On November 11, 2008, Frank Keating, President and Chief Executive Officer of the American Council of Life Insurers (“ACLI”), submitted a proposal to the National Association of Insurance Commissioners (“NAIC”) asking the NAIC to consider changing reserve and risk-based capital requirements that it believes are too conservative (the “Proposal”).

The Proposal notes that current state laws require life insurers to put aside assets to cover all claims on policies the insurer has issued, and these requirements tie up capital that could otherwise be used in certain business opportunities or for investment in the U.S. economy. The Proposal identifies four general areas of concern:

  1. Reserves for certain life insurance products;
  2. Reserve and capital requirements for variable annuities with guarantees;
  3. Capital requirements for commercial mortgages held by insurance companies; and
  4. Accounting for deferred taxes.

The NAIC responded to the Proposal by forming the “Capital and Surplus Relief Working Group.” As stated on the NAIC website, the group was formed to (1) consider the need and appropriateness for changes to existing NAIC solvency framework components that impact statutory capital and surplus requirements; and (2) provide any recommended changes, including whether or not the changes should be temporary, to the NAIC Executive Committee. During NAIC’s 2008 Winter National Meeting, the Capital and Surplus Relief Working Group met behind closed doors and did not publicly discuss its views regarding the Proposal.