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Group Capital Calculation

Last Updated 3/7/19

Issue: U.S. state insurance regulators are developing a group capital calculation for use in solvency-monitoring activities. The calculation is intended to provide additional analytical information to the lead state for use in assessing group risks and capital adequacy to complement the current holding company analysis in the U.S. It will include information on potential risks to policyholders emanating from outside the insurance companies, as well as location and sources of capital within the group. The calculation will help regulators perform an assessment of capital when combined with other information obtained by regulators. This includes group organizational information provided on Schedule Y, enterprise risk information on Form F and internal risk self-assessment information in Own Risk and Solvency Assessment (ORSA) filings (where applicable).

Background: Beginning in 2008, through the NAIC Solvency Modernization Initiative (SMI), U.S. state insurance regulators devised plans for revisions to group supervision. During and after the SMI, considerable attention was given to the framework around group supervision. Considerable revisions were made to the Insurance Holding Company Regulatory Act (Holding Company Act), which introduced supervisory colleges and included the implementation of a new regulatory filing: the Enterprise Risk Report (Form F). In addition to these revisions, state regulators also implemented the Risk Management and Own Risk and Solvency Assessment Model Act (ORSA Model Act), which required certain insurance companies and/or insurance groups to file an Own Risk and Solvency Assessment summary report (ORSA Report) with their lead state regulator.

The Group Capital Calculation is intended to fit seamlessly and efficiently with these and other group supervision tools implemented currently by state regulators. This analytical tool is designed to include information on potential risks, as well as the location and sources of capital within the group. As such, the tool can only be helpful to the extent it’s consistent with the lead-state regulator’s view of such risks and sources. The scope of the group is determined by the lead state based upon their understanding of the group and considering the input of other domestic states or other regulators that have an entity in the group.

While the default starting point for the group should be the ultimate controlling person as defined in the Holding Company Act, it’s incumbent upon the lead state to define the scope of application differently if the facts and circumstances suggest a different approach is more appropriate. The proposed approach to establish the scope of the group for purposes of applying the Group Capital Calculation leverages off existing group supervision tools and allows for lead-state regulators to utilize information gained from these tools, as well as communication with other regulators to drive the implementation of the group capital calculation.

The NAIC group capital calculation will be an aggregation method for use with groups that include a U.S. insurance company. Group capital standards are also being developed internationally and by the US Federal Reserve Board. The IAIS is creating a group insurance capital (ICS) under a consolidated approach for use with Internationally Active Insurance Groups (IAIGs). The IAIS is also collecting data from the US and other interested jurisdictions to assess whether an aggregation method (such as the U.S. Group Capital Calculation) can be considered an “outcome-equivalent” approach for implementation of the ICS. To assist with this, the NAIC, in collaboration with the Federal Reserve and Federal Insurance Office, submitted a proposed data collection template. The Federal Reserve Board is developing a building block method (BBA) for developing a group capital standard for U.S.-based insurance led groups that include a depository bank within the group. The BBA approach is expected to be finalized in 2019.

Status: States are committed to the development of a group capital calculation as an additional solvency evaluation tool. The Group Capital Calculation (E) Working Group leads this effort. In 2019, the Working Group is charged to continue constructing a U.S. group capital calculation using a risk-based capital (RBC) aggregation methodology. As part of this, it will liaise, as necessary, with the ComFrame Development and Analysis (G) Working Group on international capital developments and consider group capital developments by the Federal Reserve Board.

Committees Active on This Topic

Additional Resources

Group Capital Calculation Presentation
2018 Insurance Summit

Insurance Group Supervision
April 2012, CIPR Newsletter

NAIC Group Capital Calculation Recommendation
2015 ComFrame Development and Analysis (G) Working Group (CDAWG) Document


Media queries should be directed to the NAIC Communications Division at 816-783-8909 or

Dan Daveline
Director, Financial Regulatory Services
Phone: 816-783-8134

Lou Felice
Solvency and Capital Policy Advisor
Phone: 212-386-1956

NAIC Center for Insurance Policy and Research (CIPR)

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