US insurance regulators have adopted updated guiding principles for the risk-based capital (RBC) framework, setting a reference point for how the regime should be used and revised in the future.
The National Association of Insurance Commissioners’ Risk-Based Capital Model Governance Task Force approved the changes as part of its ongoing work to clarify the purpose and scope of RBC rules.
The revised principles include a second formulation of the long-debated “equal capital for equal risk” concept. That alternative, which drew broad backing from most industry trade groups, specifies that RBC requirements are to be applied within individual lines of business rather than across all lines, according to Amnon Levy (pictured above), founder of Bridgeway Analytics, which is assisting the NAIC in drafting the principles.
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Under the adopted language, RBC charges should be tied to measurable risks that can affect solvency, including recognition of how effective risk management can mitigate those exposures.
The principles are intended to guide future calibrations and structural changes to the formula, while keeping its role focused on prudential oversight rather than comprehensive capital setting.
The task force’s work forms part of a wider push by the NAIC to update solvency tools under its 2025 roadmap, “Securing Tomorrow: Advancing State-Based Regulation.” That plan calls for “modernizing the risk-based capital framework” alongside efforts to bolster consumer protection and address emerging issues such as artificial intelligence, signaling that RBC refinements are expected to continue over the next several years.
“We think it's important that RBC be maintained as an early monitoring system for troubled companies and not a robust capital standard such as the ICS or Solvency II,” said Jeff Alton, senior vice president, accounting, finance and risk for the Reinsurance Association of America, during the task force meeting.
He said the added sentence in the second option “further clarifies that we should not have a standard statistical safety level that you see under Solvency II.”
Alton’s comments reflect a view among many US market participants that the RBC framework should remain a supervisory trigger and not converge toward international capital standards such as the Insurance Capital Standard (ICS) or Europe’s Solvency II regime.
Several trade groups argued that a single, explicit confidence level would represent a shift away from the system’s original intent.
At the same time, regulators are using RBC more actively to respond to changes in insurers’ investment profiles, including larger allocations to private credit, collateral loans and other Schedule BA assets.
The NAIC has tightened disclosure and RBC requirements for some of these instruments and for certain offshore reinsurance structures, aiming to capture concentration, valuation and liquidity risks that could affect policyholder protection and capital adequacy.
The American Council of Life Insurers, however, backed the first “equal capital for equal risk” option rather than the new alternative. Mariana Gomez Vock, ACLI senior vice president, prudential policy and international, said option one had already been extensively vetted and that its wording is clearer than the second formulation.
Regulators from Virginia and Iowa indicated during the meeting that they agreed with ACLI’s assessment of the original language. Despite those reservations, the task force moved ahead with the revised principles, which will now serve as the reference framework for future changes to RBC methodology and calibration.
