risk-based capital – Actuarial News

NAIC Revisions to Capital Requirements Widen Opportunities for Real Estate Investments by Life Insurers

September 27, 2022September 27, 2022 Mary Pat Campbell

Link: https://news.ambest.com/articlecontent.aspx?AltSrc=104&RefNum=317587

Excerpt:

A new set of revisions to the National Association of Insurance Commissioners requirements that govern real estate investments on the part of life insurers could be teeing up the asset class for growth in the future, as barriers to entry are lowered.
Late last year, the NAIC released a set of changes to its risk-based capital requirements that, for life insurers, lowered the factor for life and health companies. For so-called Schedule A investments—properties owned outright by carriers—the required set-aside was lowered to 11% from 15%. In the case of Schedule BA investments, such as partnerships and funds where the carrier isn’t the sole owner, that figure went down to 13% from 23%.
….
As of 2020, life and annuity insurers had $8.15 trillion in invested assets, with an overall net return on that sum of 4.1%, according to Best’s Rankings US Life/Health—2020 Asset Distribution. Meanwhile, Best’s Rankings US Life/Health—Industry 2020 Investment Returns—2021 Edition reports mortgages had a return of 4.42% compared to 4.22% for bonds.
George Hansen, senior industry research analyst, AM Best, said life insurers traditionally have only placed about 6% of their portfolios in Schedule BA real estate products and less than 1% in Schedule A real estate investments. Whether there’s any increase and by how much will likely be tied to which segments of the industry carriers are in, but Hansen said he doesn’t expect a huge increase.

Author(s): Terence Dopp

Publication Date: March 2022

Publication Site: Best’s Review

2021 Academy Legislative/Regulatory Review

February 16, 2022February 16, 2022 Mary Pat Campbell

Link: https://www.actuary.org/sites/default/files/members/alerts/pdf/2022/2022-CP-1.pdf

Excerpt:

The American Academy of Actuaries presents this summary of select significant regulatory and
legislative developments in 2021 at the state, federal, and international levels of interest to the U.S.
actuarial profession as a service to its members.
Introduction
The Academy focused on key policy debates in 2021 regarding pensions and retirement, health, life,
and property and casualty insurance, and risk management and financial reporting.

Responding to the COVID-19 pandemic, addressing ever-changing cyber risk concerns, and analyzing
the implications and actuarial impacts of data science modeling continued to be a focus in 2021.

Practice councils monitored and responded to numerous legislative developments at the state, federal,
and international level. The Academy also increased its focus on the varied impacts of climate risk and
public policy initiatives related to racial equity and unfair discrimination in 2021.

The Academy continues to track the progress of legislative and regulatory developments on actuarially
relevant issues that have carried over into the 2022 calendar year.

Publication Date: 15 Feb 2022

Publication Site: American Academy of Actuaries

Credit FAQ: Understanding S&P Global Ratings’ Request For Comment On Proposed Changes To Its Insurer Risk-Based Capital Adequacy Methodology

February 8, 2022February 8, 2022 Mary Pat Campbell

Link:https://www.spglobal.com/ratings/en/research/articles/211206-credit-faq-understanding-s-p-global-ratings-request-for-comment-on-proposed-changes-to-its-insurer-risk-bas-12183007

Graphic:

Excerpt:

The main reasons for the proposed changes to our criteria include:
Incorporating recent data and experience since our last update of the insurance capital model criteria;
Enhancing global consistency in our risk-based capital (RBC) analysis;
Increasing risk differentiation in capital requirements where relevant and material to our analysis, as well as reducing complexity where it does not add analytical value;
Improving the transparency and usability of our methodology, such as with our proposal to supersede 10 related criteria articles; and
Supporting our ability to respond to changes in macroeconomic and market conditions by introducing sector and industry variables.
A list of changes to our proposed criteria appears in the RFC and in the appendix of this article.

Author(s):

Simon Ashworth, Ali Karakuyu, Carmi Margalit, Eunice Tan, Sebastian Dany, Olivier J Karusisi,	Ron A Joas, Mark Button

Publication Date: 6 Dec 2021

Publication Site: Standard & Poors