Arlington, VA – The American Consumer Institute (ACI) has formally expressed its concerns to the National Association of Insurance Commissioners (NAIC) regarding the proposed increase in risk-based capital (RBC) charges for residual tranches and interests of asset-backed securities from 30 percent to 45 percent for life insurance companies. In a detailed letter addressed to Philip Barlow, Chair of the NAIC’s Risk-Based Capital and Investment Risk and Evaluation Working Group, ACI highlights the potential negative impacts on the availability and affordability of life insurance for policyholders.

Key Takeaways from the Letter:

  • ACI warns that the proposed RBC charge increase could limit financial options for life insurance policyholders, impacting their financial security and the peace of mind these policies provide.
  • The Oliver Wyman study cited by ACI indicates that a 30 percent RBC charge is sufficient to meet risk requirements, making the proposed 45 percent charge unjustifiable.
  • Increased RBC charges would likely result in higher costs for life insurance and annuities, impacting consumers at a time when retirement insecurity is a growing concern.
  • The proposal could also affect the origination of consumer loans by making securitization structures less attractive, potentially leading to higher costs for consumer loans.

ACI urges the NAIC to reconsider the proposed rule change, recommending that the association either postpone the implementation to conduct further risk-based testing or adjust the charge to 30 percent as supported by the Oliver Wyman report. The Institute emphasizes the importance of ensuring that policyholders maintain access to essential financial tools without undue limitations. By aligning regulations with evidence-based findings and the realities of market dynamics, stakeholders can safeguard the financial wellbeing of millions of American families relying on life insurance. ACI remains committed to advocating for policy decisions that support consumer interests and foster a healthy insurance market.

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