The Mortgage Bankers Association (MBA) is pleased with the National Association of Insurance Commissioner's (NAIC's) shelved the proposed increase in the risk-based capital (RBC) factor from 2.6% to 4.0%.

The MBA strongly opposed this increase because it would have resulted in a 53% increase in RBC for all life insurance companies.

The MBA said that a compromise proposal that would be much less onerous for life companies. The compromise takes a much more targeted approach to RBC increases where the mortgage experience adjustment factor, or MEAF, would be adjusted. The MEAF floor would increase to 80% from 75% and the MEAF ceiling would increase to 175% from 125%.

This change in the MEAF will have a very modest impact on life companies with strong loan performance and will have a higher impact on companies in the worse loan performance categories.

However, even at its highest level (175%), the MEAF remains well below the 350% ceiling that was in effect as late as 2008. The new MEAF settings will be in place for 2010 and 2011.

This timeframe is intended to provide sufficient time for MBA and the American Council of Life Insurers to develop a long-term solution for addressing life company RBC.


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