sal 2

018-

19-P

. How

ever

, the

WG

inte

nded

to

eval

uate

the

data

ann

ually

unt

il re

achi

ng

any

agre

ed u

pon

chan

ge to

the

fact

oran

d th

e st

ruct

ure.

8/4/

2018

14P&

C

RB

C W

G1

Yea

r-end

20

21 o

r lat

er Ev

alua

te th

e pr

opos

ed c

hang

es fr

om th

e A

ffilia

ted

Inve

stm

ent A

d H

oc G

roup

rela

ted

to P

/C R

BC

Affi

liate

d In

vest

men

ts6/

10/2

019

15P&

C

RB

C W

G1

2021

Su

mm

er

Mee

ting

or

late

r

Con

tinue

wor

king

with

the

Aca

dem

y to

revi

ew th

e m

etho

dolo

gy a

nd re

vise

the

unde

rwrit

ing

(Inve

stm

ent I

ncom

e A

djus

tmen

t, Lo

ss C

once

ntra

tion,

LO

B U

W ri

sk)

char

ges i

n th

e PR

BC

form

ula

as a

ppro

pria

te.

6/10

/201

9

16P&

C

RB

C W

G1

Yea

r-end

20

20Ev

alua

te th

e R

BC

impa

ct o

n tw

o di

ffere

nt re

troac

tive

rein

sura

nce

exce

ptio

n ap

proa

ches

.1/

7/20

- re

ceiv

ed a

refe

rral f

rom

the

SAPW

G1/

9/20

20

17C

at R

isk

SG1

Yea

r-end

20

20 o

r lat

er Ev

alua

te th

e po

ssib

ility

of a

llow

ing

addi

tiona

l thi

rd p

arty

mod

els t

o ca

lcul

ate

the

cat

mod

el lo

sses

12/6

/201

9

11C

at R

isk

SG1


11/19/20


Cap

ital A

dequ

acy

(E) T

ask

Forc

eC

API

TAL

AD

EQU

AC

Y (E

) TA

SK F

OR

CE

WO

RK

ING

AG

END

A IT

EMS

FOR

CA

LEN

DA

R Y

EAR

202

0

Expe

cted

2020

2020

Com

plet

ion

#O

wne

rPr

iori

tyD

ate

Wor

king

Age

nda

Item

Sour

ceC

omm

ents

Dat

e A

dded

to

Age

nda

Prio

rity

1 –

Hig

h pr

iorit

y Pr

iorit

y 2

– M

ediu

m p

riorit

y Pr

iorit

y 3

– Lo

w p

riorit

y

18P&

C

RB

C W

G1

Yea

r-end

20

20Ev

alua

te th

e R

BC

impa

ct o

n th

e m

odifi

catio

n of

the

inst

allm

ent f

ees a

nd e

xpen

ses

repo

rting

gui

danc

e .

1/7/

20 -

rece

ived

a re

ferra

l fro

m th

e SA

PWG

10/2

7/20

- 20

19-4

0 w

as a

dopt

ed b

y SA

PWG

on

3/18

. Per

SA

PWG

, PC

RBC

WG

doe

s not

nee

d to

add

ress

th

is iss

ue fo

r no

w. T

hey

will

rea

ch o

ut

to u

s if t

hey

have

add

ition

al is

sues

re

gard

ing

this

topi

c.

1/9/

2020

19P&

C

RB

C W

G1

2021

Spr

ing

Mee

ting

Eval

uate

if c

hang

es sh

ould

be

mad

e to

the

P/C

form

ula

to b

ette

r ass

ess c

ompa

nies

in

runo

ff.1/

29/2

0 - r

ecei

ved

a re

ferra

l fro

m th

e R

estru

ctur

ing

Mec

hani

sms (

E) W

G2/

3/20

20

20P&

C

RB

C W

G1

2021

Spr

ing

Mee

ting

Eval

uate

the

Und

erw

ritin

g R

isk

Line

1 F

acto

rs in

the

P/C

form

ula.

7/30

/202

0

New

Item

s – P

&C

RBC

21C

at R

isk

SG1

2021

Spr

ing

Mee

ting

Mod

ify in

stru

ctio

ns to

PR

027

Inte

rrog

ator

ies t

hat c

lari

fy h

ow in

sure

rs w

ith n

o gr

oss e

xpos

ure

to e

arth

quak

e or

hur

rica

ne sh

ould

com

plet

e th

e in

terr

ogat

orie

s10

/27/

20 -

expo

se th

e pr

opsa

l for

30

day

com

men

t per

iod

10/1

9/20

20

22P&

C

RBC

W

G

120

21 S

prin

g M

eetin

gR

emov

e th

e em

bedd

ed 3

% o

pera

tiona

l risk

com

pone

nt c

onta

ined

in th

e re

insu

ranc

e co

ntin

gent

cre

dit r

isk fa

ctor

of R

cat

10/2

7/20

- ex

pose

the

prop

sal f

or 3

5 da

y co

mm

ent p

erio

d10

/27/

2020

23P&

C

RBC

W

G

120

21

Sum

mer

M

eetin

g

Eval

uate

R3

Adj

ustm

ent f

or O

pera

tiona

l Risk

Cha

rge

10/2

7/20

20

Ong

oing

Item

s – H

ealth

RBC

24H

ealth

R

BC

WG

3 1

Yea

r-end

20

21 R

BC

or

late

r

2021

Spr

ing

Mee

ting

Eval

uate

the

impa

ct o

f Fed

eral

Hea

lth C

are

Law

on

the

Hea

lth R

BC

For

mul

as4/

13/2

010

CA

TF

Cal

lA

dopt

ed 2

014-

01H

Ado

pted

201

4-02

HA

dopt

ed 2

014-

05H

Ado

pted

201

4-06

HA

dopt

ed 2

014-

24H

Ado

pted

201

4-25

HA

dopt

ed 2

016-

01-H

Ado

pted

201

7-09

-CA

Ado

pted

201

7-10

-HTh

e W

orki

ng G

roup

will

con

tinua

lly

eval

uate

any

cha

nges

to th

e he

alth

fo

rmul

a as

a re

sult

of o

ngoi

ng fe

dera

l di

scus

sion

s and

legi

slatio

n.C

onsi

der a

nd re

fer p

ropo

sal 2

020-

02-C

A

to th

e TF

for t

he d

elet

ion

of th

e A

CA

Fe

eSe

nsiti

vity

Test

07/3

0/20

20

25H

ealth

R

BC

WG

3Y

ear-e

nd

2021

RB

C o

r la

ter

Dis

cuss

and

mon

itor t

he d

evel

opm

ent o

f fed

eral

leve

l pro

gram

s and

act

ions

and

the

pote

ntia

l im

pact

of t

hese

cha

nges

to th

e H

RB

C fo

rmul

a:

-Dev

elop

men

t of t

he st

ate

rein

sura

nce

prog

ram

s;-A

ssoc

iatio

n H

ealth

Pla

ns;

-Cro

ss-b

orde

r sal

es

HR

BC

WG

Dis

cuss

and

mon

itor t

he d

evel

opm

ent

o f

fede

ral l

evel

pro

gram

s and

the

pote

ntia

l im

pact

on

the

HR

BC

form

ula.

1/11

/201

8

Car

ry-O

ver

Item

s Cur

rent

ly b

eing

Add

ress

ed –

Hea

lth R

BC


11/19/20


Cap

ital A

dequ

acy

(E) T

ask

Forc

eC

API

TAL

AD

EQU

AC

Y (E

) TA

SK F

OR

CE

WO

RK

ING

AG

END

A IT

EMS

FOR

CA

LEN

DA

R Y

EAR

202

0

Expe

cted

2020

2020

Com

plet

ion

#O

wne

rPr

iori

tyD

ate

Wor

king

Age

nda

Item

Sour

ceC

omm

ents

Dat

e A

dded

to

Age

nda

Prio

rity

1 –

Hig

h pr

iorit

y Pr

iorit

y 2

– M

ediu

m p

riorit

y Pr

iorit

y 3

– Lo

w p

riorit

y

26H

ealth

R

BC

WG

3Y

ear-E

nd

2023

RB

C o

r La

ter

Con

side

r cha

nges

for s

top-

loss

insu

ranc

e or

rein

sura

nce.

AA

A R

epor

t at

Dec

. 200

6 M

eetin

g(B

ased

on

Aca

dem

y re

port

expe

cted

to

be re

ceiv

ed a

t YE-

2016

)20

16-1

7-C

A

27H

ealth

R

BC

WG

2Y

ear-e

nd

2023

RB

C o

r la

ter

Rev

iew

the

indi

vidu

al fa

ctor

s for

eac

h he

alth

car

e re

ceiv

able

s lin

e w

ithin

the

Cre

dit

Ris

k H

3 co

mpo

nent

of t

he R

BC

form

ula.

HR

BC

WG

Ado

pted

201

6-06

-HR

ejec

ted

2019

-04-

H

28H

ealth

R

BC

WG

1Y

ear-e

nd

2022

or l

ater

Esta

blis

h an

Ad

Hoc

Gro

up to

revi

ew th

e H

ealth

Tes

t and

ann

ual s

tate

men

t cha

nges

fo

r rep

ortin

g he

alth

bus

ines

s in

the

Life

and

P/C

Bla

nks

HR

BC

WG

Eval

uate

the

appl

icab

ility

of t

he c

urre

nt

Hea

lth T

est i

n th

e A

nnua

l Sta

tem

ent

inst

ruct

ions

in to

day's

hea

lth in

sura

nce

mar

ket.

Dis

cuss

way

s to

gath

er

addi

tiona

l inf

orm

atio

n fo

r hea

lth

busi

ness

repo

rted

in o

ther

bla

nks.

8/4/

2018

29H

ealth

R

BC

WG

1Y

ear-e

nd

2020

RB

C o

r la

ter

Rev

iew

the

Man

aged

Car

e C

redi

t cal

cula

tion

in th

e H

ealth

RB

C fo

rmul

a -

spec

ifica

lly C

ateg

ory

2a a

nd 2

b.H

RB

CW

GR

evie

w th

e M

anag

ed C

are

Cat

egor

y an

d th

e cr

edit

calc

ulat

ed, m

ore

spec

ifica

lly

the

cred

it ca

lcul

ated

whe

n m

ovin

g fro

m

Cat

egor

y 0

& 1

to 2

a an

d 2b

.

12/3

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8

30H

ealth

R

BC

WG

1Y

ear-e

nd

2020

or l

ater

Rev

iew

refe

rral l

ette

r fro

m th

e O

pera

tiona

l Ris

k (E

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grou

p on

the

exce

ssiv

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owth

cha

rge

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the

deve

lopm

ent o

f an

Ad

Hoc

gro

up to

cha

rge.

H

RB

CW

GR

evie

w if

cha

nges

are

requ

ired

to th

e H

ealth

RB

C F

orm

ula

4/7/

2019

31H

ealth

R

BC

WG

120

21 S

prin

g M

eetin

gR

evie

w a

nd c

onsi

der t

he fo

rmul

a fo

r the

MA

X fu

nctio

n in

Lin

e 17

of t

he E

xces

sive

G

row

th C

harg

e.H

RB

CW

G20

20-0

4-H

4/3/

2020

32H

ealth

R

BC

WG

1Y

ear-E

nd

2021

or l

ater

Con

side

r im

pact

of C

OV

ID-1

9 an

d pa

ndem

ic ri

sk in

the

Hea

lth R

BC

form

ula.

H

RB

CW

G7/

30/2

020

New

Item

s – H

ealth

RBC

33H

ealth

R

BC

WG

1Y

ear-

End

2021

or

late

rW

ork

with

the

Aca

dem

y to

eva

luat

e in

corp

orat

ing

and

incl

udin

g in

vest

men

t in

com

e in

the

Und

erw

ritin

g R

isk c

ompo

nent

of t

he H

ealth

RBC

form

ula.

H

RBC

WG

Ref

erra

l Let

ter

was

sent

to th

e A

cade

my

on S

ept 2

1.8/

18/2

020

34H

ealth

R

BC W

G1

2021

Disc

uss a

nd d

eter

min

e th

e bo

nd fa

ctor

s for

the

20 d

esig

natio

ns.

Ref

erra

l fro

m

Inve

stm

ent R

BC

July

/202

0

Wor

king

Gro

up w

ill u

se tw

o- a

nd fi

ve-

year

tim

e ho

rizo

n fa

ctor

s in

2020

impa

ct

anal

ysis.

9/11

/202

0

New

Item

s – T

ask

Forc

e35

CA

DTF

120

21 o

r Lat

erSu

pple

men

tary

Inve

stm

ent R

isks I

nter

roga

tori

es (S

IRI)

Ref

erra

l fro

m

Bla

ckro

ck a

nd IL

D

OI

The

Task

For

ce re

ceiv

ed th

e re

ferra

l on

Oct

. 27.

Thi

s ref

erra

l will

be

tabl

ed u

ntil

the

bond

fact

ors h

ave

been

ado

pted

and

th

e TF

will

con

duct

a h

olis

tic re

view

all

inve

stm

ent r

efer

rals.

11/1

9/20

20

Ong

oing

Item

s – T

ask

Forc

e


11/19/20


Cap

ital A

dequ

acy

(E) T

ask

Forc

eC

API

TAL

AD

EQU

AC

Y (E

) TA

SK F

OR

CE

WO

RK

ING

AG

END

A IT

EMS

FOR

CA

LEN

DA

R Y

EAR

202

0

Expe

cted

2020

2020

Com

plet

ion

#O

wne

rPr

iori

tyD

ate

Wor

king

Age

nda

Item

Sour

ceC

omm

ents

Dat

e A

dded

to

Age

nda

Prio

rity

1 –

Hig

h pr

iorit

y Pr

iorit

y 2

– M

ediu

m p

riorit

y Pr

iorit

y 3

– Lo

w p

riorit

y

36C

AD

TF1

2020

Con

side

ratio

n gi

ven

to 2

0 de

sign

atio

ns fo

r bon

ds in

all

RB

C fo

rmul

as so

that

an

impa

ct a

naly

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an b

e pr

ovid

ed o

n 20

20 y

ear-e

nd d

ata

to d

eter

min

e th

e bo

nd R

BC

fa

ctor

s. T

he T

ask

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e w

ill n

eed

to d

iscu

ss a

nd d

eter

min

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heth

er H

ybrid

s are

in

clud

ed w

ith th

e ne

w b

ond'

s stru

ctur

e.

His

tory

In 2

012

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as p

art o

f the

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venc

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oder

niza

tion

Initi

ativ

e “r

oadm

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and

subs

eque

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hite

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apita

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quac

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k Fo

rce

iden

tifie

d in

crea

sed

gran

ular

ity in

the

asse

t and

inve

stm

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isk

char

ges a

s a p

riorit

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ea.

It w

as o

rigin

ally

targ

eted

at t

he L

ife R

BC

form

ula

and

was

refe

rred

to a

s the

“C

1 fa

ctor

revi

ew”.

The

pro

ject

was

ass

igne

d to

a n

ewly

form

ed In

vest

men

t RB

C (E

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orki

ng G

roup

in 2

013.

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k w

as c

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cted

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the

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C-1

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k G

roup

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eric

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cade

my

of A

ctua

ries (

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dem

y) a

t the

inst

ruct

ions

of t

he w

orki

ng g

roup

us

ing

defin

ed c

riter

ia fo

r the

ana

lysi

s: T

he C

1 bo

nd fa

ctor

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def

ined

as t

he

amou

nt n

eede

d to

pre

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loss

es a

t the

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rcen

tile

min

us th

e am

ount

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umed

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fund

ed in

stat

utor

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licy

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rves

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cre

dit l

oss d

istri

butio

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skew

ed w

ith

the

mea

n oc

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ng a

t app

roxi

mat

ely

the

60th

per

cent

ile. T

he R

P do

es n

ot v

ary

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ii

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20

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port

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num

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PRB

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espe

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e fo

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opos

al #

201

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A

37C

AD

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liate

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erra

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d H

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roup

form

ed S

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2016

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d H

oc g

roup

will

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vide

per

iodi

c up

date

s on

thei

r pro

gres

s.

Car

r y-O

ver

Item

s not

Cur

rent

ly b

eing

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ress

ed –

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k Fo

rce

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ble

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ecur

ities

fact

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der e

valu

atin

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ctor

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ry 3

ye

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1, 2

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7, e

tc.)

39C

AD

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or L

ater

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