NAIC committee revises RBC Preamble

The Financial Condition (E) Committee of the National Association of Insurance Commissioners (NAIC) has voted to make significant changes to the Preamble to the Risk-Based Capital (RBC) requirements imposed on insurers, indicating a shift in how regulators perceive the RBC standard and how the insurance industry should navigate it going forward.

RBC is one of the NAIC’s and state insurance regulators’ key tools in regulating the amount of capital that insurers must hold. The specific RBC requirements applicable to insurers are embodied in instructions and related publications issued by the NAIC, which contain a Preamble setting forth the basic purposes and functions of RBC as a regulatory tool. On July 8, 2026, E Committee adopted certain changes to the Preamble, described below.

Among the principal changes made to the Preamble are the following:

• The Preamble’s historical discussion of the development of the RBC framework has been updated to reflect the use of RBC by regulators in assessing the solvency risk of insurance groups (as opposed to individual insurance operating entities). In this regard, the amended language mentions the NAIC’s Group Capital Calculation and Aggregation Method initiatives of recent years. The update also indicates that RBC is used by other “stakeholders who are assessing potential regulatory action.” 
• The existing Preamble prohibits an insurer from publishing (in an advertisement or the like) any statement with regard to RBC levels, except as permitted in the RBC Model Act. The E Committee amendments relax this broad prohibition, adding language that permits insurers to “make assertions or disclosures of certain RBC information, consistent with applicable state law, to accommodate the interests of other stakeholders, including policyholders, investors, ratings agencies, lenders, and other regulatory authorities.” An insurer making any such assertions or disclosures should “provide appropriate contextual information alongside it, describing RBC’s purpose as a regulatory tool and its limitations for other uses.” The amendments retain the concept that RBC should not be used to rank insurers against one another. 
• Under the existing Preamble, RBC is used exclusively to identify weakly capitalized insurers, and any other application of the RBC tools would be “inappropriate.” The amendments clarify that RBC ratios can be used beyond identifying weakly capitalized insurers. Language in the existing Preamble indicating that RBC was developed with regulatory needs in mind and for no other purpose has been stricken. However, under the amended language, a “spectrum of factors” should be considered when using RBC for other purposes, including the following:
  • “Insurers voluntarily strengthen[ ] or weaken[ ] assumptions used for reserving, resulting in a reduction or increase of an insurer’s RBC ratio [and]
  • RBC requirements are often developed with data that extends over a substantial period of years, with actuarial modeling often extending over long horizons.”
• The amendments codify the principle of “equal capital for equal risk,” a concept that has featured prominently in the recent NAIC deliberations on capital charges in the context of invested assets. In other words, two investments exposing an insurer to the same amount of risk should carry the same RBC charge, regardless of the legal form of the investment, “unless there are substantial differences in the nature of the risk in the context of the business model (e.g., life vs. property & casualty) to warrant alternative treatments.”