NAIC Eases Capital Requirements For Life Companies

Posted by Orb Staff on June 15, 2010 No Comments
Categories : Commercial Mortgage

tional Association of Insurance Commissioners (NAIC) has reduced its proposed increase in risk-based capital (RBC) for life companies carrying commercial mortgages in their portfolios. The regulators had proposed raising the RBC factor from 2.6% to 4%, which opponents of the measure say would have caused a 53% increase in RBC for all life insurance companies. The original NAIC proposal was met with resistance by trade organizations, including the Mortgage Bankers Association (MBA) and the American Council of Life Insurers (ACLI). ‘The compromise takes a much more targeted approach to RBC increases in which the mortgage experience adjustment factor, or MEAF, would be adjusted,’ explains MBA Chairman Robert E. Story Jr., who lauded the NAIC's revised proposal. ‘The MEAF floor would increase from 75 percent to 80 percent, and the MEAF ceiling would increase from 125 percent to 175 percent. ‘This change in the MEAF will have a very modest impact on life companies with strong loan performance and will have a higher impact on companies in the worse loan performance categories,’ Story adds. ‘However, even at its highest level (175%) the MEAF remains well below the 350 percent ceiling that was in effect as late as 2008. The new MEAF settings will be in place for 2010 and 2011.’ SOURCE: [link=]Mortgage Bankers Association

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