Capital Adequacy (E) Task Force
Financial Condition (E) Committee

The mission of the Capital Adequacy (E) Task Force is to evaluate and recommend appropriate refinements to capital requirements for all types of insurers.

2012 Charges

• Evaluate refinements to the existing NAIC risk-based capital (RBC) formulas implemented in 2011. Forward final version of the structure of the 2012 life, property/casualty, health and fraternal RBC formulas to Financial Condition (E) Committee by June 2012.
• Consider proposals for structural changes to the RBC formulas (including proposals related the NAIC Solvency Modernization Initiative) submitted by the working groups/subgroups. Proposed structural changes to the 2012 formulas that are received by the 2011 Fall National Meeting will be considered for adoption by the Capital Adequacy (E) Task Force, and adopted changes will be forwarded to Financial Condition (E) Committee by March 2012.
• Review the effectiveness of the NAIC’s RBC policies and procedures as they affect the accuracy, audit ability, timeliness of reporting access to RBC results, and comparability between the RBC formulas. Report on data quality problems in the 2011 RBC filings at the summer and fall national meetings.
• Monitor changes in accounting and reporting requirements resulting from the adoption and continuing maintenance of the revised Accounting Practices and Procedures Manual to ensure that model laws, publications, formulas, analysis tools, etc., supported by the Capital Adequacy (E) Task Force continue to meet regulatory objectives.
• Evaluate emerging “risk” issues for referral to the risk-based capital working groups/subgroups for certain issues involving more than one RBC formula. Monitor emerging and existing risks relative to their consistent or divergent treatment in the three RBC formulas.
• Conduct a regulatory review of the 2008, 2009, 2010 and 2011 RBC filings and associated company records in order to assess the impact resulting from implementation of the principle-based changes to the life RBC formula. Monitor implementation and impact of the adopted changes, as well as provide responses to the Principles-Based Reserving (EX) Working Group, regarding how the proposed expansion to the principle-based approach affects all of the RBC formulas. Also develop and review disclosure-documentation and governance protocols to be used by regulators and companies.
• When a class of securities is being reviewed by the Invested Assets (E) Working Group, the chair of Capital Adequacy (E) Task Force, or his/her representative, will be deemed a member of the Invested Asset (E) Working Group of the Valuation of Securities (E) Task Force. The chair, or his/her representative, is charged with contributing the applicable perspective and expertise of the regulatory group to the development of NAIC regulatory guidance for the security under review by the Invested Assets (E) Working Group.

The following Working Groups report to the Capital Adequacy Task Force:

• C-1 Factor Review Subgroup
• Health Risk-Based Capital Working Group
• Life Risk-Based Capital Working Group
• Property Risk Based Capital Working Group
• Solvency Modernization Initiative RBC Subgroup