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Capital Adequacy (E) Task Force Working Agenda (Revised December 8, 2023)

2024 # Owner 2024
Priority
Expected
Completion Date
Working Agenda Item Source Comments Date Added
to Agenda
Ongoing Items - Life RBC
L1 Life RBC WG Ongoing Ongoing Make technical corrections to Life RBC instructions, blank and /or methods to provide for consistent treatment among asset types and among the various components of the RBC calculations for a single asset type.      
L2 Life RBC WG 1 2023 or later 1. Monitor the impact of the changes to the variable annuities reserve framework and risk-based capital (RBC) calculation and determine if additional revisions need to be made. 
2. Develop and recommend appropriate changes including those to improve accuracy and clarity of variable annuity (VA) capital and reserve requirements. 
CADTF Being addressed by the Variable Annuities Capital & Reserve (E/A) Subgroup  
L3 Life RBC WG 1 2023 or later Provide recommendations for the appropriate treatment of longevity risk transfers by the updated longevity factors and consider expanding the scope to include all payout annuities. New Jersey Being addressed by the Longevity (E/A) Subgroup  
L4 Life RBC WG 1 2023 or Later Monitor the economic scenario governance framework, review material economic scenario generator updates, key economic conditions and metrics, support the implementation of an economic scenario generator for use in statutory reserve and capital calculations and develop and maintain acceptance criteria.   Being addressed by the Generator of Economic Scenarios (GOES) (E/A) Subgroup  
Carryover Items Currently being Addressed - Life RBC
L5 Life RBC WG 1 2023 or later Update the current C-3 Phase I or C-3 Phase II methodology to include indexed annuities with consideration of contingent deferred annuities as well AAA    
L6 Life RBC WG 1

2023 or later

Review companies at action levels, including previous years, to determine what drivers of the events are and consider whether changes to the RBC statistics are warranted.      
L7 Life RBC WG 1 2023 or later Work with the Academy on creating guidance for the adopted C-2 mortality treatment for 2023 and next steps.      
New Items - Life RBC
        There are no items at this time      
               
               
2024
#
Owner 2024
Priority
Expected
Completion Date
Working Agenda Item Source Comments Date Added
to Agenda
Ongoing Items - RBC IR&E
        There are no items at this time      
               
               
Carryover Items Currently being Addressed - RBC IR&E
IR1 RBC IRE 2 2023 or later Supplementary Investment Risks Interrogatories (SIRI)

Referred from CADTF

Referral from Blackrock and IL DOI

The Task Force received the referral on Oct. 27. This referral will be tabled until the bond factors have been adopted and the TF will conduct a holistic review all investment referrals.

1/12/2022

11/19/2020

IR2 RBC IRE 2 2023 or later NAIC Designation for Schedule D, Part 2, Section 2 - Common Stocks

Equity investments that have an underlying bond characteristic should have a lower RBC charge. Similar to existing guidance for SVO-identified ETFs reported on Schedule D-1, are treated as bonds.

Referred from CADTF

Referral from SAPWG 
8/13/2018

10/8/19 - Exposed for a 30-day Comment period ending 11/8/2019
3-22-20 - Tabled discussion pending adoption of the bond structure and factors.
 

1/12/2022

10/11/2018

IR3 RBC IRE 2 2023 or later Structured Notes - defined as an investment that is structured to resemble a debt instrument, where the contractual amount of the instrument to be paid at maturity is at risk for other than the failure of the borrower to pay the contractual amount due. Structured notes reflect derivative instruments (i.e. put option or forward contract) that are wrapped by a debt structure.

Referred from CADTF

Referral from SAPWG
4/16/2019

10/8/19 - Exposed for a 30-day Comment period ending 11/8/2019
3-22-20 - Tabled discussion pending adoption of the bond structure and factors.

1/12/2022

8/4/2019

IR4 RBC IRE 2 2023 or later Comprehensive Fund Review for investments reported on Schedule D Pt 2 Sn2

Referred from CADTF

Referral from VOSTF
9/21/2018

Discussed during Spring Mtg. NAIC staff to do analysis.
10/8/19 - Exposed for a 30-day comment period ending 11/8/19
3-22-20 - Tabled discussion pending adoption of the bond structure and factors.

1/12/2022

11/16/2018

New Items - RBC IR&E
IR5 RBC IRE   2023 or later Evaluate the appropriate RBC treatment of Asset-Backed Securities (ABS), including Collateralized Loan Obligations (CLO), collateralized fund obligations (CFOs), or other similar securities carrying similar types of tail risk (Complex Assets). Request from E Committee, SAPWG, VOSTF Per the request of E Committee comments were solicited asking if these types of assets should be considered a part of the RBC framework. 1/12/2022
IR6 RBC IRE   2023 or later

Evaluate the appropriate RBC treatment of Residual Tranches.

Request from  E Committee, SAPWG, VOSTF Per the request of E Committee comments were solicited asking if these types of assets should be considered as part of the RBC framework. 1/12/2022
IR7 RBC IRE   2025 or later Phase 2 Bond analysis - evaluate and develop an approach to map other ABS to current bond factors following the established principles from Phase I where the collateral has an assigned RBC.  This project will likely require an outside consultant and the timeline could exceed 2-3 years. Request from E Committee Per the request of E Committee comments were solicited requesting the need for outside review. 1/12/2022
IR8 RBC IRE   2023 or later Address the tail risk concerns not captured by reserves for privately structured securities.  Referral from the Macroprudential (E) Working Group    8/11/2022 
2024 # Owner 2024
Priority
Expected
Completion Date
Working Agenda Item Source Comments Date Added
to Agenda
Ongoing Items - P&C RBC
P1 Cat Risk SG 1 Year-end 2024 or later Continue development of RBC formula revisions to include a risk charge based on catastrophe model output:
a) Evaluate other catastrophe risks for possible inclusion in the charge

  • determine whether to recommend developing charges for any additional perils, and which perils or perils those should be.
Referral from the Climate and Resiliency Task Force. March 2021

4/26/21 - The SG exposed the referral for a 30-day period.
6/1/21 - The SG forwarded the response to the Climate and Resiliency Task Force.
2/22/22 - The SG adopted proposal 2021-17-CR (adding the wildfire peril for informational purposes only). The SG continues reviewing other perils for possible inclusion in the Rcat.
8/11/22 – The TF adopted Proposal 2022-04-CR (2013-2021 Wildfire Event Lists)
9/26/22 – The SG formed an ad hoc group to conduct review on severe convective storm models.
7/18/23-The SG is finishing reviewing the following SCS vendor models: RMS, Verisk, KCC, and Corelogic.
12/2/23-Proposal 2023-15-CR (Convective Storm for Informational Purposes Only Structure) was exposed for a 30-day comment period at the Joint P/C RBC and Cat Risk SG meeting.

4/26/2021
P2 PCRBCWG 1 Ongoing Review and analyze the P/C RBC charges that have not been reviewed since developed.     3/23/2023
Carryover Items Currently being Addressed - P&C RBC
P3 P&C RBC WG 1 Year-end 2025 or later Evaluate a) the current growth risk methodology whether it is adequately reflects both operational risk and underwriting risk; b) the premium and reserve based growth risk factors either as a stand-alone task or in conjunction with the ongoing underwriting risk factor review with consideration of the operational risk component of excessive growth; c) whether the application of the growth factors to NET proxies adequately accounts for growth risk that is ceded to reinsurers that do not trigger growth risk in their own right. Refer from Operational Risk Subgroup 1) Sent a referral to the Academy on 6/14/18 conference call. 1/25/2018
P4 P&C RBC WG 1 2024 Summer Meeting or later Continue working with the Academy to review the methodology and revise the underwriting (Investment Income Adjustment, Loss Concentration, LOB UW risk) charges in the PRBC formula as appropriate.    11/16/23 The Academy provided a presentation on their Underwriting Risk Report at the Joint PCRBC And Cat Risk SG meeting. 6/10/2019
P5 P&C RBC WG 1 2023 Summer Meeting or later Evaluate the Underwriting Risk Line 1 Factors in the P/C formula.     7/30/2020
P6 Cat Risk SG 1 2025 Spring Meeting Quantify the R5 Ex-cat Factors for wildfire peril (for informational purposes only). Evaluate the possibility of adding PR018A to determine the R5 including the wildfire peril     3/21/2023
P7 Cat Risk SG 2 2025 Spring Meeting Evaluate the impact of flood peril to the insurance market.     3/21/2023
P8 PCRBCWG 1 2024 Spring Meeting  Adding pet insurance line in the RBC PR017, 018, 035 and RBC Schedule P, parts due to the adoption of the Annual Statement Blanks proposal 2023-01BWG.   12/2/23 Proposal 2023-14-P (Pet Insurance) was exposed for a 30-day comment period at the Joint P/C RBC and Cat Risk SG meeting. 7/27/2023
New Items - P&C RBC
               
2024 # Owner 2024
Priority
Expected
Completion Date
Working Agenda Item Source Comments Date Added
to Agenda
Ongoing Items - Health RBC
X1 Health RBC WG  Yearly Yearly Evaluate the yield of the 6-month U.S. Treasury Bond as of Jan. 1 each year to determine if further modification to the Comprehensive Medical, Medicare Supplement and Dental and Vision underwriting risk factors is required. Any adjustments will be rounded up to the nearest 0.5%.  HRBCWG  Adopted 2022-16-CA (YE-2023) 11/4/2021 
X2 Health RBC WG  3 Ongoing Continue to monitor the Federal Health Care Law or any other development of federal level programs and actions (e.g. state reinsurance programs, association health plans, mandated benefits, and cross-border) for future changes that may have an impact on the Health RBC Formula.  4/13/2010 CATF Call  Adopted 2014-01-H
Adopted 2014-02H 
Adopted 2014-05H 
Adopted 2014-06H 
Adopted 2014-24H 
Adopted 2014-25H 
Adopted 2016-01-H 
Adopted 2017-09-CA 
Adopted 2017-10-H 
The Working Group will continually evaluate any changes to the health formula because of ongoing federal discussions and legislation. 
 
Discuss and monitor the development  of federal level programs and the potential impact on the HRBC formula. 
1/11/2018
Carryover Items Currently being Addressed - Health RBC
X3 Health RBC WG  2 Year-End 2024 RBC or Later  Consider changes for stop-loss insurance or reinsurance.  AAA Report at Dec. 2006 Meeting  (Based on Academy report expected to be received at YE-2016) 
2016-17-CA 
Adopted proposal 2023-01-CA
 
X4 Health RBC WG  2 Year-end 2024 RBC or later  Review the individual factors for each health care receivables line within the Credit Risk H3 component of the RBC formula. 

Work with the American Academy of Actuaries (Academy) to inquire through the NAIC on the reporting of the health care receivables to better understand why these receivables are being reported as such. With the intention to produce recommendations to improve instruction clarity or provide additional guidance.

HRBC WG  Adopted 2016-06-H 
Rejected 2019-04-H 
Annual Statement Guidance (Year-End 2020) and Annual Statement Blanks Proposal (Year-End 2021) referred to the Blanks (E) Working Group 
 
X5 Health RBC WG 1 Year-end 2024 RBC or later  Work with the Academy to perform a comprehensive review of the H2 - Underwriting Risk component of the Health RBC formula including the Managed Care Credit review.
 
Review the Managed Care Credit calculation in the health RBC formula - specifically Category 2a and 2b. 
 
Review Managed Care Credit across formulas.  
 
As part of the H2 - Underwriting Risk review, determine if other lines of business should include investment income and how investment income would be incorporated to the existing lines if there are changes to the structure.  
HRBCWG  Review the Managed Care Category and the credit calculated, more specifically the credit calculated when moving from Category 0 & 1 to 2a and 2b.  4/23/2021 
 
 
 
12/3/2018 
X6 Health RBC WG 1 Year-end 2024 or later  Review referral letter from the Operational Risk (E) Subgroup on the excessive growth charge and the development of an Ad Hoc group to charge.   HRBCWG  Review if changes are required to the Health RBC Formula  4/7/2019 
X7 Health RBC WG 2 Year-end 2024 or later  Consider impact of COVID-19 and pandemic risk in the Health RBC formula.   HRBCWG    7/30/2020 
X8 Health RBC WG 3 Year-end 2025 or later  Discuss and determine the re-evaluation of the bond factors for the 20 designations.   Referral from Investment RBC July 2020  Working Group will use two- and five-year time horizon factors in 2020 impact analysis. Proposal 2021-09-H - Adopted 5/25/21 by the WG    9/11/2020 
New Items - Health RBC
        There are no items at this time       
               
               
2024 # Owner 2024
Priority
Expected
Completion Date
Working Agenda Item Source Comments Date Added
to Agenda
Ongoing Items - Task Force
CA1 CADTF 2 2023 Affiliated Investment Subsidiaries Referral 
Ad Hoc group formed Sept. 2016
Ad Hoc Group  Structural and instructions changes will be exposed by each individual working group for comment in 2022 with an anticipated effective date of 2023. 

Proposal 2022-09-CA was adopted at the 2022 Summer Meeting.

Proposal 2022-09-CA MOD was adopted at the 2023 Spring Meeting.

Proposal 2023-12-CA was adopted at the 2023 Fall Meeting.

 
Carryover Items Currently being Addressed - Task Force
CA2     Ongoing All investment related items referred to the RBC Investment Risk & Evaluation (E) Working Group      1/12/2022
CA3 CADTF 3 Ongoing Receivable for Securities factor    Consider evaluating the factor every 3 years.  
(2024, 2027, 2030, etc.) 
 
Factors are exposed for comment. Comments due May 28, 2021 for consideration on June 30th.  Factors Adopted for 2021.  
 
CA4 CADTF 1 2026 or later

Established the Risk Evaluation Ad Hoc Group to:

a. Evaluate the RBC factors;
b. Potentially develop an evaluating process;
c. Prioritize those factors that require reviewing.

  7/26/23 – the Risk Evaluation Ad Hoc Group established 3 Ad Hoc Subgroup to focus on different issues: 1) RBC Purposes & Guidelines Ad Hoc Subgroup; 2) Asset Concentration Ad Hoc Subgroup; and 3) Geographic Concentration Ad Hoc Subgroup. 3/23/2023
New Items - Task Force
CA5 CADTF 2 2024 or later Evaluate if changes should be made in the RBC formula to reflect the split of the Annual Statement, Schedule D, Part 1 into two sections. Blanks WG and SAPWG TF adopted the proposal 2022-13-CA at the Spring meeting. 12/2/2023
CA6 CADTF 2 2024 or later Evaluate if changes should be made in the RBC formula to reflect the possible changes in the Annual Statement, Schedule BA proposal for non-bond debt securities Blanks WG and SAPWG 12/2/23 – the TF received a referral from SAPWG regarding the possible Annual Statement reporting for debt securities that do not qualify as bonds on Schedule BA. 12/2/2023