Voya 2013 Annual Report Download - page 105

defined benefit pension plans that are likely to increase sponsors’ costs of maintaining these plans and imposed
certain requirements on defined contribution plans. Over time, these changes could negatively impact our sales of
defined benefit or defined contribution plan products and services and cause sponsors to discontinue existing
plans for which we provide insurance, asset management, administrative, or other services. Certain tax-favored
savings initiatives that have been proposed could hinder sales and persistency of our products and services that
support employment based retirement plans.
The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 also includes
certain provisions for defined benefit pension plan funding relief. These provisions may impact the likelihood of
corporate plan sponsors terminating their plans and/or engaging in transactions to partially or fully transfer
pension obligations to an insurance company. As part of our retirement services segment, we offer general
account and separate account group annuity products that enable a plan sponsor to transfer these risks, often in
connection with the termination of defined benefit pension plans. Consequently, this legislation could indirectly
affect the mix of our business, with fewer closeouts and more non-guaranteed funding products, and adversely
impact our results of operations.
We may not be able to mitigate the reserve strain associated with Regulation XXX and NAIC Actuarial
Guideline 38, potentially resulting in a negative impact on our capital position or in a need to increase prices
and/or reduce sales of term or universal life products.
Regulation XXX requires insurers to establish additional statutory reserves for certain term life insurance
policies with long-term premium guarantees and for certain universal life policies with secondary guarantees. In
addition, AG38 clarifies the application of XXX with respect to certain universal life insurance policies with
secondary guarantees. Many of our newly issued term insurance products and an increasing number of our
universal life insurance products are affected by XXX and AG38, respectively. The application of both XXX and
AG38 involves numerous interpretations. At times, there may be differences of opinion between management
and state insurance departments regarding the application of these and other actuarial standards. Such differences
of opinion may lead to a state insurance regulator requiring greater reserves to support insurance liabilities than
management estimated.
We have implemented reinsurance and capital management actions to mitigate the capital impact of XXX
and AG38, including the use of LOCs and the implementation of other transactions that provide acceptable
collateral to support the reinsurance of the liabilities to wholly owned reinsurance captives or to third-party
reinsurers. These arrangements are subject to review and approval by state insurance regulators and review by
rating agencies. In October 2011, the NAIC established a subgroup to study the use of captives and special
purpose vehicles to transfer insurance risk in relation to existing state laws and regulations, and to establish
appropriate regulatory requirements to address concerns identified in the study. Additionally, in June 2013, the
NYDFS released a report critical of certain captive reinsurance structures and calling, in part, for other state
regulators to adopt a moratorium on approving such structures pending further review by state and federal
regulators. Also, in December 2013, FIO issued a report on how to modernize and improve the system of
insurance regulation in the United States, recommending, in part, that states develop a uniform and transparent
solvency oversight regime for the transfer of risk to reinsurance captives and adopt a uniform capital requirement
for reinsurance captives, including a prohibition on transactions that do not constitute legitimate risk transfer. See
“—Our insurance businesses are heavily regulated, and changes in regulation in the United States, enforcement
actions and regulatory investigations may reduce profitability” above and “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Statutory Capital
and Risk-Based Capital of Principal Insurance Subsidiaries—Captive Reinsurance Subsidiaries”. Rating agencies
may include a portion of these LOCs or other collateral in their calculation of leverage calculations, which could
increase their assessment of our leverage ratios and potentially impact our ratings. We cannot provide assurance
that we will be able to continue to use captive reinsurance companies or that there will not be regulatory or rating
agency challenges to the reinsurance and capital management actions we have taken to date or that acceptable
collateral obtained through such transactions will continue to be available or available on a cost-effective basis.
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