NAIC panel readies controversial RBC changes for fall meeting vote

Regulators discussed the purpose of risk-based capital data last week as work progressed on an at-times controversial set of RBC principles.

The Risk-Based Capital Model Governance Task Force will meet in person Dec. 10 at the National Association of Insurance Commissioners’ fall meeting in Hollywood, Fla. Work has progressed for months on the principles, with one aspect drawing most of the attention: Language banning insurance companies from publishing their RBC ratio.

Wednesday’s meeting featured much less friction as regulators fielded comments on the purpose of RBC – to identify “potentially weakly capitalized” companies.

RBC numbers are a regular feature of public companies’ financial reports and earnings calls with Wall Street analysts. RBC requirements provide for a ratio to assess the level of risk associated with an insurance company’s assets.

Working with Bridgeway Analytics, NAIC regulators embarked earlier this year on the effort to address “gaps and inconsistencies in the RBC formula and suggestions (solutions) for what could improve/address such gaps.” Other goals included plans for future updates to RBC, as well as an education campaign to highlight the benefits of RBC.

An Ohio proposal to prohibit any insurer from putting its RBC ratio in its earnings releases, press releases, webcast materials, or presentations drew most of the negative feedback on the RBC principles. Regulators are concerned that the wide dissemination of RBC figures is leading to a misunderstanding of insurance companies’ financial strength.

Periodic review of RBC formulas

Several groups spoke in support of their comment letters during Wednesday’s call, with only mild disagreements aired. UnitedHealth Group suggested that the process should include a “periodic review of how each formula as a whole is performing relative to regulators’ expectations.”

“In the end, the test of the formulas is whether, in fact, they are capturing a significant number of the companies that do, in fact, prove to be weakly capitalized,” said James R. Braue, vice president of actuarial services for UnitedHealth Group. “To the extent that they are not identifying those companies, do we understand why they are not?”

Amnon Levy, founder and CEO of Bridgeway Analytics, explained that regulators opted for “parsimony” of language as the drafts of RBC principles evolved, “in part, to avoid errors of omission that can result from including too many details, and to ensure the concepts remain relevant over time.”

Some commenters questioned whether the principles are too parsimonious.

“[W]e believe that the principles themselves should not be oversimplified or stated too briefly,” reads a comment letter from Risk Regulatory Consulting. “While not every detail can be included, we believe it is important to include enough detail to avoid ambiguity and misinterpretation.”

RRC included the example of how “Emerging Risks” is addressed in a July 3 draft, compared to how the language was pared down in the current draft:

July 3 draft: Emerging Risks. Evaluation of emerging risks should consider:

a. The level and growth in exposure to the emerging risk;
b. How quickly the risk can become materially incorporated into insurers’ business;
c. Industry exposure to the risk, as well as industry segment exposure; and
d. Identification and measurement limitations of emerging risks.

In the Sept. 23, 2025 draft:

Emerging Risks. Updated to incorporate emerging risks (including macroprudential risk) by
the time they become material to the industry or an identifiable segment of companies.

It is possible to “leave out so much detail” that the principles become “vague,” said Lynn Manchester, director with RRC.

Work will continue on the RBC principles, with the task force discussing a 2026 plan and goals during its meeting on Dec. 10, members said.

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