Key takeaways

• The NAIC exposed for comment a draft of the new XXX/AXXX Credit for Reinsurance Model Regulation, which proposes to deny all reinsurance credit to a ceding insurer in the event of any shortfall in the Primary Security or Other Security that the insurer is required to hold for ceded AG 48 reserves.
• The effective date on which XXX/AXXX reinsurance captives will be subject to NAIC accreditation standards is January 1, 2016. XXX/AXXX reinsurance transactions that satisfy the AG 48 standards will be deemed to satisfy the accreditation standards and XXX/AXXX policies that were issued prior to January 1, 2015 and ceded so that they were part of a reinsurance arrangement as of December 31, 2014 are exempt from the accreditation standards. An effective date and grandfathering provision applicable to variable annuity and long-term care reinsurance captives have not been adopted yet.
• An operational risk charge containing two components will appear on the 2015 RBC reports for informational purposes only. The first component will add an RBC charge for growth risk for gross direct premiums that exceed a certain threshold of such premiums from the previous year. The second component will add a charge for general operational risk that will apply a factor to premiums and reserves (with the higher of the two as the RBC charge) and a 3% capital add-on charge.