Ameriprise 2012 Annual Report Download - page 38

Insurance Regulation
Our insurance subsidiaries are subject to supervision and regulation by states and other territories where they are
domiciled or otherwise licensed to do business. The primary purpose of this regulation and supervision is to protect the
interests of contractholders and policyholders. In general, state insurance laws and regulations govern standards of
solvency, capital requirements, the licensing of insurers and their agents, premium rates, policy forms, the nature of and
limitations on investments, periodic reporting requirements and other matters. In addition, state regulators conduct periodic
examinations into insurer market conduct and compliance with insurance and securities laws. The Minnesota Department
of Commerce, the Wisconsin Office of the Commissioner of Insurance, and the New York State Department of Financial
Services (the ‘‘Domiciliary Regulators’’) regulate certain of the RiverSource Life companies, and the Property Casualty
companies depending on each company’s state of domicile. In addition to being regulated by their Domiciliary Regulators,
our RiverSource Life companies and Property Casualty companies are regulated by each of the insurance regulators in the
states where each is authorized to transact business. Financial regulation of our RiverSource Life companies and Property
Casualty companies is extensive, and their financial and intercompany transactions (such as intercompany dividends,
capital contributions and investment activity) are often subject to pre-notification and continuing evaluation by the
Domiciliary Regulators.
Virtually all states require participation in insurance guaranty associations, which assess fees to insurance companies in
order to fund claims of policyholders and contractholders of insolvent insurance companies subject to statutory limits.
These assessments are generally based on a member insurer’s proportionate share of all premiums written by member
insurers in the state during a specified period prior to an insolvency. See Note 22 to our Consolidated Financial
Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding guaranty
association assessments.
Certain variable annuity and variable life insurance policies offered by the RiverSource Life companies constitute and are
registered as securities under the Securities Act of 1933, as amended. As such, these products are subject to regulation
by the SEC and FINRA. Securities regulators have recently increased their focus on the adequacy of disclosure regarding
complex investment products, including variable annuities and life insurance, and have announced that they will continue
to review actions by life insurers to improve profitability and reduce risks under in-force annuity and insurance products
with guaranteed benefits. In reviewing such actions, regulators examine, among other factors, potential conflicts between
an insurer’s financial interests and the interests of the contract owners, as well as perceived inconsistencies between an
insurer’s actions and the expectations of investors at the time a product was sold.
The Dodd-Frank Act created the Federal Insurance Office (‘‘FIO’’) within the Department of Treasury. The FIO does not have
substantive regulatory responsibilities, though it is tasked with monitoring the insurance industry and the effectiveness of
its regulatory framework and providing periodic reports to the President and Congress. The scope and impact of the
research and reports provided by the FIO and the work of the Basel, Switzerland-based International Association of
Insurance Supervisors (‘‘IAIS’’), and the extent to which such work may ultimately lead to a more prominent role of the
federal government in the regulation of the insurance industry, is uncertain.
In October 2012, RiverSource Life purchased a block of residential mortgage loans from Ameriprise Bank, FSB. As an
owner and servicer of residential mortgages, RiverSource Life must comply with applicable federal and state lending laws
and is subject to the jurisdiction of the federal Consumer Finance Protection Bureau and certain state regulators relative to
these mortgage loans.
Each of our insurance subsidiaries is subject to risk-based capital (‘‘RBC’’) requirements designed to assess the adequacy
of an insurance company’s capital and surplus in relation to its investment and insurance risks. The National Association of
Insurance Commissioners (‘‘NAIC’’) has established RBC standards that virtually all state insurance departments have
adopted, with minor modifications. The RBC requirements are used by the NAIC and state insurance regulators to identify
companies that merit regulatory actions designed to protect policyholders. Our RiverSource Life companies and Property
Casualty companies are subject to various levels of regulatory intervention should their total adjusted statutory capital fall
below defined RBC action levels. At the ‘‘company action level,’’ defined as total adjusted capital level between 100% and
75% of the RBC requirement, an insurer must submit a plan for corrective action with its primary state regulator. The
‘‘regulatory action level,’’ which is between 75% and 50% of the RBC requirement, subjects an insurer to examination,
analysis and specific corrective action prescribed by the primary state regulator. If a company’s total adjusted capital falls
between 50% and 35% of its RBC requirement, referred to as ‘‘authorized control level,’’ the insurer’s primary state
regulator may place the insurer under regulatory control. Insurers with total adjusted capital below 35% of the requirement
will be placed under regulatory control.
RiverSource Life, RiverSource Life of NY, IDS Property Casualty and Ameriprise Insurance Company maintain capital levels
well in excess of the company action level required by state insurance regulators. For RiverSource Life, the company action
level RBC was $620 million as of December 31, 2012, and the corresponding total adjusted capital was $3.3 billion,
which represents 525% of company action level RBC. For RiverSource Life of NY, the company action level RBC was
$44 million as of December 31, 2012, and the corresponding total adjusted capital was $256 million, which represents
577% of company action level RBC. As of December 31, 2012, the company action level RBC was $66 million for IDS
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