§ 217.602 Definitions. ( a ) Terms that are set forth in § 217.2 and used in this subpart have the definitions assigned thereto in § 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 § 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 § 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 § 217.608.
*Building block capital requirement* has the meaning set out in § 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 § 217.605, provided that for purposes of § 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 § 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 § 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.
*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.
*Scaling* means the translation of building block available capital and building block capital requirement from one indicated capital framework to another by application of § 217.606.
*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 § 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.