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Capital Adequacy (E) Task Force Working Agenda (Revised Dec. 14, 2022)

2023 # Owner 2023
Priority
Expected
Completion Date
Working Agenda Item Source Comments Date Added
to Agenda
Ongoing Items - Life RBC
1 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.      
2 Life RBC WG 1 2022 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  
3 Life RBC WG 1 2022 or later Provide recommendations for the appropriate treatment of longevity risk transfers by the new longevity factors. New Jersey Being addressed by the Longevity (E/A) Subgroup  
Carryover Items Currently being Addressed - Life RBC
4 Life RBC WG 1 2022 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    
5 Life RBC WG 1 2022 or later Work with the Life Actuarial (A) Task Force and Conning to develop the economic scenario generator for implementation.      
6 Life RBC WG 1

2022

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.      
7 Life RBC WG 1 2022 Work with the Academy on creating guidance for the adopted C-2 mortality treatment for 2022 and next steps for 2023.      
New Items - Life RBC
        There are no items at this time      
               
               
2023
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Owner 2023
Priority
Expected
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Working Agenda Item Source Comments Date Added
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Ongoing Items - RBC IR&E
        There are no items at this time      
               
               
Carryover Items Currently being Addressed - RBC IR&E
8 RBC IRE 2 2022 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

9 RBC IRE 2 2022 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

10 RBC IRE 2 2022 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

11 RBC IRE 2 2022 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
12 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
13 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
14 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
15 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 
2023 # Owner 2023
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Working Agenda Item Source Comments Date Added
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Ongoing Items - P&C RBC
        There are no items at this time      
               
               
Carryover Items Currently being Addressed - P&C RBC
16 Cat Risk SG 1

Year-end 2023 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 different convective storm models
4/26/2021
17 P&C RBC WG 1 Year-end 2020 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
18 P&C RBC WG 1 2023 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.     6/10/2019
19 Cat Risk SG 1 Year-end 2023 or later Evaluate the possibility of allowing additional third party models or adjustments to the vendor models to calculate the cat model losses   7/15/21 - The SG is continue evaluating this item.
10/27/21 - The SG exposed the proposal 2021-15-CR (adding KCC model ).
12/16/21 - The SG adopted the proposal 2021-15-CR.
3/23/22 - The WG adopted this proposal.
12/6/2019
20 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
21 Cat Risk SG 2 2023 Spring Meeting or later Evaluate the possibility of enhancing the Independent Model Instructions.   9/26/22 – The SG adopted proposal 2022-08-CR. 3/22/2022 
22 P&C RBC WG  1 2023 Spring Meeting  Changing the RBC PR035 Line of Business categories to match the Lines of Business categories in the Annual Statement, Underwriting and Investment Exhibit, Part 1B.    8/9/22 - The WG exposed proposal 2022-07-P for a 30-day comment period.  7/7/2022 
New Items - P&C RBC
        There are no items at this time      
               
               
2023 # Owner 2023
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Expected
Completion Date
Working Agenda Item Source Comments Date Added
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Ongoing Items - Health RBC
23 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 0.5% adjustment 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    11/4/2021 
24 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 as a result 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
25 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 
 
26 Health RBC WG  2 Year-end 2023 RBC or later  Review the individual factors for each health care receivables line within the Credit Risk H3 component of the RBC formula.  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 
 
27 Health RBC WG  1 Year-end 2023 or later  Continue to review the: premium and reserve ratio in the Health Test Ad Hoc Group in the Health Test and review possible annual statement changes for reporting health business in the Life and P/C Blanks. HRBCWG  Evaluate the applicability of the current Health Test in the Annual Statement instructions in today's health insurance market. Discuss ways to gather additional information for health business reported in other blanks.  
 
Referred Proposal 2022-06BWG to Blanks Working Group for exposure and consideration. 

8/4/2018 
 

 

2/25/2022 

28 Health RBC WG 1 Year-end 2023 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 
29 Health RBC WG 1 Year-end 2023 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 
30 Health RBC WG 2 Year-end 2023 or later  Consider impact of COVID-19 and pandemic risk in the Health RBC formula.   HRBCWG    7/30/2020 
31 Health RBC WG 3 Year-end 2023 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
32 Health RBC WG  1 Year-End 2023 or later  Review and respond to the request from the Capital Adequacy (E) Task Force on the referral from the Restructuring Mechanisms (E) Subgroup for input regarding health runoff companies.   Capital Adequacy (E) Task Force    8/11/2022
2023 # Owner 2023
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Ongoing Items - Task Force
33 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.    
Carryover Items Currently being Addressed - Task Force
34       All investment related items referred to the RBC Investment Risk & Evaluation (E) Working Group      1/12/2022
35 CADTF 3 2021 Receivable for Securities factor    Consider evaluating the factor every 3 years.  
(2021, 2024, 2027, etc.) 
 
Factors are exposed for comment. Comments due May 28, 2021 for consideration on June 30th.  Factors Adopted for 2021.  
 
New Items - Task Force
36 CADTF 1 2023 Evaluate if changes should be made to RBC formulas to better assess companies in runoff PCRBCWG  TF shared the referral to the Life and Health RBC WGs at the summer meeting.  8/11/2022 
37 CADTF 1 2023 Update the Health Premiums and Underwriting Risk Premium References to match the Annual Statement Schedule H, Part 1, and Part 5 references 2021-14-BWG    11/30/2022