Capital Adequacy (E) Task Force
Capital Adequacy (E) Task Force Page
Joint Executive (EX) / Plenary Committee Summary Report
Summer 2009 Meeting Summaries Index

The Capital Adequacy (E) Task Force met June 14, 2009.

During this meeting, the Task Force:

• Discussed the C-3 Phase III proposal that had been released for comment. The Life Risk-Based Capital Working Group will schedule a conference call after the Summer National Meeting to go over the 11 comment letters received on the proposal. Year-end 2010 would be the earliest implementation would occur.  
• Adopted the short-term mortgage experience adjustment factor proposal for year-end 2009 life RBC only, which changed the minimum factor to 75% and the maximum factor to 125%. Concerns were discussed regarding the uncertainty of only making the change for year-end 2009. The Task Force will monitor market conditions and progress on a long-term proposal for year-end 2010 implementation. If it appears unlikely that a long-term proposal will not be adopted for 2010, the Task Force would review the short-term proposal by the Winter National Meeting and discuss whether it should be modified and/or extended through 2010.  
• Discussed the American Council of Life Insurers (ACLI) proposal for derivative risk mitigation. A conference call of the Life Risk-Based Capital Working Group would be held after the Summer National Meeting for the ACLI to finish presenting the proposal and to address regulator comments received at the May 27 Working Group conference call. The Working Group will need to consider the effect of the proposal on the derivatives collateral issue. A year-end 2009 short-term proposal for the RBC charge for derivatives with collateral had been released for comment at the Summer National Meeting.
• Adopted changes of the Risk-Based Capital (RBC) for Health Organizations Model Act (#315) to implement a health RBC trend test.
• Adopted changes to Medicare Part D factors for the health RBC calculations for all three RBC formulas. Minor changes were made to the underwriting factors for basic coverage differentiating them between large and small companies. A more material change made to the supplemental benefit factors would increase RBC substantially and will be phased-in over a two-year period.
• Received an update from the C-3 Results Subgroup. Twelve companies were contacted by Subgroup members to see if the actuarial memorandum would be provided. Once the actuarial memorandums were received, they would be reviewed in conference calls of the Subgroup. A report from the Subgroup is expected by the Winter National Meeting.
• Discussed adding 10 years of Schedule P annual statement data for the P/C two-year lines of business. The Property Risk-Based Capital Working Group would be drafting a blanks proposal to add the data as part of the electronic annual statement filing and not the hard-copy filing. The Working Group would need to consider whether to release the proposal for comment before sending to the Blanks Working Group.
• Adopted the Property RBC annual update of the underwriting risk industry development factors.
• Discussed potential Task Force subgroups to address solvency modernization initiative issues and investment issues. Several regulators had volunteered to join the solvency modernization subgroup, which will review charges provided to the Task Force by the Solvency Modernization Initiatives (EX) Task Force.  
• Received the minutes of the May 4 Task Force conference call.
• Adopted the minutes from the Life Risk-Based Capital Working Group, Property Risk-Based Capital Working Group, Health Risk-Based Capital Working Group and the Capital Adequacy Task Force (CADTF)/Life and Health Actuarial Task Force (LHATF) Joint Subgroup.
• Discussed letters from the ACLI and Nationwide regarding ratings issues by NAIC Approved Rating Organizations (AROs) related to residential mortgage-backed securities. The Valuation of Securities Task Force will be taking the lead on the issue, and the Capital Adequacy Task Force will monitor the issue.
• Discussed reports provided by NAIC staff regarding year-end 2008 RBC data reported.

Action Items:

1. Adopted the Life RBC short-term mortgage experience adjustment factor proposal.
2. Adopted the Property RBC annual update of the underwriting risk industry factors.
3. Adopted changes of the Risk-Based Capital (RBC) for Health Organizations Model Act (#315).
4. Adopted changes to Medicare Part D factors for the health RBC calculations.
5. Received the minutes to the May 7 Task Force conference call.
6. Adopted the minutes from the Life Risk-Based Capital Working Group, Property Risk-Based Capital Working Group, Health Risk-Based Capital Working Group and the CADTF/LHATF Joint Subgroup.