New RBC Bond Factors and then Some – Slated for Year End 2019

by Peter A. Wirtala, CFA of AAM - Insurance Investment Management

New NAIC Bond RBC factors will have different impacts on different insurers. Good update via AAM. NAIC still targeting end of 2019 effective date.

"This will most likely entail increasing the number of bond ratings buckets from 6 to 20, changing the factors associated with these buckets, and also changing the calculation of the portfolio adjustment factor (also known as the bond size factor) to add extra incentive to hold a diversified portfolio. According to the NAIC’s newsletter (November, 2017), “The expanded factors are intended to add more transparency to the varying degrees of risk within insurers’ fixed‐income securities. This will allow the capital charges for these investments to better reflect the capital needed over a 10‐year time horizon.”"

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New RBC Bond Factors and then Some – Slated for Year End 2019

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