Attachment Thirteen
Capital Adequacy (E) Task Force
RBC Proposal Form
[
] Capital Adequacy (E) Task Force
[
] Health RBC (E) Working Group
[
[
] Catastrophe Risk (E) Subgroup
[
] Investment RBC (E) Working Group
[ x ] Op Risk RBC (E) Subgroup
[
] C3 Phase II/ AG43 (E/A) Subgroup
[
] P/C RBC (E) Working Group
[
DATE:
3/20/2017
] Life RBC (E) Working Group
] Stress Testing (E) Subgroup
FOR NAIC USE ONLY
CONTACT PERSON:
Lou Felice
Agenda Item # 2016-13-O
TELEPHONE:
212-386-1956
Year
EMAIL ADDRESS:
[email protected]
ON BEHALF OF:
Operational Risk (E) Subgroup
[
] ADOPTED
NAME:
Alan Seeley
[
] REJECTED
TITLE:
Chair
[
] DEFERRED TO
AFFILIATION:
New Mexico Office of the Super of Ins
[
] REFERRED TO OTHER NAIC GROUP
2017
DISPOSITION
[ X ] EXPOSED
ADDRESS:
[
] OTHER (SPECIFY)
IDENTIFICATION OF SOURCE AND FORM(S)/INSTRUCTIONS TO BE CHANGED
[ x ] Health RBC Blanks
[ x ] Property/Casualty RBC Blanks
[
] Life RBC Instructions
[ x ] Fraternal RBC Blanks
[
] Health RBC Instructions
[
] Property/Casualty RBC Instructions
[ x ] Life RBC Blanks
[
] Fraternal RBC Instructions
[
] OTHER ______________
DESCRIPTION OF CHANGE(S)
Life / Fraternal RBC: Add lines 68 and 69; renumber existing lines and line references on page LR31 accordingly;
and edit renumbered line 71. Delete “informational only” lines 1-9, 19 – 22, 32, 34 and 35 from page
LR29A and renumber remaining lines.
P&C RBC:
Add lines 73, 73A, 74, 74A, 83, 83A, 84 and 84A; edit lines 72, 72A, 82, 82A, 85 and 85A; renumber
existing lines and line references accordingly; and revise line references in the footnote at the bottom
of page PR033
Delete “informational only” page PR028.
Health RBC:
Add lines 38 and 39 and renumber existing line 38 as line 40 on page XR025.
Delete “informational only” lines 1 – 3, 14 and 15 from page XR022 and renumber remaining lines.
REASON OR JUSTIFICATION FOR CHANGE **
RBC Structural changes to the 2017 RBC formulas necessary in order to implement an “add-on” methodology for
basic operational risk.
Additional Staff Comments:
•
•
Exposed 11/2/16 for 45 days
6 comment letters received and discussed during open Subgroup call on 1/23/17. Main comment on structure was
to exclude C-0, H-0 and R-0 from the calculation of the basic op risk add-on.
2016 National Association of Insurance Commissioners
Attachment Thirteen
•
•
•
•
During a 2/13/17 open call the Subgroup decided to retain the existing growth risk charge in the PC RBC formula
and delete the informational op risk page in its entirety.
Revision provided by American Academy of Actuaries to include C-4a risk of subsidiaries in the offset to the
basic on risk “add-on” on the Parent’s LRBC. Discussed during the open call on 3/20/17
During the 3/20/17 open call the Subgroup adopted the original exposed structural change with the change to
delete the entire informational op risk page in the PC RBC formula.
During the 3/20/17 open call the current informational factor of 3% was exposed for 45 days as the “live” factor
to be used with the adopted structural changes.
___________________________________________________________________________________________________
** This section must be completed on all forms.
Revised 11-2013
2016 National Association of Insurance Commissioners
Attachment Thirteen
Growth Operational Risk XR022
(FOR INFORMATIONAL PURPOSES ONLY)
(1)
Statement Value
(2)
Factor
RBC Requirement
Reference
(1)
(2)
Net Written Premium
U&I, Pt 1, Premiums, C4, L12
Net Claim Liability Reserves
U&I, Pt 2A, Claims Liab. CY, C1, L4.4
(3)
Growth Operational Risk:
Greater of C(2)L(1) or C(2)L(2)
(1)
Current Year Direct Premiums Written
U&I, Pt 1, Premiums, C1, L12
Current Year Reinsurance Assumed from Affiliates
Sch. S, Pt 1, Sn 2, C7, L0799999 + Life
Supp. Sch. S, Pt. 1, Sn. 1, C9, L0799999 +
P&C Supp. Sch. F, Pt. 1, C5, L0899999
(3)
Current Year Reinsurance Assumed from Non-Affiliates
Sch. S, Pt 1, Sn 2, C7, L1099999 + Life
Supp. Sch. S, Pt. 1, Sn. 1, C9, L1099999 +
P&C Supp. Sch. F, Pt. 1, C5, L0999999
(4)
Current Year Gross Premiums Written Excluding Reinsurance Assumed from Affiliates
C(1), L(1) + (3)
(5)
Prior Year Direct Premiums Written
(6)
Prior Year Reinsurance Assumed from Affiliates
(7)
Prior Year Reinsurance Assumed from Non-Affiliates
PY U&I, Pt 1, Premiums, C1, L12
PY Sch. S, Pt 1, Sn 2, C7, L0799999 + PY
Life Supp. Sch. S, Pt. 1, Sn. 1, C9,
L0799999 + PY P&C Supp. Sch. F, Pt. 1,
C5, L0899999
PY Sch. S, Pt 1, Sn 2, C7, L1099999 + PY
Life Supp. Sch. S, Pt. 1, Sn. 1, C9,
L1099999 + PY P&C Supp. Sch. F, Pt. 1,
C5, L0999999
(8)
Prior Year Gross Premiums Written Excluding Reinsurance Assumed from Affiliates
C(1), L(5) + (7)
(9)
Gross Written Premium in Excess of 125% of Prior Year's Gross Written Premium
C(1), L(4) - 1.25 x C(1), L(8)
Operational Risk Charge (Tentatively as H5 - covariance treatment to be determined later)
C(2), L(12) + C(2), L(3)
(2)
(13)
Base Operational Risk Charge
0.0020
0.0250
0.0200
Alternate Base Operational Risk Charge - Capital Add-on Approach (tentatively as potential Capital add-on after covariance)
(14)
(15)
RBC After Covariance
Page XR025, L(37)
Total Operational Risk Charge Based on Capital Add-on and Growth Charges
C(2), L(12) + C(2), L(14)
0.0300
Denotes items that must be manually entered on the filing software.
© 1998-2016 National Association of Insurance Commissioners
XR022
09/09/2016
Attachment Thirteen
CALCULATION OF TOTAL RISK-BASED CAPITAL AFTER COVARIANCE
(1)
RBC Amount
H3 - CREDIT RISK
(28) Total Reinsurance RBC
(29) Intermediaries Credit Risk RBC
(30) Total Other Receivables RBC
(31) Total H3
XR019, Credit Risk Page, L(21)
XR019, Credit Risk Page, L(28)
XR020, Credit Risk Page, L(34)
Sum L(28) through L(30)
H4 - BUSINESS RISK
(32) Administrative Expense RBC
(33) Non-Underwritten and Limited Risk Business RBC
(34) Premiums Subject to Guaranty Fund Assessments
XR021, Business Risk Page, L(7)
XR021, Business Risk Page, L(11)
XR021, Business Risk Page, L(12)
(35) Excessive Growth RBC
XR021, Business Risk Page, L(19)
(36) Total H4
Sum L(32) through L(35)
(37)
(38)
(39)
(40)
RBC after Covariance Before Basic Operational Risk
H0 + Square Root of (H12+H22+H32+H42)
Basic Operational Risk
RBC After Covariance Including Basic Operational Risk
Authorized Control Level RBC
.03 x Line (37)
Line (37) + Line (38)
.50 x Line (39)
Denotes items that must be manually entered on filing software.
© 1998-2016 National Association of Insurance Commissioners
XR025
09/09/2016
Attachment Thirteen
GROWTH OPERATIONAL RISK PR028
(For Informational Purposes Only)
(2)
(1)
Reference
Statement Value
Factor
RBC Requirement
(1)
Net Written Premium
Pg 8, Premwrtn, C6 L35
0
0.011
0
(2)
Net Loss Reserves
Pg 3, Liab, C1 L1 + L3
0
0.011
0
(3)
Base Operational Risk charge
Greater of C(2)L(1) or C(2)L(2)
0
Growth Operational Risk:
(1)
Direct Business
Pg 8, Premwrtn, C1 L35
0
(2)
Reinsurance Assumed From Affiliates
Pg 8, Premwrtn, C2 L35
0
(3)
(4)
Reinsurance Assumed From Non-Affiliates
Pg 8, Premwrtn, C3 L35
0
Gross Written Premium Excluding Reinsurance Assumed from Affiliates
C(1) L(1) + C(1) L(3)
0
(5)
Prior Year Direct Business
PY Pg 8, Premwrtn, C1 L35
0
(6)
Prior Year Reinsurance Assumed From Affiliates
PY Pg 8, Premwrtn, C2 L35
0
(7)
(8)
Prior Year Reinsurance Assumed From Non-affiliates
Prior Year Gross Written Premium Excluding Reinsurance Assumed from Affiliates
PY Pg 8, Premwrtn, C3 L35
0
C(1) L(5) + C(1) L(7)
0
(9)
Gross Written Premium in Excess of 120% of Prior Year's Gross Written Premium
C(1)L(4) - 1.2 x C(1)L(8)
0
(13)
0.175
L(3) + L(12)
0
0
Total Operational Risk Charge (Tentatively as R6 - covariance treatment to be determined later)
Alternate Base Operational Risk Charge - Capital Add-on Approach (Tentatively as potential capital add-on covariance)
(14)
(15)
RBC After Covariance
Total Operational Risk Charge Based on Capital Add-on and Growth Charges
Denotes items that must be manually entered on the filing software
Page PR033, L(80)
C(2) L(12) + C(2)L(14)
0
0.030
0
0
Attachment Thirteen
Calculation of Total Risk-Based Capital After Covariance
PR033 R4-Rcat
(1)
R4 - Underwriting Risk - Reserves
(62)
One half of Reinsurance RBC
PRBC O&I Reference
RBC Amount
If R4 L(63)>(R3 L(57) + R3 L(58)), R3 L(58), otherwise, 0
0
One half of Reinsurance RBC (For Informational Puposes Only)
If R4 L(63)>(R3 L(57) + R3 L(58A)), R3 L(58A), otherwise, 0
0
(63)
'Total Adjusted Unpaid Loss/Expense Reserve RBC
'PR017 L(15)C(20)
(64)
Excessive Premium Growth - Loss/Expense Reserve
PR016 L(13) C(8)
0
(65)
A&H Claims Reserves Adjusted for LCF
PR024 L(5) C(2) + PR023 L(6) C(4)
0
L(62)+L(63)+L(64)+L(65)
0
L(62A)+L(63)+L(64)+L(65)
0
(62A)
(66)
(66A)
Total R4
Total R4A (For Informational Puposes Only)
R5 - Underwriting Risk - Net Written Premium
(67)
Total Adjusted NWP RBC
PR018 L(15)C(20)
0
(68)
Excessive Premium Growth - Written Premiums Charge
PR016 L(14)C(8)
0
(69)
Total Net Health Premium RBC
PR022 L(21)C(2)
0
(70)
Health Stabilization Reserves
PR025 L(8)C(2) + PR023 L(3) C(2)
0
L(67)+L(68)+L(69)+L(70)
0
(71)
(72)
(72A)*
(73)
(73A)*
(74)
(74A)*
(75)
(75A)*
Total R5
Total RBC After Covariance excluding Catastrophe Risk Before Basic Operational Risk = R0+SQRT(R1^2+R2^2+R3^2+R4^2+R5^2)
0
Total RBC After Covariance excluding Catastrophe Risk Before Basic Operational Risk = R0+SQRT(R1^2+R2^2+R3A^2+R4A^2+R5^2) (For Informational Puposes Only)
0
Basic Operational Risk = .03 x L(72)
0
Basic Operational Risk = .03 x L(72A) (For Informational Puposes Only)
0
Total RBC After Covariance excluding Catastrophe Risk and Including Basic Operational Risk = L72 + L73
Total RBC After Covariance excluding Catastrophe Risk and Including Basic Operational Risk = L72A + L73A
0
Authorized Control Level RBC excluding Catastrophe Risk = .5 x L(74)
0
Authorized Control Level RBC excluding Catastrophe Risk = .5 x (L74A) (For Informational Puposes Only)
0
For Informational Purposes Only
R5A - Underwriting Risk - Net Written Premium
(76)
Total Adjusted NWP RBC
PR018A L(15)C(20)
0
(77)
Excessive Premium Growth - Written Premiums Charge
PR016 L(14)C(8)
0
(78)
Total Net Health Premium RBC
PR022 L(21)C(2)
0
(79)
Health Stabilization Reserves
PR025 L(8)C(2) + PR023 L(3) C(2)
0
Total R5A
L(76)+L(77)+L(78)+L(79)
0
Total Rcat
PR027 L(3) C(1)
0
(80)
Rcat - Catastrophe Risk
(81)
(82)
(82A)*
(83)
(83A)*
Total RBC After Covariance including Catastrophe Risk Before Basic Operational risk = R0A+SQRT(R1A^2+R2A^2+R3^2+R4^2+R5A^2+Rcat^2)
0
Total RBC After Covariance including Catastrophe Risk Before Basic Operational Risk = R0A+SQRT(R1A^2+R2A^2+R3A^2+R4A^2+R5A^2+Rcat^2)
0
BasicOperational Risk = .03 x L(82)
0
Basic Operational Risk = .03 x L(82A)
0
Total RBC After Covariance including Catastrophe Risk and Basic Operational risk = L82 + L83
0
Total RBC After Covariance including Catastrophe Risk and Basic Operational Risk = L82A + L83A
0
(85)
Authorized Control Level RBC including Basic Operational Risk and Catastrophe Risk = .5 x L84
0
(85A)*
Authorized Control Level RBC including Basic Operational Risk and Catastrophe Risk = .5 x L84A
0
(84)
(84A)*
* Lines 72A, 73A, 74A, 75A, 82A, 83A, 84A and Line 85A reflect the implementation of recently approved credit risk charges for reinsurance recoverable
Company Name
Attachment Thirteen
Confidential when Completed
NAIC Company Code
GROWTH OPERATIONAL RISK
(For Informational Purposes Only)
Source
(1)
Statement Value
2.000
Factor
(3)
RBC Requirement
Life Insurance and Annuities
(1)
(2)
(3)
Net Premium Life Insurance
Net Premium Annuities
Total Net Premium Life Insurance and Annuities
Exhibit 1, Part 1, Columns 2, 3, 5 and 6, Line 20.4
Exhibit 1, Part 1, Columns 4 and 7, Line 20.4
Lines (1) and (2)
0.004
(4)
(5)
(6)
(7)
Net Claim Liability Life Insurance
Net Claim Liability Individual Annuities
Net Aggregate Reserves Life Insurance
Net Aggregate Reserves Annuities
Exhibit 8, Part 1, Column 3, Line 4.4
Exhibit 8, Part 1, Column 4, Line 4.4
Exhibit 5, Column 4, Line 0199999
Exhibit 5, Column 4, Line 0299999
0.001
0.001
0.001
0.001
(8)
Total Net Claim Liability and Net Aggregate Reserves Life Insurance and Annuities
Column (3) Sum of Lines (4) Through (7)
(9)
Base Operational Risk Charge for Life Insurance and Annuities
Greater of Column (3) Line (3) or Line (8)
(1)
(2)
(3)
(4)
Direct Premium Life Insurance and Annuities
Assumed Premium From Affiliates Life Insurance and Annuities
Assumed Premium From Non-Affiliates Life Insurance and Annuities
Total Direct and Assumed Premium From Non-Affiliates Life Insurance and Annuities
Exhibit 1, Part 1, Columns 2 Through 7, Line 20.1
Schedule S, Part 1, Section 1, Column 9, Line 0799999
Schedule S, Part 1, Section 1, Column 9, Line 1099999
Lines (1) and (3)
(5)
(6)
(7)
(8)
Prior Year Direct Premium Life Insurance and Annuities
Prior Year Assumed Premium From Affiliates Life Insurance and Annuities
Prior Year Assumed Premium From Non-Affiliates Life Insurance and Annuities
Prior Year Total Direct and Assumed Premium From Non-Affiliates Life Insurance and Annuities
Prior Year Exhibit 1, Part 1, Columns 2 Through 7, Line 20.1
Prior Year Schedule S, Part 1, Section 1, Column 9, Line 0799999
Prior Year Schedule S, Part 1, Section 1, Column 9, Line 1099999
Lines (5) and (7)
(9) Direct and Assumed Premium From Non-Affiliates Life Insurance and Annuities in Excess of 120% of
Prior Year Direct and Assumed Premium From Non-Affiliates Life Insurance and Annuities
(19) Total Operational Risk Charge for Life Insurance and Annuities
Line (4) minus (120% multiplied by Line (8))
0.050
Column (3), Line (9) plus Line (18)
Accident and Health
(20) Net Premium Accident and Health
(21) Net Claim Liability Accident and Health
Exhibit 1, Part 1, Columns 8, 9 and 10, Line 20.4
Exhibit 8, Part 1, Columns 9, 10 and 11, Line 4.4
(22) Base Operational Risk Charge for Accident and Health
Greater of Column (3) Line (20) or Line (21)
(10)
(11)
(12)
(13)
Direct Premium Accident and Health
Assumed Premium From Affiliates Accident and Health
Assumed Premium From Non-Affiliates Accident and Health
Total Direct and Assumed Premium From Non-Affiliates Accident and Health
Exhibit 1, Part 1, Columns 8, 9 and 10, Line 20.1
Schedule S, Part 1, Section 2, Column 7, Line 0799999
Schedule S, Part 1, Section 2, Column 7, Line 1099999
Lines (10) and (12)
(14)
(15)
(16)
(17)
Prior Year Direct Premium Accident and Health
Prior Year Assumed Premium From Affiliates Accident and Health
Prior Year Assumed Premium From Non-Affiliates Accident and Health
Prior Year Total Direct and Assumed Premium From Non-Affiliates Accident and Health
Prior Year Exhibit 1, Part 1, Columns 8, 9 and 10, Line 20.1
Prior Year Schedule S, Part 1, Section 2, Column 7, Line 0799999
Prior Year Schedule S, Part 1, Section 2, Column 7, Line 1099999
Lines (14) and (16)
(18) Direct and Assumed Premium From Non-Affiliates in Excess of 125% of
Prior Year Direct and Assumed Premium From Non-Affiliates Accident and Health
(32) Total Operational Risk Charge for Accident and Health
Line (13) minus (125% multiplied by Line (17))
(19) Total Growth Operational Risk Charge - Based on Base and Growth Charges
Line (9), plus Line (18)
0.002
0.025
0.020
Column (3), Line (22) plus Line (31)
Alternative Capital Add-On Base Operational Risk Charge
(34) Total Risk-Based Capital After Covariance
LR031 Calculation of Authorized Control Level Risk-Based Capital, Column (1), Line (67)
(35) Total Operational Risk Charge Based on Capital Add-On and Growth Charges
Column (3), Line (18) plus Line (31) plus Line (34)
0.030
Denotes items that must be manually entered on the filing software.
© 1993-2016 National Association of Insurance Commissioners
LR029-A
8/19/2016
Company Name
Attachment Thirteen
Confidential when Completed
NAIC Company Code
CALCULATION OF AUTHORIZED CONTROL LEVEL RISK-BASED CAPITAL
Source
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Asset Risk - Affiliated Amounts (C-0)
Affiliated US Property-Casualty Insurers Directly Owned
Affiliated US Life Insurers Directly Owned
Affiliated US Health Insurers Directly and Indirectly Owned
Affiliated US Property-Casualty Insurers Indirectly Owned
Affiliated US Life Insurers Indirectly Owned
Affiliated Alien Life Insurers - Canadian
Affiliated Alien Life Insurers - All Others
Off-Balance Sheet and Other Items
Total (C-0) - Pre-Tax
(C-0) Tax Effect
Net (C-0) - Post-Tax
Asset Risk – Unaffiliated Common Stock and Affiliated Non-Insurance Stock (C-1cs)
(12) Schedule D Unaffiliated Common Stock
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
Schedule BA Unaffiliated Common Stock
Schedule BA Affiliated Common Stock - C-1cs
Common Stock Concentration Factor
Affiliated Preferred Stock and Common Stock - Holding Company in Excess of
Indirect Subsidiaries
Affiliated Preferred Stock and Common Stock - All Other
Total (C-1cs) - Pre-Tax
(C-1cs) Tax Effect
Net (C-1cs) - Post-Tax
Asset Risk - All Other (C-1o)
(21) Bonds after Size Factor
(22) Mortgages (including past due and unpaid taxes)
(23) Unaffiliated Preferred Stock Including Hybrids
(24) Affiliated Preferred Stock and Common Stock - Investment Subsidiaries
(25) Affiliated Preferred Stock and Common Stock - Parent
(26) Affiliated Preferred Stock and Common Stock - Property and Casualty Insurers not
Subject to Risk-Based Capital
(27) Affiliated Preferred Stock and Common Stock - Life Insurers not Subject to Risk-Based
Capital
(28) Affiliated Preferred Stock and Common Stock - Publicly Traded Insurers Held at
Fair Value (excess of statement value over book value)
(29) Separate Accounts with Guarantees
(1)
RBC
Requirement
LR042 Summary for Affiliated Investments Column (4) Line (1)
LR042 Summary for Affiliated Investments Column (4) Line (2)
LR042 Summary for Affiliated Investments Column (4) Line (3)
LR042 Summary for Affiliated Investments Column (4) Line (4)
LR042 Summary for Affiliated Investments Column (4) Line (5)
LR042 Summary for Affiliated Investments Column (4) Line (8)
LR042 Summary for Affiliated Investments Column (4) Line (9)
LR017 Off-Balance Sheet and Other Items Column (5) Line (34)
Sum of Lines (1) through (8)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (120)
Line (9) - Line (10)
LR005 Unaffiliated Common Stock Column (5) Line (30) + LR018 Off-Balance Sheet
Collateral Column (3) Line (16)
LR008 Other Long-Term Assets Column (5) line (47)
LR008 Other Long-Term Assets Column (5) line (49.2)
LR011 Common Stock Concentration Factor Column (6) Line (6)
LR042 Summary for Affiliated Investments Column (4) Line (7)
LR042 Summary for Affiliated Investments Column (4) Line (13)
Sum of Lines (12) through (17)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (132)
Line (18) - Line (19)
LR002 Bonds Column (2) Line (27) + LR018 Off-Balance Sheet Collateral
Column (3) Line (8)
LR004 Mortgages Column (6) Line (31)
LR005 Unaffiliated Preferred and Common Stock Column (5) Line (18) +
LR018 Off-Balance Sheet Collateral Column (3) Line (15)
LR042 Summary for Affiliated Investments Column (4) Line (6)
LR042 Summary for Affiliated Investments Column (4) Line (10)
LR042 Summary for Affiliated Investments Column (4) Line (11)
LR042 Summary for Affiliated Investments Column (4) Line (12)
LR042 Summary for Affiliated Investments Column (4) Line (14)
LR006 Separate Accounts Column (3) Line (7)
Denotes items that must be manually entered on the filing software.
© 1993-2016 National Association of Insurance Commissioners
LR031
8/19/2016
Company Name
Confidential when Completed
Attachment Thirteen
CALCULATION OF AUTHORIZED CONTROL LEVEL RISK-BASED CAPITAL (CONTINUED)
(30)
(31)
(32)
(33)
(34)
Synthetic GIC's (C-1o)
Surplus in Non-Guaranteed Separate Accounts
Real Estate (gross of encumbrances)
Schedule BA Real Estate (gross of encumbrances)
Other Long-Term Assets
(35)
(36)
(37)
(38)
Schedule BA Mortgages
Concentration Factor
Miscellaneous
Replication Transactions and Mandatory Convertible Securities
(39)
(40)
(41)
(42)
Reinsurance
Total (C-1o) - Pre-Tax
(C-1o) Tax Effect
Net (C-1o) - Post-Tax
Source
LR006 Separate Accounts Column (3) Line (8)
LR006 Separate Accounts Column (3) Line (13)
LR007 Real Estate Column (3) Line (13)
LR007 Real Estate Column (3) Line (25)
LR008 Other Long-Term Assets Column (5) Line (56) + LR018 Off-Balance Sheet
Collateral Column (3) Line (17) + Line (18)
LR009 Schedule BA Mortgages Column (6) Line (23)
LR010 Asset Concentration Factor Column (6) Line (68) Grand Total Page
LR012 Miscellaneous Assets Column (2) Line (21)
LR013 Replication (Synthetic Asset) Transactions and Mandatory
Convertible Securities Column (7) Line (9999999)
LR016 Reinsurance Column (4) Line (17)
Sum of Lines (21) through (39)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (109)
Line (40) - Line (41)
(43)
(44)
(45)
(46)
(47)
(48)
(49)
Insurance Risk (C-2)
Individual and Industrial Life Insurance
Group and Credit Life Insurance and FEGI/SGLI
Total Health Insurance
Premium Stabilization Reserve Credit
Total (C-2) - Pre-Tax
(C-2) Tax Effect
Net (C-2) - Post-Tax
LR025 Life Insurance Column (2) Line (8)
LR025 Life Insurance Column (2) Lines (20) and (21)
LR024 Health Claim Reserves Column (4) Line (18)
LR026 Premium Stabilization Reserves Column (2) Line (10)
Sum of Lines (43) through (46)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (139)
Line (47) - Line (48)
Interest Rate Risk (C-3a)
(50) Total Interest Rate Risk - Pre-Tax
(51) (C-3a) Tax Effect
(52) Net (C-3a) - Post-Tax
LR027 Interest Rate Risk Column (3) Line (36)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (140)
Line (50) - Line (51)
Health Credit Risk (C-3b)
(53) Total Health Credit Risk - Pre-Tax
(54) (C-3b) Tax Effect
(55) Net (C-3b) - Post-Tax
LR028 Health Credit Risk Column (2) Line (7)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (141)
Line (53) - Line (54)
Market Risk (C-3c)
(56) Total Market Risk - Pre-Tax
(57) (C-3c) Tax Effect
(58) Net (C-3c) - Post-Tax
LR027 Interest Rate Risk Column (3) Line (37)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (142)
Line (56) - Line (57)
(1)
RBC
Requirement
Denotes items that must be manually entered on the filing software.
© 1993-2016 National Association of Insurance Commissioners
LR031
8/19/2016
Company Name
Attachment Thirteen
Confidential when Completed
NAIC Company Code
CALCULATION OF AUTHORIZED CONTROL LEVEL RISK-BASED CAPITAL (CONTINUED)
Source
(59)
(60)
(61)
(62)
(63)
Business Risk (C-4a)
Premium Component
Liability Component
Subtotal Business Risk (C-4a) - Pre-Tax
(C-4a) Tax Effect
Net (C-4a) - Post-Tax
LR029 Business Risk Column (2) Lines (12) + (24) + (36)
LR029 Business Risk Column (2) Line (39)
Lines (59) + (60)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (143)
Line (61) - Line (62)
Business Risk (C-4b)
(64) Health Administrative Expense Component of Business Risk (C-4b) - Pre-Tax
(65) (C-4b) Tax Effect
(66) Net (C-4b) - Post-Tax
LR029 Business Risk Column (2) Line (57)
LR030 Calculation of Tax Effect for Life Risk-Based Capital Column (2) Line (144)
Line (64) - Line (65)
Total Risk-Based Capital After Covariance Before Basic Operational Risk
(67) C-0 + C-4a + Square Root of [(C-1o + C-3a)² + (C-1cs + C-3c)² + (C-2)² + (C-3b)²
+ (C-4b)²]
REPORT AMOUNT ON PARENT COMPANY'S RBC IF APPLICABLE
L(11)+L(63) + Square Root of [(L(42) + L(52))² + (L(20) + L(58))² + L(49)² + L(55)²
+ L(66)²]
(68) Gross Basic Operational Risk
(69) Net Basic Operational Risk
.03 x L(67)
Excess Over L(63) - (Line 68 - Line 63 - Not less than zero)
(70) Primary Security Shortfall Calculated in Accordance With Actuarial Guideline XLVIII
Multiplied by 2
LR036 XXX/AXXX Reinsurance Primary Security Shortfall by Cession Column (7) Line (9999999)
Multiplied by 2
(71) Total Risk-Based Capital After Covariance (Including Plus Basic Operational Risk and Primary Security Shortfall multiplied by 2)
Line (67) + Line (69) + Line (70)
Authorized Control Level Risk-Based Capital (After Covariance Adjustment and Shortfall)
(72) Total Risk-Based Capital After Covariance Times Fifty Percent
Line (71) x 0.50
Tax Sensitivity Test
(73) Tax Sensitivity Test: Total Risk-Based Capital After Covariance
(74) Tax Sensitivity Test: Authorized Control Level Risk-Based Capital
© 1993-2016 National Association of Insurance Commissioners
(1)
RBC
Requirement
L(9)+L(61) + Square Root of [(L(40) + L(50))² + (L(18) + L(56))² + L(47)² + L(53)²
+ L(64)²]
Line (73) x 0.50
LR031
8/19/2016
Attachment Thirteen
NAIC STAFF SUMMARY ON RATIONALE FOR CURRENT 3% INFORMATIONAL FACTOR
APPLIED TO THE PERCENTAGE OF CAPITAL (“ADD-ON”) APPROACH
1. Comments on factor:
All comment letters received last December on the structural proposal included some comments about
the 3% informational factor as well. Some commenters were ok with the 3% (ACLI, P&C / Health
Academy), but all either saw it as a cap and some (P/C IP, BCBSA, UnitedHealth Group) advocate for a
lower factor or a transitional factor. Several questioned the justification for the informational or any
other factor to be put into effect for 2017.
STAFF RESPONSE: I offer the following points as background for the initial selection of 3% as a
factor for the add-on approach.
•
•
•
•
•
•
•
There are clearly similar calibration issues being confronted by other advanced insurance
regulators around the globe and therefore there is heavy reliance on supervisory judgement.
Some jurisdictions have opted for internal capital models which may better reflect a particular
firm’s operational risk exposure relative to other risks, but U.S regulators have not embraced
broad-based internal capital models for RBC purposes.
A review of standard methodologies used in other advanced jurisdictions indicates that our 3%
post diversification (covariance) add-on is at the low end of the spectrum for ratio of operational
risk to total capital requirement. All jurisdictional factors appear heavily reliant on regulatory
judgement and there is limited clear rational for a higher (or lower) RBC add-on factor at this
time.
The after covariance proportion of C-4a to total industry-wide Life RBC is approximately 7%.
The current factor assumes that only 3% represents operational risk. Arguably, the proportion of
C-4a consisting of operational risk is higher than 3%*. However, there are potentially differing
levels of embedded operational risk in the different RBC formulas so 3% appears to be a fair
starting point.
The distinction between health writers that file Life RBC vs. Health RBC relative to offset
appears justified given that the life RBC filers do include C-4a risk in their RBC which makes
the two formulas more comparable relative to a floor based on the same factor.
Add-on factors as high as 6% were tested and did not result in material adverse impact, but did
provide an earlier warning for some companies near the margin of action level.
The add-on approach is designed to be a first step in addressing operational risk. The Subgroup
will continue its efforts to identify additional data sources and explore longer-term solutions for
each formula.
*It is noted that not all Life Companies report C-4a capital. This is a result of the original rationale
for C-4a being based on guarantee fund risk and thus tied to direct premiums. Those entities not
reporting any C-4a capital will be assessed the full 3% add-on, but in most cases will require less
overall capital than those that include C-4a risk capital.