Property and Casualty Hurricane, Earthquake Lists Approved for 2013 Risk-Based Capital Reporting
Nov 21, 2013
On November 14, 2013, the National Association of Insurance Commissioners (“NAIC”) Catastrophe Risk (E) Subgroup approved revisions to both the Hurricane and Earthquake lists used in catastrophe risk-based capital reporting for the year-end 2013 Property Risk-Based Capital Report. Of note, in 2013, these charges will be reflected in the Risk-Based Capital Formula only for informational purposes.
The Hurricane List was revised to remove those storms with losses less than $25 million (only one from 2007) and storms prior to 2003 (all 2002 storms in the list). The Earthquake List has only five identified events.
The approved lists for 2013 reporting purposes are hyperlinked below, along with a list of approved non-U.S. catastrophes.
Risk-Based Capital (“RBC”) measures the minimum amount of capital appropriate for a reporting entity to support its overall business operations in consideration of its size and risk profile. RBC limits the amount of risk a company can take, requiring a company with a higher amount of risk to hold a higher amount of capital.
Before RBC reporting was created, regulators used fixed capital standards as a primary tool for monitoring the financial solvency of insurance companies.
Guidelines for Catastrophe Risk-Based Capital Reporting for the Year-End 2013 Property RBC Report
Beginning with the 2013 Risk-Based Capital Report, two new risk charges have been introduced: R6 and R7 (hurricane and earthquake charges). Where appropriate, amendments have been made to the 2013 Risk-Based Capital Report to integrate these two charges into the formula. For 2013, these charges are reported for informational purposes only.
Companies must report their catastrophe risk information in RBC report pages PR025, PR030, PR031, PR032, PR034 and PR100+.
This new page calculates the catastrophe risk charge for R6 (earthquake) and R7 (hurricane). This page includes an interrogatory to determine whether a company with hurricane and earthquake exposure must complete this form if they are part of an intercompany reinsurance arrangement that manages these risks. All other companies must complete this form for their hurricane and earthquake risk, as applicable.
R5A, R6 and R7 components were added to calculate the Authorized Control Level RBC inclusive of catastrophe risk.
The Trend Test Including Catastrophe Risk was added to determine if a company triggers regulatory attention at the Company Action Level when catastrophe risk is included in the formula.
A new column was added to compare the Total Adjusted Capital to the Company Action Level amount inclusive of catastrophe risk.
Pages PR034 and 100+
Both U.S and non-U.S. catastrophe losses by annual statement Schedule P line of business must be provided. If the line of business has incurred U.S. catastrophe losses arising from events either included on the list of U.S. catastrophe events approved by the Catastrophe Risk Subgroup as available on the NAIC’s website or numbered and labeled by PCS as a hurricane, tropical storm, or earthquake, provide the data required in columns (24A) and (28A). If this line of business has incurred non-U.S. catastrophe losses arising from a hurricane, tropical storm, or earthquake from an event included on the list of non-U.S. catastrophe events approved by the Catastrophe Risk Subgroup as available on the NAIC’s website, provide the data in columns (24B) and (28B).
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