© 2010 National Association of Insurance Commissioners U.S. Solvency Modernization Initiative Director Christina Urias, Chair Solvency Modernization Initiative (EX) Task Force Interim Meeting, Phoenix, March 11, 2010

© 2010 National Association of Insurance Commissioners Background - Evolution of the U.S. Solvency System U.S. insurance regulation: a successful, detailed, uniform financial regulatory system. U.S. insurance regulation: a successful, detailed, uniform financial regulatory system. Major financial regulation changes in the early 1990s; RBC development. Major financial regulation changes in the early 1990s; RBC development. 20 years of continuous improvements: model audit rule, risk-focused exams, uniform statutory accounting model, etc. 20 years of continuous improvements: model audit rule, risk-focused exams, uniform statutory accounting model, etc. Today, global and national developments call for another comprehensive review. Today, global and national developments call for another comprehensive review.

© 2010 National Association of Insurance Commissioners Solvency Modernization Initiative (SMI) Critical examination and review of U.S Solvency Framework Critical examination and review of U.S Solvency Framework Modernize, Modify, Expand, Eliminate, Enhance U.S. regulatory system as appropriate Modernize, Modify, Expand, Eliminate, Enhance U.S. regulatory system as appropriate Examine international developments for potential use in U.S. insurance regulation Examine international developments for potential use in U.S. insurance regulation

© 2010 National Association of Insurance Commissioners Capital Requirements Today   Risk-Based   Cover Major Risks   Insurance Parent – “Group RBC”  Additional Risk Charges  Defined Safety Level  Expanded Formula; Modeling with Safeguards

© 2010 National Association of Insurance Commissioners Financial Reporting & Supervision (Off-Site and On-Site) Today   Extensive Uniform Financial Reporting   Electronic reporting   New Risk-Focused Surveillance Process  Significant Training on Risk- Focused Surveillance  New ERM requirements – ORSA  Company Stress Tests

© 2010 National Association of Insurance Commissioners Accounting/Valuation Today   Fully codified statutory accounting   P&C Principles- Based Valuation (Life is Rules- Based)   Limited P&C discounting  Possibilities: Retain SAP? No changes? Utilize GAAP with some non-public statutory reporting?  Life Insurance principles-based reserving  Does P&C discounting with an explicit margin provide better information?

© 2010 National Association of Insurance Commissioners ERM/Governance Today   Existing legislation and case law   “Back door” – Qualitative analysis, Risk- focused Financial Examinations  Broader authority; new law?  Governance framework  Risk management - ORSA

© 2010 National Association of Insurance Commissioners Today’s Meeting: Goals Regulator and Interested Parties Dialogue Regulator and Interested Parties Dialogue Discuss subject matter, allow parties who submitted written comments to present further commentary prior to regulator discussionDiscuss subject matter, allow parties who submitted written comments to present further commentary prior to regulator discussion Gain information to further develop the SMI Roadmap/work plan Gain information to further develop the SMI Roadmap/work plan Consider drafting a capital requirements white paper based upon the consultation paper and comments received Consider drafting a capital requirements white paper based upon the consultation paper and comments received