Independent Life is committed to providing long-term financial security to its policy holders and its payees. In order to demonstrate this financial commitment, Independent Life has entered into a capital maintenance agreement with Independent Assignment Company that states:
If a quarterly Risk Based Capital (RBC) calculation indicates that (a) the capital and surplus is less than $40,000,000 or (b) the total adjusted capital of the Annuity Issuer is less than 900% of the Authorized Control Level (ACL) RBC of the Annuity Issuer (the amount of such deficit, a “Capital Shortfall”), then within ten (10) Business Days of such RBC calculation, the Annuity Issuer shall cease issuing new annuity contracts or raise additional capital to cure the Capital Shortfall.
What It Means
RBC is a critical measure of the financial strength and security of an insurance company. This measure is calculated as the ratio (the relative magnitude) of an insurer's capital to its 'required capital', the cumulative amount of capital estimated to be required as a safeguard against the risks of its assets and particular businesses. Assets and insurance businesses deemed to have higher risk are assessed greater risk factors and accordingly require a higher level of capital as a buffer against those risks, while conversely assets and businesses that are exposed to a lower level of risk require a lower amount of required capital as a buffer.
State regulators, part of the coalition of the National Association of Insurance Commissioners (NAIC), use the RBC measure to determine which insurers have sufficient levels of risk-adjusted capital to ensure that insurers' policyholders' and customers' policy claims will be met. Insurers with inadequate levels of risk-adjusted capital will be required by the regulators to revise their strategies to strengthen their financial positions. Should an insurer not be successful in adequately strengthening its position, it could be forced to cease operations.
Independent Life, at its inception, has guaranteed that it will maintain an RBC ratio of 900%, deemed to be very strong by the state insurance regulators. Independent Life will work with its independent audit partner, KPMG, to calculate its ACL-RBC score on a quarterly basis. This score will be filed with the Texas Department of Insurance and will be made publicly available. Should its ratio fall below 900%, it is committed to either raising additional capital or writing less business within ten (10) business days to restore its 900% RBC ratio.
At or below 200% of ACL-RBC, the company must submit a capital course correction plan to the regulator. At or below 100% of ACL-RBC, the regulator may take over and rehabilitate the company. Our minimum target of 900% of ACL-RBC is equivalent to the capital ratio of top-rated companies.
"Independent Life has pledged that it will maintain an RBC ratio of 900%, deemed to be very strong by insurance regulators and rating agencies alike. It has the financial backing of well capitalized and committed investors and a conservative business model that collectively enable it to maintain this high capital ratio, in order to provide its customers with peace of mind over the duration of their structured settlement contracts."
Michael A. Cohen, Principal
Cohen Strategic Consulting
Former Head of U.S. Life Insurance Rating Group, A.M. Best