Voya 2014 Annual Report Download - page 72

hazardous financial condition. Insurance regulators may also limit the ability of an insurer to issue new life
insurance policies and annuity contracts above an amount based upon the face amount and premiums of policies
of a similar type issued in the prior year. We do not currently believe that the current or anticipated levels of
statutory surplus of our insurance subsidiaries present a material risk that any such regulator would limit the
amount of new policies that our Principal Insurance Subsidiaries may issue.
Risk-Based Capital. The NAIC has adopted RBC requirements for life, health and property and casualty
insurance companies.The requirements provide a method for analyzing the minimum amount of adjusted capital
(statutory capital and surplus plus other adjustments) appropriate for an insurance company to support its overall
business operations, taking into account the risk characteristics of the company’s assets, liabilities and certain
off-balance sheet items .State insurance regulators use the RBC requirements as an early warning tool to identify
possibly inadequately capitalized insurers .An insurance company found to have insufficient statutory capital
based on its RBC ratio may be subject to varying levels of additional regulatory oversight depending on the level
of capital inadequacy.As of December 31, 2014, the RBC of each of our insurance subsidiaries exceeded
statutory minimum RBC levels that would require any regulatory or corrective action.
The NAIC is currently working with the American Academy of Actuaries as they consider possible updates
to the asset factors that are used to calculate the RBC requirements for investment portfolio assets. The NAIC
review may lead to an expansion in the number of NAIC asset class categories for factor-based RBC
requirements and the adoption of new factors, which could increase capital requirements on some securities and
decrease capital requirements on others. We cannot predict what, if any, changes may result from this review or
their potential impact on the RBC ratios of our insurance subsidiaries that are subject to RBC requirements. We
will continue to monitor developments in this area.
IRIS Tests. The NAIC has developed a set of financial relationships or tests known as the Insurance
Regulatory Information System (“IRIS”) to assist state regulators in monitoring the financial condition of U.S.
insurance companies and identifying companies requiring special attention or action. For IRIS ratio purposes, our
Principal Insurance Subsidiaries submit data to the NAIC on an annual basis. The NAIC analyzes this data using
prescribed financial data ratios. A ratio falling outside the prescribed “usual range” is not considered a failing
result. Rather, unusual values are viewed as part of the regulatory early monitoring system. In many cases, it is
not unusual for financially sound companies to have one or more ratios that fall outside the usual range.
Regulators typically investigate or monitor an insurance company if its IRIS ratios fall outside the
prescribed usual range for four or more of the ratios, but each state has the right to inquire about any ratios falling
outside the usual range.The inquiries made by state insurance regulators into an insurance company’s IRIS ratios
can take various forms.
Management does not anticipate regulatory action as a result of the 2014 IRIS ratio results. In all instances
in prior years, regulators have been satisfied upon follow-up that no regulatory action was required. It is possible
that similar results may not occur in the future.
Insurance Guaranty Associations. Each state has insurance guaranty association laws that require insurance
companies doing business in the state to participate in various types of guaranty associations or other similar
arrangements. The laws are designed to protect policyholders from losses under insurance policies issued by
insurance companies that become impaired or insolvent. Typically, these associations levy assessments, up to
prescribed limits, on member insurers on the basis of the member insurer’s proportionate share of the business in
the relevant jurisdiction in the lines of business in which the impaired or insolvent insurer is engaged. Some
jurisdictions permit member insurers to recover assessments that they paid through full or partial premium tax
offsets, usually over a period of years.
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