A new set of revisions to the National Association of Insurance Commissioners requirements that govern real estate investments on the part of life insurers could be teeing up the asset class for growth in the future, as barriers to entry are lowered.
Late last year, the NAIC released a set of changes to its risk-based capital requirements that, for life insurers, lowered the factor for life and health companies. For so-called Schedule A investments—properties owned outright by carriers—the required set-aside was lowered to 11% from 15%. In the case of Schedule BA investments, such as partnerships and funds where the carrier isn’t the sole owner, that figure went down to 13% from 23%.
George Hansen, senior industry research analyst, AM Best, said life insurers traditionally have only placed about 6% of their portfolios in Schedule BA real estate products and less than 1% in Schedule A real estate investments. Whether there’s any increase and by how much will likely be tied to which segments of the industry carriers are in, but Hansen said he doesn’t expect a huge increase.
The American Academy of Actuaries presents this summary of select significant regulatory and legislative developments in 2021 at the state, federal, and international levels of interest to the U.S. actuarial profession as a service to its members.
The Academy focused on key policy debates in 2021 regarding pensions and retirement, health, life, and property and casualty insurance, and risk management and financial reporting.
Responding to the COVID-19 pandemic, addressing ever-changing cyber risk concerns, and analyzing the implications and actuarial impacts of data science modeling continued to be a focus in 2021.
Practice councils monitored and responded to numerous legislative developments at the state, federal, and international level. The Academy also increased its focus on the varied impacts of climate risk and public policy initiatives related to racial equity and unfair discrimination in 2021.
The Academy continues to track the progress of legislative and regulatory developments on actuarially relevant issues that have carried over into the 2022 calendar year.