Around The Horn RBC CHANGES Pete Wirtala, CFA AAM Insurance - - PowerPoint PPT Presentation

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Around The Horn RBC CHANGES Pete Wirtala, CFA AAM Insurance - - PowerPoint PPT Presentation

Dec 28, 2023 413 likes •457 views

Around The Horn RBC CHANGES Pete Wirtala, CFA AAM Insurance Strategist Investment Risk-Based Capital is changing (and changing, and changing) 2 Key Changes: 1) Bond RBC factors will become more granular, and (mostly) increase 2)

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RBC CHANGES Around The Horn

Pete Wirtala, CFA AAM Insurance Strategist

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Investment Risk-Based Capital is changing (and changing, and changing…)

2 Key Changes: 1) Bond RBC factors will become more granular, and (mostly) increase 2) Portfolio Adjustment Factor changing to strongly incentivize holding many issuers

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Investment risk factors more relevant for Life companies Testing suggests C-1o factor to increase ~50% for Life insurers More required capital = lower RBC ratio

Timing: Year-end 2019 implementation, though not yet finalized

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Investment Risk-Based Capital is changing (and changing, and changing…)

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Previous Recommendation: To offset changes, shift towards “barbell” off AAA/AA+ bonds and BB+ bonds, which get relatively favorable treatment New recommendation: Increase # of issuers held to improve the Portfolio Adjustment Fact (bond ETF’s may help)