b'Insurance Regulatory | US/NAICNAIC Adopts Group Capital Framework forUS Insurance Holding Company SystemsOn December 9, 2020, the NAIC Executive (EX) Committee and Plenary adopted a Group Capital Calculation template and instructions (the GCC). The NAIC began developing the GCC in 2015 to assist efforts by state insurance regulatory authorities to better understand the financial risk profile of the holding company systems of the insurers they regulate. Also on December 9, 2020, the NAIC adopted amendments to the Model Insurance Holding Company System Regulatory Act (the Model Act) and the Model Insurance Holding Company System Regulation (the Model Regulation) to incorporate the GCC framework.Like any other change to NAIC model laws, the GCC needs to be enacted by the individual states to become effective. The NAIC is targeting the end of 2022 for this to be accomplished.The GCC uses a bottom-up aggregation approach that involves: Looking at each of the entities within an insurance holding company systemincluding insurers, other financial businesses and non-financial businesses;Calculating the available capital/financial resources and the required regulatory capital based on the valuation of assets and liabilities of each entity;Quantifying capital requirements for non-insurance entities in the holding company system and using scalar adjustments to convert non-US and non-insurance capital requirements to a 200% RBC equivalent; and Aggregating all the entities within the system, using eliminations to prevent any double counting of available capital/financial resources or calculated capital within the system. As stated by the NAIC in a press release on December 9, 2020, key benefits that regulatory authorities can expect to derive from the GCC will include: Use of a tool that quantifies risk across the insurance group coupled with transparency into how capital is allocated; Receipt of key financial information on the insurance group that will assist in holistically understanding the financial condition of non-insurance entities; Receipt of information that will assist in understanding whether and to what degree insur-ance companies may be supporting the operations of non-insurance entities; and Use of a tool which can be used to help resolve concerns that policyholders of insurers in a group may not be adequately protected.64GLOBAL INSURANCE INDUSTRY | YEAR IN REVIEW2020'