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  "authorName": "Oliver Wyman",
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      "text": "Absent adoption of revised scalars, group capital ratios reported in the GCC for life and health insurers operating in Japan will be severely impacted.",
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      "text": "1. The stringency of current Japanese solvency standards on health (“Third Sector”) vs. life (“First Sector”) business. AFLAC data indicates a materially higher level of capital stringency (capital devoted to Third Sector business) compared to its First Sector business.",
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      "text": "As with the initial GCC scalars development, the projected health scalar for the GCC upon and after regime change in Japan should be reviewed in conjunction with the life scalar for Japan. For example, the life scalar would be updated first (if necessary) and then the adjustments described below applied to the life scalar to calculate a heath scalar. The Oliver Wyman report includes guidance for such a process for the life scalar.",
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      "text": "The updated health scalars presented above were derived using the same methodology framework used in 2019/2020 starting with the life scalar developed by the NAIC for Japan (and now as updated in the accompanying Oliver Wyman report) and then adjusted for several factors.",
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      "text": "Louis Felice, Consultant\nlouisfelice@gmail.com\n(518) 424-1970",
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      "text": "Starting with the life insurance ratios included in the accompanying Oliver Wyman report and using updated data provided by AFLAC through 12/31/22, the scalars for life insurers were adjusted based on two broad concepts:",
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      "text": "in Japan’s Third Sector. Both Life and Non-Life insurers in Japan may write health or related insurance in the Third Sector. The data used to develop the proposed life scalars for Japan includes health business similar to the data used for the Japan scalars in the current GCC template.",
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      "text": "The current Japanese insurance capital regime includes a Solvency Margin Ratio (SMR) calculated in a way much closer to U.S. RBC. Reported weighted average solvency ratios in Japan are historically higher than reported U.S. RBC ratios for life insurers. This can result in a scalar greater than 1 as is the case for the proposed Japan Life Scalar of 1.24. Effective in fiscal year 2025, this will change to an Economic Solvency Ratio (ESR) regime with required capital calculated in a way closer to the Solvency II regimes used in the United Kingdom and European Union. Based on an impact study by the Japan Financial Services Authority in 2020 and other available information the targeted solvency ratios will be significantly lower than weighted average U.S. RBC ratios under the ESR regime (See Oliver Wyman report). This results in a scalar much lower than 1 as is the case for the tentative projected Japan Life Scalar of .30. Absent adoption of revised scalars, group capital ratios reported in the GCC for life and health insurers operating in Japan will be severely impacted.",
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