40-2c03. Determination of risk-based capital.
40-2c03
40-2c03. Determination of risk-based capital.(a) A life and health insurer's RBC shall be determined inaccordance with theformula set forth in the RBC instructions. The formula shall take into accountand may adjust for the covariance between:
(1) The risk with respect to the insurer's assets;
(2) the risk of adverse insurance experience with respect to theinsurer's liabilities and obligations;
(3) the interest rate risk with respect to the insurer'sbusiness; and
(4) all other business risks and such other relevant risks asare set forthin the RBC instructions;
determined in each case by applying the factors in the manner set forth inthe RBC instructions.
(b) A property and casualty insurer's RBC shall be determined inaccordance with the formula set forth in the RBC instructions. The formulashall take into account and may adjust for the covariance between:
(1) Asset risk;
(2) credit risk;
(3) underwriting risk; and
(4) all other business risks and such other relevant risks as are set forthin the RBC instructions;
determined in each case by applying the factors in the manner set forth inthe RBC instructions.
(c) An excess of capital over the amount produced by the risk-based capitalrequirements contained in this act and the formulas, schedules and instructionsreferenced in this act is desirable in the business of insurance. Accordingly,insurers should seek to maintain capital above the RBC levels required by thisact. Additional capital is used and useful in the insurance business and helpsto secure an insurer against various risks inherent in, or affecting, thebusiness of insurance and not accounted for or only partially measured by therisk-based capital requirements contained in this act.
History: L. 1994, ch. 138, § 3;L. 1996, ch. 134, § 2; July 1.