NAIC moves to lower carrier capital, surplus levels

Amid heated debate from the insurance industry representatives and consumer advocates, the National Association of Insurance Commissioners’ capital and surplus relief working group decided yesterday to recommend that the full body adopt six proposals that would ease restrictions on carriers’ required capital and surplus levels.

Amid heated debate from the insurance industry representatives and consumer advocates, the National Association of Insurance Commissioners’ capital and surplus relief working group decided yesterday to recommend that the full body adopt six proposals that would ease restrictions on carriers’ required capital and surplus levels.
Originally, the Washington-based American Council of Life Insurers put forward nine suggestions that would loosen what they felt were overly conservative rules on capital and surplus.
Among the proposals is a pitch to speed up the elimination of an asset adequacy analysis for variable annuity living benefits, thus granting an estimated $2 billion to $3 billion of reserve relief to carriers.
(View all relevant NAIC/ACLI documents here)
The Kansas City, Mo.-based NAIC’s working group, which is led by Washington commissioner Thomas Hampton, held a public hearing yesterday in Washington to give consumer advocates and industry members a chance to discuss the proposals.
The naysayers were led by Bob Hunter, director of insurance at the Consumer Federation of America in Washington, but also included Mike Humphreys, director of legislative affairs and education at the National Conference of Insurance Legislators in Troy, N.Y.
Mr. Humphreys, reading from an NCOIL letter sent to NAIC president and New Hampshire commissioner Roger Sevigny, insisted that the regulatory group reconsider the proposals because if the measures passed that it would “leave the appearance that standards are being relaxed.”
Supporters of the ACLI proposals at the hearing included Maureen Emmert Adolf, corporate vice president of external affairs at Prudential Financial Inc. of Newark, N.J., who argued that though the company’s business fundamentals are strong, it would benefit from the passage of the ACLI’s proposals.
That statement was met with skepticism from New York state insurance superintendent Eric R. Dinallo, who said that though the insurers were requesting immediate, wholesale relief through eased rules, no one carrier wanted to admit that it was in dire need.
“We can localize support of a company if there was real distress at an institution,” Mr. Dinallo said. “[Insurers are] looking for optimization but we have no evidence that there’s a company — even privately —who’ll say that they need the penicillin.”
Currently, six out of the nine ACLI proposals have been given a preliminary nod by the NAIC.
The regulators will hold a conference call tomorrow in which its executive committee and plenary — all voting members—will consider the working group’s recommendations.

For the full report see the upcoming Feb. 2 issue of InvestmentNews.