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NAIC Investigates Increasing the Risk Based Capital Requirement by 50 Percent

At the 2003 fall meeting of the NAIC, the NAIC's Risk-Based Capital Task Force announced that it was considering whether to raise the Risk Based...
September 23, 2003

At the 2003 fall meeting of the NAIC, the NAIC's Risk-Based Capital Task Force announced that it was considering whether to raise the Risk Based Capital (RBC) requirements of insurers by as much as 50 percent. This considered change in RBC requirements was spurred on by the dramatic increase in insurer insolvencies over the last three years. For example, a representative from the National Commission of Insurance Guaranty Funds testified that over the last 30 years prior to the year 2000, a total of around $10 billion in guaranty funds had been paid out. Yet, over just the last three years, a total of $14 billion in guaranty funds had been paid out. Hence, the NAIC is receiving pressure to take greater actions to protect insurer financial solvency.

What It Means to Agents: An increase of RBC requirements would increase an insurer's costs and this increase in costs is likely to be transferred to the consumer in the form of higher premiums. PIA will continue to monitor the actions of the NAIC's Risk-Based Capitol Task Force as it considers this issue.