Group Capital Calculation
The NAIC is creating a Group Capital Calculation (GCC) in order to satisfy the terms of the U.S.-EU Covered Agreement and to rectify a perceived shortcoming of state regulation. The Covered Agreement prohibits state regulators from applying the GCC to Aegon, but there is some consideration of including U.S. subgroups. Transamerica has opposed proposed "on top adjustments” that deviate from legal entity rules and would create a “dual system.” The Covered Agreement requires the GCC to be completed by November 2022.
Transamerica supports regulatory capital standards that are tailored to the long-term life insurance business models. The life insurance business model is unique in that many products are held by consumers for decades. A capital standard, therefore, should reflect a “buy and hold” mindset and should avoid extreme volatility.
Transamerica also supports standards promote a level competitive playing field. Capital standards should fairly apply to all categories of insurers, not just a subset such as larger companies or international groups.
Transamerica also supports a supervisory framework that avoids redundant and conflicting standards. Redundant standards drive up compliance costs, many of which are ultimately borne by consumers. Conflicting standards complicate risk management and could compromise the soundness of the company’s risk management processes.
Annuity Suitability/Best Interest
In the wake of the invalidation of the U.S. Department of Labor’s Fiduciary Rule, Transamerica and the broader life insurance industry supported adoption of a “best interest” standard of care for the sale of annuities. The NAIC has now revised its Model Annuity Suitability rule to include a best interest standard, which we expect to be adopted by approximately twenty-five states by year-end 2021. New York remains the only state that has adopted a best interest standard for the sale of life insurance.