15 November 2004 AAA Updated Research on the NAIC Risk Based Capital (RBC) FormulaModerator:Robert F. Wolf, Principal, Mercer Oliver WymanPanelists: Chris G. Nyce, Senior Manager, KPMGAnthony G. Phillips, VP, Actuarial, Accident Fund Insurance Company of America
American Academy Committee Structure • P/C RBC Committee • Reports to Joint AAA RBC Committee • Reports to Risk Management and Solvency Committee • Reports to Risk management and Financial Reporting Council • Works with NAIC Capital Adequacy Task Force
Prescribed Goal of the NAIC US Risk Based Capital Formula • Provide regulators with the authority to enforce compliance with more appropriate capital requirements. • NAIC Endorsed Uses • Minimum Capital Requirements • Solvency Monitoring • Legal Authority • NAIC Non-Endorsed Uses • Ratemaking • Marketing
A Question of Responsiveness • “...It's hard not to read news about property-casualty insurers whose financial strength ratings tumble from "A" to "B" in a heartbeat, only to have their hearts stop beating soon after, without wondering what's going on….” • Suzanne Sclafane, National Underwriter Same Question have been raised for RBC Ratios !
Current and Recent Research • Two Major Research Inititives to Date • Updating Premium and Reserve Charges • Trend Test Feasibility Study Mission- Subcommittee for Reserve and Premium Risk Factors , Chairman- Tony Phillips The mission of this subcommittee was to update the Risk Base Capital (RBC) charges for the reserving and premium and to also update the investment income offset factors. The committee was to achieve this by not “reinventing the wheel” but rather update using the same methodology as before. Mission- Subcommittee of the Committee on Trend Tests, Chairman- Chris Nyce
Thank You ! Q&A?