Spotlight
Group Capital Calculation

• Thomas Harman
• September 2018
• 

The NAIC's group calculation working group has chosen a joint industry draft document as a starting point for the calculation, which it hopes the International Association of Insurance Supervisors will accept as a comparable outcome to its international capital standard.

The ICS agreement reached last fall by the IAIS, which includes U.S. regulators, was designed to create a common language for supervisory discussions regarding group solvency.

It created a five-year monitoring period, along with a two-year implementation period. During that time U.S. regulators would use data collected by the IAIS and test its aggregation-based group capital calculation to see if it generates outcomes comparable to those in the ICS.

During the NAIC's Summer National Meeting, Consedine said European regulators have Solvency II and versions of the international capital standard that are being scrutinized, “and we need to sort of put up or shut up. We know that, the Federal Reserve knows that, and I think over the next year, you're going to see us produce on that.”

Consedine said demonstrating whether any group capital calculation can produce comparable outcomes to the ICS may depend on the approach. “If we approach that on an outcome basis, we will be able to demonstrate that,” he said. “If it's an apples-to-apples [approach], then no, no one's ever going to be able to. Unless we actually have Solvency II or the ICS, then we're not going to be able to meet that kind of standard. But we're pretty confident that what we're developing will not only be a useful tool for regulators—which is where this discussion started—but it will be something that our global colleagues will be able to have confidence in.”