(a) Terms that are set forth in section 217.2 and
used in this subpart have the definitions assigned thereto in section
217.2.
(b) For the purposes of this subpart, the following
terms are defined as follows:
Allocation share means the portion of a downstream
building block’s available capital or building block capital requirement
that a building block parent must aggregate in calculating its own
building block available capital or building block capital requirement,
as applicable, and calculated in accordance with section 217.605(d).
Assignment means the process of associating
an inventory company with one or more building block parents for purposes
of inclusion in the building block parents’ building blocks.
BBA ratio is defined in section 217.603.
Building block means a building block parent
and all downstream companies and subsidiaries assigned to the building
block parent.
Building block available capital has the meaning
set out in section 217.608.
Building block capital requirement has the
meaning set out in section 217.607.
Building block parent means the lead company
of a building block whose indicated capital framework must be applied
to all members of a building block for purposes of determining building
block available capital and the building block capital requirement.
Capital-regulated company means a company that
is—
(i) A depository institution, foreign bank,
or company engaged in the business of insurance in a supervised insurance
organization; and
(ii)
Directly subject to a regulatory capital framework.
Common capital framework means NAIC RBC.
Company available capital means, for a company,
the amount of its capital elements, net of any adjustments and deductions,
as determined in accordance with the company’s indicated capital framework.
Company capital element means any part, item,
component, balance sheet account, instrument, or other element qualifying
as regulatory capital under a company’s indicated capital framework
prior to any adjustments and deductions under that framework.
Company capital requirement means:
(i) For a company whose indicated capital
framework is NAIC RBC, the Authorized Control Level risk-based capital
requirement as set forth in NAIC RBC;
(ii) For a company whose indicated capital
framework is a U.S. Federal banking capital rule, the total risk-weighted
assets; and
(iii) For
any other company, a risk-sensitive measure of required capital used
to determine the jurisdictional intervention point applicable to that
company.
Downstream building block parent means a building
block parent that is a downstream company of another building block
parent.
Downstream company means a company whose company
capital element is directly or indirectly owned, in whole or in part,
by another company in the supervised insurance organization.
Downstreamed capital means direct ownership
of a downstream company’s company capital element that is accretive
to a downstream building block parent’s building block available capital.
When calculating building block available capital, the amount of the
downstreamed capital is calculated as the amount, excluding any impact
on taxes, of the company available capital of the building block parent
of the upstream building block, if the owner were to deduct the downstreamed
capital.
Financial entity means:
(i) A bank holding company; a savings and
loan holding; a U.S. intermediate holding company established or designated
for purposes of compliance with part 252 of this chapter;
(ii) A depository institution
as defined in section 3(c) of the Federal Deposit Insurance Act (12
U.S.C. 1813(c)); an organization that is organized under the laws
of a foreign country and that engages directly in the business of
banking outside the United States; a Federal credit union or state
credit union; a national association, state member bank, or state
nonmember bank that is not a depository institution; an institution
that functions solely in a trust or fiduciary capacity; an industrial
loan company, an industrial bank, or other similar institution;
(iii) An entity that is
state-licensed or registered as:
(A) A credit or lending
entity, including a finance company; money lender; installment lender;
consumer lender or lending company; mortgage lender, broker, or bank;
motor vehicle title pledge lender; payday or deferred deposit lender;
premium finance company; commercial finance or lending company; or
commercial mortgage company; except entities registered or licensed
solely on account of financing the entity’s direct sales of goods
or services to customers; or
(B) A money services business, including
a check casher; money transmitter; currency dealer or exchange; or
money order or traveler’s check issuer;
(iv) Any person registered with the Commodity
Futures Trading Commission as a swap dealer or major swap participant
pursuant to the Commodity Exchange Act (7 U.S.C. 1 et seq.),
or an entity that is registered with the U.S. Securities and Exchange
Commission as a security-based swap dealer or a major security-based
swap participant pursuant to the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.);
(v) A securities holding company as defined in section 618 of the
Dodd-Frank Act (12 U.S.C. 1850a); a broker or dealer as defined in
sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(4)–(5)); an investment company registered with the
U.S. Securities and Exchange Commission under the Investment Company
Act of 1940 (15 U.S.C. 80a–1 et seq.); or a company that has
elected to be regulated as a business development company pursuant
to section 54(a) of the Investment Company Act of 1940 (15 U.S.C.
80a–53(a));
(vi) A private
fund as defined in section 202(a) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)); an entity that would be an investment company
under section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3)
but for section 3(c)(5)(C) of that Act; or an entity that is deemed
not to be an investment company under section 3 of the Investment
Company Act of 1940 pursuant to 17 CFR 270.3a–7 (Investment Company
Act Rule 3a–7 of the U.S. Securities and Exchange Commission);
(vii) A commodity pool,
a commodity pool operator, or a commodity trading advisor as defined,
respectively, in sections 1a(10), 1a(11), and 1a(12) of the Commodity
Exchange Act (7 U.S.C. 1a(10), 1a(11), and 1a(12)); a floor broker,
a floor trader, or introducing broker as defined, respectively, in
sections 1a(22), 1a(23) and 1a(31) of the Commodity Exchange Act (7
U.S.C. 1a(22), 1a(23), and 1a(31)); or a futures commission merchant
as defined in section 1a(28) of the Commodity Exchange Act (7 U.S.C.
1a(28));
(viii) An entity
that is organized as an insurance company, primarily engaged in underwriting
insurance or reinsuring risks underwritten by insurance companies;
(ix) Any designated financial
market utility, as defined in section 803 of the Dodd-Frank Act (12
U.S.C. 5462); and
(x)
An entity that would be a financial entity described in paragraphs
(i) through (ix) of this definition, if it were organized under the
laws of the United States or any State thereof.
Indicated capital framework is defined in section
217.605, provided that for purposes of section 217.605(b)(2), the
NAIC RBC frameworks for life insurance and fraternal insurers, property
and casualty (P&C) insurance, and health insurance companies are
different indicated capital frameworks.
Inventory company means a company identified
pursuant to section 217.605(b)(1).
Material means, for a company in the supervised
insurance organization:
(i) Where the top-tier depository institution
holding company’s total exposure to the company exceeds 5 percent
of the maximum of—
(A) Top-tier depository institution
holding company’s company available capital; and
(B) The largest company available capital
of all capital regulated companies reported in the supervised insurance
organization’s inventory; or
(ii) The company is otherwise significant
when assessing the building block available capital or building block
capital requirement of the top-tier depository institution holding
company based on factors including risk exposure, activities, organizational
structure, complexity, affiliate guarantees or recourse rights, and
size.
(iii) For purposes
of this definition, total exposure includes:
(A) The absolute value
of the top-tier depository institution holding company’s direct or
indirect interest in the company capital elements of the company;
(B) The maximum possible
loss from a guarantee (explicit or implicit) the top-tier depository
institution holding company or any other company in the supervised
insurance organization provides for the benefit of the company; and
(C) Maximum potential
counterparty credit risk to the top-tier depository institution holding
company or any other company in the supervised insurance organization
arising from any derivative or similar instrument, reinsurance or
similar arrangement, or other contractual agreement.
Material financial entity means a financial
entity that, together with its subsidiaries, but excluding any subsidiary
capital-regulated company (or subsidiary thereof), is material, provided
that an inventory company is not eligible to be a material financial
entity if:
(i) The supervised insurance organization
has elected pursuant to section 217.605(c) not to treat the company
as a material financial entity; or
(ii) The inventory company is a financial
subsidiary, as defined in section 121 of the Gramm-Leach-Bliley Act.
Member means, with respect to a building block,
the building block parent or any of its downstream companies or subsidiaries
that have been assigned to a building block.
NAIC means the National Association of Insurance
Commissioners.
NAIC RBC means the most recent version of the
Risk-Based Capital (RBC) for Insurers Model Act, together with the
RBC instructions, as adopted in a substantially similar manner by
an NAIC member and published in the NAIC’s Model Regulation Service.
Permitted accounting practice means an accounting
practice, specifically requested by a state-regulated insurer, that
departs from SAP and state prescribed accounting practices and has
been approved by the state-regulated insurer’s domiciliary state regulatory
authority.
Prescribed accounting practice means an accounting
practice that is incorporated directly or by reference to state laws,
regulations, and general administrative rules applicable to all insurance
companies domiciled in a particular state.
Principles based reserving (PBR) means the
valuation standard adopted for certain life insurance reserves by
the NAIC effective as of January 1, 2020.
Recalculated building block capital requirement means, for a downstream building block parent and an upstream building
block parent, the downstream building block parent’s building block
capital requirement recalculated assuming that the downstream building
block parent had no upstream investment in the upstream building block
parent.
Regulatory capital framework means, with respect
to a company, the applicable legal requirements, excluding this subpart,
specifying the minimum amount of total regulatory capital the company
must hold to avoid restrictions on distributions and discretionary
bonus payments, regulatory intervention on the basis of capital adequacy
levels for the company, or equivalent standards; provided that the
NAIC RBC frameworks for life and fraternal insurance, P&C insurance,
and health insurance companies are different regulatory capital frameworks.
SAP means Statutory Accounting Principles as
promulgated by the NAIC and adopted by a jurisdiction for purposes
of financial reporting by insurance companies.
Scaling means the translation of building block
available capital and building block capital requirement from one
indicated capital framework to another by application of section 217.606.
Scalar compatible means a capital framework:
(i) For which the Board has determined
scalars; or
(ii) That
is an insurance capital regulatory framework, and exhibits each of
the following three attributes:
(A) The framework is clearly
defined and broadly applicable;
(B) The framework has an identifiable
regulatory intervention point that can be used to calibrate a scalar;
and
(C) The framework
provides a risk-sensitive measure of required capital reflecting material
risks to a company’s financial strength.
Submission date means the date as of which
form FR Q-1 is filed with the Board.
Supervised insurance organization means:
(i) In the case of a depository institution
holding company, the set of companies consisting of:
(A) A top-tier
depository institution holding company that is an insurance underwriting
company, together with its inventory companies; or
(B) A top-tier depository institution
holding company, together with its inventory companies, that, as of
June 30 of the previous calendar year, held 25 percent or more of
its total consolidated assets in insurance underwriting companies
(other than assets associated with insurance underwriting for credit
risk). For purposes of this paragraph (i)(B), the supervised firm
must calculate its total consolidated assets in accordance with GAAP,
or if the firm does not calculate its total consolidated assets under
GAAP for any regulatory purpose (including compliance with applicable
securities laws), the company may estimate its total consolidated
assets, subject to review and adjustment by the Board; or
(ii) An institution that
is otherwise subject to this subpart, as determined by the Board,
together with its inventory companies.
Tier 2 capital instruments has the meaning set
out in section 217.608(a).
Top-tier depository institution holding company means a depository institution holding company that is not controlled
by another depository institution holding company.
Upstream building block parent means an upstream
company that is a building block parent.
Upstream company means a company within a supervised
insurance organization that directly or indirectly controls a downstream
company, or directly or indirectly owns part or all of a downstream
company’s company capital elements.
Upstream investment means any direct or indirect
investment by a downstream building block parent in an upstream building
block parent. When calculating adjusted downstream building block
available capital, the amount of the upstream investment is calculated
as the impact, excluding any impact on taxes, on the downstream building
block parent’s building block available capital if the owner were
to deduct the investment.
U.S. federal banking capital rules mean this
part, other than this subpart, and the regulatory capital rules promulgated
by the Federal Deposit Insurance Corporation at chapter III of this
title and the Office of the Comptroller of the Currency at chapter
I of this title.
