1 making progress . . . together NAI C NAIC Risk-Based Capital NAIC Risk-Based Capital Walter Bell Walter Bell NAIC President and NAIC President and Alabama Insurance Commissioner Alabama Insurance Commissioner Vice Chair of IAIS Executive Vice Chair of IAIS Executive Committee Committee ASSAL ANNUAL CONFERENCE ASSAL ANNUAL CONFERENCE Santiago, Chile Santiago, Chile
NAIC Risk-Based Capital. Walter Bell NAIC President and Alabama Insurance Commissioner Vice Chair of IAIS Executive Committee ASSAL ANNUAL CONFERENCE Santiago, Chile. History of Risk Based Capital. Risk based capital concept began in 1989 - PowerPoint PPT Presentation
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C-3 – Interest Rate Risk and Market C-3 – Interest Rate Risk and Market RiskRisk C-3 Phase I – 2000C-3 Phase I – 2000 C-3 Phase II – 2005C-3 Phase II – 2005 C-3 Phase III – 2008 or 2009C-3 Phase III – 2008 or 2009 C-3 Phase IV C-3 Phase IV Future ?Future ?
1515making progress . . . together
NAI C
C-3 Phase IC-3 Phase I
Interest rate risk of annuities and single Interest rate risk of annuities and single premium lifepremium life
Based on cash flow testing of assets and Based on cash flow testing of assets and liabilitiesliabilities
Originally, only companies that Originally, only companies that triggered one of two tests for materialitytriggered one of two tests for materiality
May be changed to a CTE methodology May be changed to a CTE methodology for modeling in the future.for modeling in the future.
1616making progress . . . together
NAI C
C-3 Phase IIC-3 Phase II
Interest rate risk and market risk of Interest rate risk and market risk of annuities with guaranteed benefitsannuities with guaranteed benefits VAGLB (Variable Annuity with Guaranteed VAGLB (Variable Annuity with Guaranteed
Living Benefits) Living Benefits) GMIB (Guaranteed Minimum Income Benefit) GMIB (Guaranteed Minimum Income Benefit) GMDB (Guaranteed Minimum Death Benefit) GMDB (Guaranteed Minimum Death Benefit)
Modeling using a CTE approachModeling using a CTE approach Relatively small number of companiesRelatively small number of companies
1717making progress . . . together
NAI C
C-3 Phase IIIC-3 Phase III
Interest rate risk and market risk for Interest rate risk and market risk for life productslife products
Modeling using a CTE approachModeling using a CTE approach
Affect a large number of companiesAffect a large number of companies
1818making progress . . . together
NAI C
C-3 Phase IVC-3 Phase IV
Interest rate risk for all annuitiesInterest rate risk for all annuities
Modeling using a CTE approachModeling using a CTE approach
Replace current C-3 Phase I and Replace current C-3 Phase I and perhaps Phase IIperhaps Phase II
1919making progress . . . together
NAI C
FutureFuture
Combine C-3 Phases into one ?Combine C-3 Phases into one ?
Capital standards and compliance Capital standards and compliance measurements should be firmly rooted in measurements should be firmly rooted in an auditing, accounting, and actuarial an auditing, accounting, and actuarial context that is cost-justified, practical, context that is cost-justified, practical, and workable.and workable.
Especially, when regarding an adversarial Especially, when regarding an adversarial regulatory action that must proceed based on regulatory action that must proceed based on legal findings.legal findings.