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U.S. Solvency Modernization Initiative

U.S. Solvency Modernization Initiative. Director Christina Urias, Chair Solvency Modernization Initiative (EX) Task Force Interim Meeting, Phoenix, March 11, 2010. Background - Evolution of the U.S. Solvency System.

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U.S. Solvency Modernization Initiative

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  1. U.S. SolvencyModernization Initiative Director Christina Urias, Chair Solvency Modernization Initiative (EX) Task Force Interim Meeting, Phoenix, March 11, 2010

  2. Background - Evolution of the U.S. Solvency System • U.S. insurance regulation: a successful, detailed, uniform financial regulatory system. • 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. • Today, global and national developments call for another comprehensive review.

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

  4. Capital Requirements • Additional Risk Charges • Defined Safety Level • Expanded Formula; Modeling with Safeguards Today • Risk-Based • Cover Major Risks • Insurance Parent – “Group RBC”

  5. Financial Reporting & Supervision(Off-Site and On-Site) • Significant Training on Risk-Focused Surveillance • New ERM requirements – ORSA • Company Stress Tests Today • Extensive Uniform Financial Reporting • Electronic reporting • New Risk-Focused Surveillance Process

  6. Accounting/Valuation • 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? Today • Fully codified statutory accounting • P&C Principles-Based Valuation (Life is Rules-Based) • Limited P&C discounting

  7. ERM/Governance • Broader authority; new law? • Governance framework • Risk management - ORSA Today • Existing legislation and case law • “Back door” – Qualitative analysis, Risk-focused Financial Examinations

  8. Today’s Meeting: Goals • Regulator and Interested Parties Dialogue • Discuss 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 • Consider drafting a capital requirements white paper based upon the consultation paper and comments received

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