Insurance regulation in a nutshell

Section VII.5.Risk-Based Capital Formula

The risk-based capital formulas used to complete the annual risk-based capital report filed by U.S. insurers with state insurance regulators (see Section III.6.) are also maintained by the NAIC. The subcommittee charged with this task is the Financial Condition (E) Subcommittee, which conducts its work through the Capital Adequacy (E) Task Force.

Section VII.6.Securities Valuation

While state insurance laws usually prescribe permitted investments that may be made by U.S. insurers (see Section III.9.), the NAIC establishes the rules for valuing the investments for purposes of presenting the “statement value” of the investment on a statutory financial statement. These rules are set out in the “Purposes and Procedures Manual of the NAIC Securities Valuation Office.” New York law allows the New York Superintendent of Insurance to require that insurers use the NAIC securities valuation method.¹¹⁰ This manual is generally updated twice a year in July and December. Revisions are made by the NAIC as needed. The subcommittee charged with this task is the Financial Condition (E) Subcommittee, which conducts its work through the Valuation of Securities (E) Task Force.
For more information on the Securities Valuation Office, see www.naic.org (select “Securities Valuation Office”).

Section VII.7.International Insurers Department

The NAIC International Insurers Department prepares and disseminates a quarterly listing (Non-Admitted Insurers Quarterly Listing) of Alien Non-Admitted Insurers. On this list appear the names of those insurers who qualify for listing as having met the standards set forth in the “Plan of Operation For Listing of Alien Non-Admitted Insurers.” Many states use this listing as a condition to an alien insurer becoming an eligible surplus lines insurer in their state.

ARTICLE VIII

State Insurance Insolvency Laws

Section VIII.1.In General

When a U.S. insurer fails, it is not subject to the federal Bankruptcy Code but instead to a receivership proceeding under the state insurance insolvency laws of its state of incorporation.¹¹¹
This Article describes actions that a state insurance regulator can take against troubled insurers prior to receivership and summarizes some key elements of state insurance insolvency law.