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

The Capital Adequacy (E) Task Force met Dec. 6, 2009. During this meeting, the Task Force:

• Discussed the implementation of the residential mortgage-backed securities (RMBS) proposal. Interim guidance for the proposal was posted on the NAIC Web site. A subgroup of the Statutory Accounting Principles (E) Working Group would be reviewing valuation, reporting, RBC and accounting for the RMBS.
• Discussed an updated derivatives risk mitigation proposal that had been released for comment by the Life Risk-Based Capital (E) Working Group. The proposal would now only include the basic one-to-one hedging transactions and not the intermediate hedges for initial implementation. The Task Force voted to allow the Life Risk-Based Capital (E) Working Group to continue developing the risk mitigation proposal and a derivatives collateral proposal until the end of December.  A conference call of the Life Risk-Based Capital (E) Working Group would be held before the end of December, potentially to adopt the proposals.
• Discussed the life RBC American Academy of Actuaries (AAA) C-3 Phase 3 proposal. Draft instructions had been released for comment by the Life Risk-Based Capital (E) Working Group. The American Council of Life Insurers (ACLI) was working on proposals for scope limitation and a materiality test. Work continued toward a potential year-end 2010 implementation.
• Discussed an AAA report received by the Property Risk-Based Capital (E) Working Group on modernizing the Property and Casualty RBC formula. The AAA was asked by the Working Group to develop a preliminary report. Separate work on solvency modernization is being addressed by the Solvency Modernization Subgroup of the Task Force for all business types. The Task Force will monitor the Solvency Modernization Initiatives work and closely coordinate the P&C work with the Life and Health formulas in line with the priorities of the overall solvency modernization project.
• Discussed that, for now, the Property Risk-Based Capital (E) Working Group had decided to pursue further validation of RBC Schedule P data filed for the two-year lines of business rather than adding 10 years of Schedule P annual statement data to the electronic annual statement filing.
• Discussed a long-term proposal for commercial mortgages in the life RBC formula that was received from the ACLI. The Life Risk-Based Capital (E) Working Group will hold a conference call in January to discuss the proposal and the 2010 mortgage experience adjustment factor calculation.
• Discussed Minnesota’s approach to developing a Fraternal RBC law. Minnesota had used fewer action levels, and more power had been given to the commissioner to take quicker action.
• Adopted new Task Force procedures needed because of moving to three national meetings in 2010.
• Received an update regarding the C-3 Phase 2 Results Subgroup. The Subgroup had reviewed several companies and was putting together a list of issues that may eventually lead to items to be added to the Task Force working agenda.
• Finalized the working agenda and membership list for the Solvency Modernization Subgroup of the Task Force. The agenda may change based on input from the Solvency Modernization Initiative (EX) Task Force.
• Adopted the minutes from the Nov. 23 and Nov. 3 Task Force conference calls.
• Adopted the minutes from the Life Risk-Based Capital (E) Working Group and Property Risk-Based Capital (E) Working Group.

A conference call will be held in February to discuss whether to request having the Risk-Based Capital (RBC) for Health Organizations Model Act (#315) become an accreditation standard. Materials will be distributed for the call to document the states that had currently adopted the model act. A memorandum soliciting comments on the request was released for comment.