rbc - in.gov based capital instructions - life 17.pdfforecasting & instructions life 2017. the naic...
TRANSCRIPT
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FO
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RBCRisk-Based Capital
201&
INST
RU
CT
ION
S
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Risk-Based Capital Forecasting & Instructions
Life
2017
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The NAIC is the authoritative source for insurance industry information. Our expert solutions support the efforts of regulators, insurers and researchers by providing detailed and comprehensive insurance information. The NAIC offers a wide range of publications in the following categories:
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© 1993-2017 National Association of Insurance Commissioners. All rights reserved.
ISBN: 978-1-945655-22-7
Printed in the United States of America
No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any storage or retrieval system, without written permission from the NAIC.
NAIC Executive Office444 North Capitol Street, NWSuite 700Washington, DC 20001202.471.3990
NAIC Central Office1100 Walnut StreetSuite 1500Kansas City, MO 64106816.842.3600
NAIC Capital Markets& Investment Analysis OfficeOne New York Plaza, Suite 4210New York, NY 10004212.398.9000
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NAIC Life Risk Based CapitalNewsle erAugust 2017Volume 23
What RBC Pages Should Be Submitted?
For year-end 2017 life RBC, submit hardcopies 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 representing the hardcopy 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, but they still need to be retained by the company as documentation.
Risk-Based Capital Level of Action
As a result of the adoption of agenda item 2017-01-L-RBC Ratio by the Capital Adequacy (E) Task Force at the Spring National Meeting, a line was added to LR034 Risk-Based Capital Level of Action to show the Author-ized Control Level RBC ratio to be consistent with the other RBC formulas and to simplify data pulls.
XXX/AXXX Reinsurance Primary Security Shortfall by Cession As a result of the adoption of agenda item 2017-02-L Primary Security Shortfall Instruction Change by the Capital Adequacy (E) Task Force on its June 28 confer-ence call, changes were made to the instructions to clarify only list cessions subject to Actuarial Guideline XLVIII—Actuarial Opinion and Memorandum Require-ments for the Reinsurance of Policies Required to be Val-ued Under Sections 6 and 7 of the NAIC Valuation of Life Insurance Policies Model Regulation (AG 48). For treaties that include some policies subject to AG 48 and some policies subject to the Term and Universal Life Insurance Reserve Financing Model Regulation (#787),only the portion of the cession regulated by AG 48 is to be included.
Operational Risk
As a result of a technical issue that was presented during the June 28 Capital Adequacy (E) Task Force conference call, implementation of a risk factor for Operational Risk has been deferred for at least a year. The Task Force adopted agenda item 2016-13-O at the Spring National Meeting and modified it on its June 28 conference call. At the Spring National Meeting, the Task Force in essence voted to “go live” for 2017 reporting by adopting the structural change to remove the proxy-based approach, move the “add-on” approach for basic opera-tional risk to page LR031 and retain the growth risk portion of the information only page. On its June 28 conference call, the Task Force adopted the operational risk instructions but voted to reduce the recommended RBC charge from 1.5% to 0% for 2017 to allow the Operational Risk (E) Subgroup to address the technical concerns raised.
In This Issue:What RBC Pages to Submit .......................................... 1 Risk-Based Capital Level of Action .............................. 1 XXX/AXXX Reins. Primary Sec. Shortfall .................. 1 Operational Risk ............................................................ 1 Money Market Mutual Funds ........................................ 2 Unaffiliated Common Stock Money Market Mutual
Funds.......................................................................... 2 Supp. Ben. w/Stand-Alone Med. Pt. D Coverage ......... 2 Stop Loss ....................................................................... 2 Contact Information ...................................................... 2
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Life Risk-Based Capital Newsletter Page 2
© 2017 National Association of Insurance Commissioners
Life Risk-Based Capital Newsletter Volume 23. 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].
Money Market Mutual Funds
As a result of the reclassification of money market mutual funds (MMMFs) to cash equivalents by the Statutory Accounting Principles (E) Working Group, the Capital Adequacy (E) Task Force adopted agenda item 2016-15-CA at the Spring National Meeting. MMMFs will be isolated on their own line on the Miscellaneous Assets schedule and subtracted from the cash equivalents. The Annual Statement Source will be Schedule E, Part 2, Column 7, Line 8599999.
Unaffiliated Common Stock MMMFs
As a result of the adoption of agenda item 2017-06-CA, by the Capital Adequacy (E) Task Force on the June 28 conference call, the factor was modified to 0% on Line (22) on LR005 Unaffiliated Preferred and Common Stock. The purpose of the modification is to avoid the double counting of MMMFs in both cash equivalents and common stock. The instructions were also revised to reflect the change.
Stop Loss
As a result of the adoption of agenda item 2016-17-CA by the Capital Adequacy (E) Task Force at the Spring National Meeting, a tiered factor approach will be applied to Stop Loss premiums. A footnote was added to apply a factor of 0.350 to the first $25 million in stop loss premium and a factor of 0.250 to premium in excess of $25 million.
Supplemental Benefits within Stand-Alone Medicare Part D Coverage
As a result of the adoption of agenda item 2016-16-CA by the Capital Adequacy (E) Task Force at the Spring National Meeting, the factor for Supplemental Benefits within Stand-Alone Medicare Part D Coverage was increased to 0.500 and will be applied to claims incurred.
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© 1
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Rep
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. 53
Und
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73
Life
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. 73
Prem
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75
Inte
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isk
and
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ket R
isk .
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. 76
Hea
lth C
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k ...
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. 92
Bus
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k ....
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.. 94
Ope
ratio
nal R
isk
(For
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iona
l Pur
pose
s Onl
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.. 95
Cal
cula
tion
of A
utho
rized
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trol L
evel
Ris
k-B
ased
Cap
ital .
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.. 96
Cal
cula
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of T
otal
Adj
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apita
l (In
clud
ing
Tota
l Adj
uste
d C
apita
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Sen
sitiv
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est) .
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......
......
.... 9
7
-
© 1
993-
2017
Nat
iona
l Ass
ocia
tion
of In
sura
nce
Com
mis
sion
ers
10/2
0/20
17
Ris
k-B
ased
Cap
ital L
evel
of A
ctio
n (I
nclu
ding
Tax
Sen
sitiv
ity T
est)
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. 100
Tr
end
Test
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... 10
1 X
XX
/AX
XX
Rei
nsur
ance
Prim
ary
Secu
rity
Shor
tfall
by C
essi
on ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... 1
01
XX
X/A
XX
X C
aptiv
e R
eins
uran
ce C
onso
lidat
ed E
xhib
it ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... 1
03
Sens
itivi
ty T
ests
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
107
Fede
ral A
CA
Ris
k A
djus
tmen
ts a
nd R
isk
Cor
ridor
Sen
sitiv
ity T
est ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. 107
A
ffili
ated
Inve
stm
ents
.....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... 10
9 M
odco
or F
unds
With
held
Rei
nsur
ance
Agr
eem
ents
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... 11
5 Ex
empt
ion
Test
: Cas
h Fl
ow T
estin
g fo
r C-3
RB
C ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... 1
17
App
endi
x 1
– C
ash
Flow
Tes
ting
for C
-3 R
BC
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
118
App
endi
x 1a
– C
ash
Flow
Tes
ting
for C
-3 R
BC
Met
hodo
logy
.....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
120
App
endi
x 1b
– F
requ
ently
Ask
ed Q
uest
ions
for C
ash
Flow
Tes
ting
for C
-3 R
BC
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
122
App
endi
x 2
– C
omm
only
Use
d H
ealth
Insu
ranc
e Te
rms .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. 123
A
ppen
dix
3 –
Com
mon
ly U
sed
Term
s for
Sta
nd-A
lone
Med
icar
e Pa
rt D
Cov
erag
e ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... 1
25
Com
pany
Info
rmat
ion
Page
(Jur
at) .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
LR
001
Bon
ds ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. LR
002
Mor
tgag
e Ex
perie
nce
Adj
ustm
ent .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. LR
003
Mor
tgag
es ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. LR
004
Una
ffili
ated
Pre
ferr
ed a
nd C
omm
on S
tock
.....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. LR
005
Sepa
rate
Acc
ount
s ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R00
6 R
eal E
stat
e ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R00
7 O
ther
Lon
g-Te
rm A
sset
s ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. LR
008
Sche
dule
BA
Mor
tgag
es ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R00
9 A
sset
Con
cent
ratio
n Fa
ctor
.....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. LR
010
Com
mon
Sto
ck C
once
ntra
tion
Fact
or ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. LR
011
Mis
cella
neou
s Ass
ets .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R01
2 R
eplic
atio
n (S
ynth
etic
Ass
et) T
rans
actio
ns a
nd M
anda
tory
Con
verti
ble
Secu
ritie
s ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. LR
013
Hed
ged
Ass
et B
ond
Sche
dule
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R01
4 H
edge
d A
sset
Com
mon
Sto
ck S
ched
ule .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R01
5 R
eins
uran
ce ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R01
6 O
ff-B
alan
ce S
heet
and
Oth
er It
ems .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
LR
017
Off
-Bal
ance
She
et C
olla
tera
l (In
clud
ing
any
Sche
dule
DL,
Par
t 1 A
sset
s not
Incl
uded
in th
e A
sset
Val
uatio
n R
eser
ve) .
......
......
......
......
......
......
......
......
......
......
LR
018
Hea
lth P
rem
ium
s ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. LR
019
Und
erw
ritin
g R
isk
– Ex
perie
nce
Fluc
tuat
ion
Ris
k ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R02
0 U
nder
writ
ing
Ris
k –
Expe
rienc
e Fl
uctu
atio
n R
isk
(For
Info
rmat
iona
l Pur
pose
s Onl
y) ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R02
0-A
U
nder
writ
ing
Ris
k –
Oth
er ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
LR
021
Und
erw
ritin
g R
isk
– M
anag
ed C
are
Cre
dit ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R02
2 Lo
ng-T
erm
Car
e ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. LR
023
Hea
lth C
laim
s Res
erve
s ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R02
4 Li
fe In
sura
nce .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R02
5
-
© 1
993-
2017
Nat
iona
l Ass
ocia
tion
of In
sura
nce
Com
mis
sion
ers
10/2
0/20
17
Prem
ium
Sta
biliz
atio
n R
eser
ves .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R02
6 In
tere
st R
ate
Ris
k an
d M
arke
t Ris
k ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R02
7 H
ealth
Cre
dit R
isk
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R02
8 B
usin
ess R
isk .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R02
9 O
pera
tiona
l Ris
k (F
or In
form
atio
nal P
urpo
ses O
nly)
.....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
LR02
9-A
C
alcu
latio
n of
Tax
Eff
ect f
or L
ife R
isk-
Bas
ed C
apita
l ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R03
0 C
alcu
latio
n of
Aut
horiz
ed C
ontro
l Lev
el R
isk-
Bas
ed C
apita
l ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R03
1 C
apita
l Not
es b
efor
e Li
mita
tion
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
LR
032
Cal
cula
tion
of T
otal
Adj
uste
d C
apita
l (In
clud
ing
Tota
l Adj
uste
d C
apita
l Tax
Sen
sitiv
ity T
est) .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R03
3 R
isk-
Bas
ed C
apita
l Lev
el o
f Act
ion
(Inc
ludi
ng T
ax S
ensi
tivity
Tes
t) ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R03
4 Tr
end
Test
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R03
5 X
XX
/AX
XX
Rei
nsur
ance
Prim
ary
Secu
rity
Shor
tfall
by C
essi
on ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R03
6 X
XX
/AX
XX
Cap
tive
Rei
nsur
ance
Con
solid
ated
Exh
ibit
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R03
7 A
dditi
onal
Info
rmat
ion
Req
uire
d ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. LR
038
Sens
itivi
ty T
ests
– A
utho
rized
Con
trol L
evel
.....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R03
9 Se
nsiti
vity
Tes
ts –
Tot
al A
djus
ted
Cap
ital .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. LR
040
Fede
ral A
CA
Ris
k A
djus
tmen
t and
Ris
k C
orrid
or S
ensi
tivity
Tes
t ....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. LR
041
Sum
mar
y fo
r Aff
iliat
ed In
vest
men
ts ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
... L
R04
2 C
ross
chec
king
for A
ffili
ated
Inve
stm
ents
.....
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.... L
R04
3 D
etai
ls fo
r Aff
iliat
ed In
vest
men
ts ..
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
. LR
044
MO
DC
O o
r Fun
ds W
ithhe
ld R
eins
uran
ce A
gree
men
ts –
Rei
nsur
ance
Ced
ed B
onds
C-1
o ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
.. LR
045
MO
DC
O o
r Fun
ds W
ithhe
ld R
eins
uran
ce A
gree
men
ts –
Rei
nsur
ance
Ass
umed
Bon
ds C
-1o .
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
LR
046
MO
DC
O o
r Fun
ds W
ithhe
ld R
eins
uran
ce A
gree
men
ts –
Rei
nsur
ance
Ced
ed A
ll O
ther
Ass
ets C
-0, C
-1o
and
C-1
cs ...
......
......
......
......
......
......
......
......
......
......
... L
R04
7 M
OD
CO
or F
unds
With
held
Rei
nsur
ance
Agr
eem
ents
– R
eins
uran
ce A
ssum
ed A
ll O
ther
Ass
ets C
-0, C
-1o
and
C-1
cs ..
......
......
......
......
......
......
......
......
......
..... L
R04
8 Ex
empt
ion
Test
: Cas
h Fl
ow T
estin
g fo
r C-3
RB
C ...
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......
..... L
R04
9
-
© 1
993-
2017
Nat
iona
l Ass
ocia
tion
of In
sura
nce
Com
mis
sion
ers
i 10
/20/
2017
NA
IC L
ife R
isk-
Bas
ed C
apita
l Rep
ort
Intr
oduc
tion
Ris
k-ba
sed
capi
tal
(RB
C)
is a
met
hod
of m
easu
ring
the
min
imum
am
ount
of
capi
tal
appr
opria
te f
or a
n in
sura
nce
com
pany
to
supp
ort
its o
vera
ll bu
sine
ss o
pera
tions
in
cons
ider
atio
n of
its
size
and
risk
pro
file.
It p
rovi
des
an e
last
ic m
eans
of s
ettin
g th
e ca
pita
l req
uire
men
t in
whi
ch th
e de
gree
of r
isk
take
n by
the
insu
rer i
s th
e pr
imar
y de
term
inan
t. Th
e fiv
e m
ajor
cat
egor
ies o
f ris
ks in
volv
ed a
re:
A
sset
Ris
k - A
ffili
ates
C–0
Th
is is
the
risk
of a
sset
s’ d
efau
lt fo
r cer
tain
aff
iliat
ed in
vest
men
ts.
Ass
et R
isk
- Oth
er
C
–1
This
is th
e ris
k of
ass
ets’
def
ault
of p
rinci
pal a
nd in
tere
st o
r flu
ctua
tion
in fa
ir va
lue.
In
sura
nce
Ris
k
C–2
Th
is is
the
risk
of u
nder
estim
atin
g lia
bilit
ies f
rom
bus
ines
s alre
ady
writ
ten
or in
adeq
uate
ly p
ricin
g bu
sines
s to
be w
ritte
n in
th
e co
min
g ye
ar.
Inte
rest
Rat
e R
isk,
C–3
Th
is is
the
risk
of lo
sses
due
to c
hang
es in
inte
rest
rate
leve
ls a
nd th
e ris
k th
at h
ealth
ben
efits
pre
paid
to p
rovi
ders
bec
ome
H
ealth
Cre
dit R
isk
and
the
oblig
atio
n of
the
heal
th in
sure
r onc
e ag
ain,
and
risk
of l
osse
s due
to c
hang
es in
mar
ket l
evel
s ass
ocia
ted
with
var
iabl
e
Mar
ket R
isk
prod
ucts
with
gua
rant
ees.
Bus
ines
s Ris
k
C–4
Th
is is
the
risk
of g
ener
al b
usin
ess.
A c
ompa
ny’s
ris
k-ba
sed
capi
tal i
s ca
lcul
ated
by
appl
ying
fac
tors
to v
ario
us a
sset
, pre
miu
m, c
laim
, exp
ense
and
res
erve
item
s. Th
e fa
ctor
is h
ighe
r fo
r th
ose
item
s w
ith g
reat
er
unde
rlyin
g ris
k an
d lo
wer
for l
ess
risky
item
s. Th
e ad
equa
cy o
f a c
ompa
ny’s
act
ual c
apita
l can
then
be
mea
sure
d by
a c
ompa
rison
to it
s ris
k-ba
sed
capi
tal a
s de
term
ined
by
the
form
ula.
R
isk-
base
d ca
pita
l st
anda
rds
will
be
used
by
regu
lato
rs t
o se
t in
mot
ion
appr
opria
te r
egul
ator
y ac
tions
rel
atin
g to
ins
urer
s th
at s
how
ind
icat
ions
of
wea
k or
det
erio
ratin
g co
nditi
ons.
It al
so p
rovi
des a
n ad
ditio
nal s
tand
ard
for m
inim
um c
apita
l req
uire
men
ts th
at c
ompa
nies
shou
ld m
eet t
o av
oid
bein
g pl
aced
in re
habi
litat
ion
or li
quid
atio
n.
Pu
rpos
e of
this
Rep
ort
This
rep
ort p
rese
nts
the
NA
IC L
ife R
isk-
Bas
ed C
apita
l for
mul
a in
an
inst
ruct
iona
l for
mat
that
sho
uld
be h
elpf
ul to
any
one
resp
onsi
ble
for
subm
ittin
g da
ta. T
his
form
ula
is a
n im
porta
nt to
ol fo
r reg
ulat
ors.
Det
erm
inin
g ac
cura
te a
nd ti
mel
y da
ta is
an
impo
rtant
par
t of t
his
proc
ess.
This
is m
ost l
ikel
y to
occ
ur w
hen
ever
yone
, fro
m th
e co
mpa
ny C
EO to
the
indi
vidu
al p
repa
ring
the
data
, has
a b
asic
und
erst
andi
ng o
f th
e fo
rmul
a. W
hile
this
repo
rt pr
ovid
es th
is u
nder
stan
ding
in a
con
cise
pac
kage
, it i
s st
rong
ly re
com
men
ded
that
the
pers
on o
r per
sons
com
pilin
g an
d en
terin
g th
e in
form
atio
n be
seni
or c
ompa
ny o
ffic
ials
with
a g
ood
unde
rsta
ndin
g of
the
finan
cial
asp
ects
of L
ife in
sura
nce
and
Hea
lth in
sura
nce,
if
appl
icab
le. I
t is
also
rec
omm
ende
d th
at c
ompa
nies
see
k th
e as
sist
ance
of
thei
r in
depe
nden
t acc
ount
ants
and
/or
actu
arie
s w
hen
prep
arin
g th
is r
epor
t. Pl
ease
com
plet
e th
e Ju
rat
sign
atur
e re
quire
men
ts in
acc
orda
nce
with
the
requ
irem
ents
of t
he d
omic
iliar
y st
ate.
Dire
ct a
ny q
uest
ions
con
cern
ing
sign
atur
e re
quire
men
ts to
that
stat
e.
W
hat’
s in
the
Rep
ort
Cer
tain
term
s rel
atin
g to
risk
-bas
ed c
apita
l use
d in
this
repo
rt ar
e de
fined
in th
e R
isk-
Bas
ed C
apita
l (R
BC
) for
Insu
rers
Mod
el A
ct.
-
© 1
993-
2017
Nat
iona
l Ass
ocia
tion
of In
sura
nce
Com
mis
sion
ers
ii 10
/20/
2017
Gen
eral
ly, e
ach
narr
ativ
e pa
ge d
iscu
sses
a d
iffer
ent s
egm
ent o
f eac
h ris
k cl
assi
ficat
ion
(e.g
., th
ere
is a
nar
rativ
e fo
r Bon
ds, M
ortg
ages
, Pre
ferr
ed a
nd C
omm
on S
tock
s, et
c. w
ithin
th
e A
sset
Ris
k Se
ctio
n). T
he fo
rmul
a is
pre
sent
ed in
wor
kshe
et fo
rm fo
llow
ing
all o
f the
nar
rativ
e se
ctio
ns.
Mos
t na
rrat
ive
page
s ha
ve a
brie
f su
mm
ary
of t
he b
ackg
roun
d of
the
dev
elop
men
t of
the
fac
tors
, cal
led
the
“Bas
is o
f th
e Fa
ctor
s.” D
evel
opm
ent
of c
erta
in f
acto
rs r
equi
red
soph
istic
ated
mod
elin
g te
chni
ques
but
the
basi
c co
ncep
ts a
re n
ot c
ompl
icat
ed.
Each
nar
rativ
e pa
ge a
lso
has
a se
ctio
n on
“Sp
ecifi
c In
stru
ctio
ns f
or A
pplic
atio
n of
the
Form
ula.
” Th
is s
ectio
n sh
ould
ser
ve a
s a
guid
elin
e fo
r th
ose
who
ass
embl
e th
e da
ta o
r an
alyz
e th
e re
sults
. It i
nclu
des
defin
ition
s an
d ex
plan
atio
ns fo
r spe
cific
item
s th
at s
houl
d be
cal
cula
ted,
cla
rific
atio
n on
the
inte
nt o
f the
stru
ctur
e of
cer
tain
sect
ions
of t
he fo
rmul
a an
d in
stru
ctio
ns o
n re
conc
iliat
ion
of c
erta
in to
tals
. A
nnua
l sta
tem
ent s
ourc
es r
efer
red
to in
this
rep
ort a
nd o
n th
e R
BC
sof
twar
e do
not
use
par
enth
eses
, i.e
., a
refe
renc
e to
the
curr
ent y
ear’
s to
tal A
sset
Val
uatio
n R
eser
ve o
n th
e Li
abili
ties
page
in th
e an
nual
sta
tem
ent w
ill re
ad a
s Pa
ge 3
Col
umn
1 Li
ne 2
4.01
. Ann
ual s
tate
men
t ref
eren
ces
will
beg
in w
ith a
pag
e nu
mbe
r onl
y fo
r Pag
es 2
and
3. O
ther
wis
e th
e re
fere
nce
will
be
an e
xhib
it nu
mbe
r (e.
g., E
xhib
it 6)
, a sc
hedu
le le
tter (
e.g.
, Sch
edul
e D
) or a
nam
e of
an
exhi
bit o
r sch
edul
e (e
.g.,
Exhi
bit o
f Life
Insu
ranc
e or
EO
LI).
Ris
k-ba
sed
capi
tal r
efer
ence
s in
this
repo
rt w
ill u
se p
aren
thes
es a
roun
d th
e lin
e an
d co
lum
n nu
mbe
r. Fo
r exa
mpl
e, a
refe
renc
e to
the
LR00
2 B
onds
pag
e Li
ne 8
Col
umn
2 in
this
re
port
will
read
, “B
onds
Lin
e (8
) Col
umn
(2).”
N
egat
ive
valu
es c
an s
omet
imes
app
ear
in th
e St
atem
ent V
alue
, Boo
k/A
djus
ted
Car
ryin
g V
alue
or
RB
C S
ubto
tal c
olum
ns o
f th
is r
epor
t. Th
ese
nega
tive
valu
es in
the
Stat
emen
t V
alue
or
the
RB
C S
ubto
tal c
olum
n ar
e re
tain
ed to
fac
ilita
te c
ross
-che
ckin
g of
am
ount
s re
porte
d in
the
annu
al s
tate
men
t aga
inst
am
ount
s re
porte
d in
the
RB
C f
iling
. How
ever
, w
hen
a ne
gativ
e nu
mbe
r app
ears
in th
e St
atem
ent V
alue
, Boo
k/A
djus
ted
Car
ryin
g V
alue
or i
n th
e R
BC
Sub
tota
l col
umns
, tha
t val
ue w
ill b
e co
nver
ted
to z
ero
befo
re d
eter
min
ing
the
RB
C R
equi
rem
ent.
For
exam
ple,
a n
egat
ive
$10,
000
for
asse
t NA
IC 1
long
-term
bon
ds [
Bon
ds, p
age
LR00
2 C
olum
n (1
) Li
ne (
2)]
will
pro
duce
a z
ero
($0
times
0.0
04)
in
Col
umn
(2),
RB
C R
equi
rem
ent,
rath
er th
an a
neg
ativ
e $4
0 (-
$10,
000
times
0.0
04).
Sim
ilarly
, a n
egat
ive
$50,
000
in a
ffili
ate
life
rese
rve
cred
its [R
eins
uran
ce, p
age
LR01
6 C
olum
n (3
) Lin
e (8
) will
pro
duce
a z
ero
($0
times
-0.0
08) i
n C
olum
n (4
), R
BC
Req
uire
men
t, ra
ther
than
a p
ositi
ve $
400
(-$5
0,00
0 tim
es -0
.008
).
Man
agem
ent D
iscu
ssio
n an
d A
naly
sis
Each
com
pany
has
the
oppo
rtuni
ty to
pre
pare
a w
ritte
n an
alys
is o
f the
ir co
mpa
ny’s
risk
-bas
ed c
apita
l res
ults
. Thi
s an
alys
is is
not
a re
quire
men
t. A
com
pany
may
exp
lain
spe
cial
si
tuat
ions
as
it de
ems
nece
ssar
y. C
ompa
nies
sho
uld
also
giv
e ex
plan
atio
ns w
here
line
item
s do
not
rec
onci
le w
ith a
mou
nts
refe
renc
ed to
ann
ual s
tate
men
t sou
rces
. How
ever
, m
odifi
catio
n of
the
risk-
base
d ca
pita
l for
mul
a is
not
acc
epta
ble.
Fac
tors
, RB
C a
mou
nts
that
go
to th
e C
alcu
latio
n of
Aut
horiz
ed C
ontro
l Lev
el R
isk-
Bas
ed C
apita
l pag
e (C
-0, C
-1c
s, C
-1o,
C-2
, C-3
a, C
-3b,
C-3
c, C
-4a,
C-4
b), a
nd th
e To
tal A
djus
ted
Cap
ital a
mou
nt sh
ould
not
be
over
writ
ten.
This
writ
ten
anal
ysis
shou
ld n
ot b
e co
nstru
ed a
s the
“R
BC
Pla
n”
requ
ired
in th
e R
isk-
Bas
ed C
apita
l (R
BC
) for
Insu
rers
Mod
el A
ct.
A
pplic
abili
ty o
f NA
IC L
ife R
BC
Rep
ort
The
NA
IC L
ife R
BC
Rep
ort h
as b
een
deve
lope
d fo
r U.S
. Life
and
Hea
lth in
sure
rs w
ho fi
le th
e N
AIC
Life
and
Acc
iden
t and
Hea
lth a
nnua
l sta
tem
ent “
blue
bla
nk.”
In so
me
stat
es,
U.S
. in
sure
rs t
hat
writ
e on
ly a
lien
busi
ness
may
be
excl
uded
fro
m r
isk-
base
d ca
pita
l re
quire
men
ts.
In a
dditi
on,
stat
es i
n w
hich
Blu
e C
ross
and
Blu
e Sh
ield
and
sim
ilar
orga
niza
tions
file
the
blue
bla
nk m
ay d
ecid
e to
exe
mpt
thes
e co
mpa
nies
from
filin
g an
RB
C re
port
base
d on
the
exte
nt to
whi
ch th
eir o
pera
tions
are
diff
eren
t fro
m c
onve
ntio
nal
insu
rers
’ ind
ivid
ual a
nd g
roup
hea
lth in
sura
nce
oper
atio
ns a
lthou
gh th
is fo
rmul
a is
now
gen
eral
ly c
onsi
sten
t with
the
NA
IC h
ealth
risk
-bas
ed c
apita
l for
mul
a de
sign
ed fo
r hea
lth
entit
ies i
nclu
ding
Blu
e C
ross
and
Blu
e Sh
ield
pla
ns.
-
© 1
993-
2017
Nat
iona
l Ass
ocia
tion
of In
sura
nce
Com
mis
sion
ers
iii
10/2
0/20
17
Cha
nges
to th
e Fo
rmul
a C
hang
es to
the
form
ula
may
be
mad
e ne
cess
ary
by a
nnua
l sta
tem
ent p
rese
ntat
ion,
acc
ount
ing
proc
edur
es a
nd re
finem
ent o
f the
form
ula.
All
such
cha
nges
will
be
dete
rmin
ed b
y th
e N
AIC
Cap
ital A
dequ
acy
(E) T
ask
Forc
e.
H
ow to
Sub
mit
Dat
a Pr
inte
d R
BC
repo
rts a
nd e
lect
roni
c su
bmis
sion
s sho
uld
be su
bmitt
ed a
s spe
cifie
d in
the
indi
vidu
al st
ate
filin
g ch
eckl
ists
. The
re m
ay b
e pl
aces
whe
re th
e sc
reen
dis
play
of t
he R
BC
pr
ogra
m a
nd th
e pr
into
ut fo
rmat
var
y sl
ight
ly fr
om th
e bo
okle
t. In
thos
e in
stan
ces,
the
book
let s
houl
d ex
plai
n th
e di
ffer
ence
s; h
owev
er, t
he o
vera
ll ca
lcul
atio
n w
ill b
e th
e sa
me.
Wor
kpap
ers
Wor
kpap
ers
need
ed t
o pr
epar
e th
is r
epor
t sh
ould
be
reta
ined
and
ava
ilabl
e fo
r ex
amin
atio
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