Insurance regulators are still reviewing a controversial proposal that would limit the public disclosure of risk-based capital (RBC) data, raising questions about transparency, interpretation, and the impact on consumer trust.

Public Comment Highlights

More than 300 participants joined a joint conference call hosted by the Capital Adequacy Task Force and the Risk-Based Capital Model Governance Task Force. The meeting included discussion of comment letters and input from industry experts, consumer advocates, and regulators.

Mike Yanacheak, chief actuary at the Iowa Insurance Division, explained that RBC is often used beyond its intended purpose. RBC is meant to measure capital sufficiency but is frequently referenced in dividend decisions or to compare companies.

Understanding Risk-Based Capital

RBC is a standardized metric used by insurance companies to measure the level of risk associated with their assets. It appears in financial reports and earnings calls, but regulators argue that widespread public access can create misperceptions about financial strength.

The proposed rule would prevent insurers from including RBC ratios in:

• Earnings releases

• Press releases

• Webcasts

• Investor presentations

According to the proposal, RBC ratios are thresholds rather than targets. Comparing ratios above the threshold may not accurately reflect relative financial strength.

Industry and Consumer Perspectives

The debate has brought rare alignment between industry groups and consumer advocates.

Scott Harrison, former regulator and current CEO of the National Alliance of Life Companies, noted that eliminating RBC disclosure could push companies to use alternative metrics. Peter Gould, an Indiana annuity owner, suggested that RBC data should be publicly accessible for at least five years to allow consumers to make informed decisions.

Gould said, "While I understand that RBC is just a metric, it is important and ought to be out there where we can find it."

How RBC Data Can Be Misinterpreted

Yanacheak illustrated that a company could appear weaker if it sets aside additional reserves for policyholder obligations.

He explained, "The company is not actually weaker. They have shown responsibility, and regulators would prefer to encourage that. But their RBC ratio has come down by setting up the additional reserves."

Next Steps for Regulators

The National Association of Insurance Commissioners (NAIC) will meet one more time to review public comments before the fall meeting scheduled for December 8-11. The final decision will affect how RBC data is shared and interpreted by insurers and consumers.

Key Takeaways

• RBC is a key measure of insurance financial strength but can be misinterpreted.

• Regulators are proposing limits on public disclosure of RBC data.

• Industry experts and consumer advocates are debating transparency and accessibility.

• Misreading RBC ratios can create false perceptions of company strength.

• Regulators will finalize decisions at the NAIC fall meeting.