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Insurance department proposes group capital and liquidity stress rules
Summary
The Department of Insurance presented a regulation to implement group capital calculations and liquidity stress tests for insurance holding companies to strengthen group-wide solvency oversight; committee approved the change by voice vote.
The Department of Insurance presented a proposed amendment to Regulation 69-14 to create a group capital calculation and liquidity stress-test framework for insurance holding companies, the committee heard.
Michael Wise, director of the Department of Insurance, said the change follows a National Association of Insurance Commissioners (NAIC) model and is designed to give state regulators additional tools to monitor group-wide solvency. “The idea is to make sure that the group is solvent. … It's not just the individual companies, but a more holistic approach to regulation,” Wise said. The rule would require large groups to calculate group capital requirements and to run liquidity stress scenarios such as mass policy withdrawals or market disruptions.
Wise said industry stakeholders were involved in drafting, and that an associated amendment to the state Holding Company Act is moving through the legislature; he also said the regulation could be promulgated under existing authority even if the statute did not pass immediately. The regulation includes carve-outs for smaller groups, with one noted exemption threshold at $1 billion in premium.
A motion to approve the regulation carried by voice vote. Wise and the department said the change supports the state’s accreditation with the NAIC and would align South Carolina with other states adopting similar group supervision tools.
