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White "NAIC" letters, with "National Association of Insurance Commissioners" underneath.  Blue background.

WASHINGTON (Feb. 20, 2025)

NAIC Executive Committee Launches Risk-Based Capital Task Force to Improve Governance

The Task Force will establish governance principles to be used in updating RBC formulas and will also consider other changes to RBC designed to increase consistency.

The National Association of Insurance Commissioners (NAIC) today announced the launch of a task force to develop guiding principles for future RBC adjustments, conduct a comprehensive gap analysis to identify areas for improvement, and design a communication campaign highlighting the RBC formulas’ strengths in the U.S. state-based system of financial regulation and solvency oversight.

The newly established Task Force will also evaluate when to integrate new risks into the RBC formulas, the data needed for setting associated factors, and approaches for addressing emerging risks when a framework did not previously exist. Additionally, it will review statistical safety levels and establish guidelines for recalibrating RBC formulas to ensure the formulas remain effective.

The Risk-Based Capital (RBC) Model Governance (EX) Task Force, spearheaded by state insurance regulators as part of the NAIC’s 2025 strategic roadmap, is being led and co-chaired by Wisconsin Insurance Commissioner Nathan Houdek and Ohio Department of Insurance Director Judith French.

“State regulators have long utilized the NAIC RBC model to assist in identifying insurers’ minimum capitalization needs, while balancing the availability of insurance products to meet consumer needs,” said Ohio Department of Insurance Director Judith French. “Our task force will work toward establishing a more coherent framework for governing changes and modifications to the RBC formulas for life, health, and property & casualty companies.”

“The extended low-interest rate period that followed the Great Financial Crisis created an industry trend to search for yield in investment portfolios, resulting in a major shift in the complexity of insurers’ investment strategies, resulting in more liquidity risk than historically seen,” said Wisconsin Insurance Commissioner Nathan Houdek. “The new RBC Task Force will not only serve as an opportunity for state regulators to enhance RBC; it is also an opportunity to reinforce the global competitiveness of the U.S. RBC framework as we educate international stakeholders on these guidance updates.”

RBC Model Governance Task Force goals:

  • Develop a set of guiding principles for the RBC framework to ensure a consistent approach to future adjustments. These principles will serve as a strategic foundation to ensure that all revisions to the RBC framework are enhancements that uphold its integrity, adaptability, and global competitiveness and further the principle of “Equal Capital for Equal Risk.”
  • Complete a comprehensive gap analysis and consistency assessment to identify and inventory gaps that exist and establish a plan for addressing identified gaps and potential inconsistencies that improve the framework.
  • Oversee the development of an education and public messaging campaign to highlight the benefits and strengths of the RBC framework as an important part of the U.S. state-based insurance regulatory system.
  • Create a process for analyzing both retrospective and future adjustments to RBC, incorporating regular reviews of RBC outcomes and ensuring future adjustments are made in alignment with guiding principles.  This process will facilitate ongoing improvements to ensure the framework remains responsive to emerging risks and market trends, enabling the RBC framework to adapt proactively.

About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.