FOR IMMEDIATE RELEASE

NAIC SUPPORTS GLOBAL SOLVENCY STANDARDS
Financial Turmoil Sharpens Focus on Risk Management

KANSAS CITY, Mo. (Oct. 17, 2008) - As members of the International Association of Insurance Supervisors (IAIS), U.S. state insurance regulators have joined their regulatory counterparts from around the world in adopting several supervisory papers at the IAIS Annual General Meeting in Budapest, Hungary.

The standards and accompanying guidance papers address the risk-management practices of insurers, the role of internal models and the necessity of managers and regulators to understand and communicate the results of these tools and practices. Nonetheless, the support comes with the realization that the current crisis in financial markets raises a number of critical issues regarding the practices of all financial institutions.

"To date, insurance companies have not been the source of the failure of major financial institutions, but there are undoubtedly valuable lessons to be learned," said Virginia Insurance Commissioner Al Gross, who chairs the IAIS Technical Committee. "Adoption of these papers is the first step in creating a broad, comprehensive framework of supervision - both for insurance companies and for more complex financial holding companies."

The papers raise unanswered questions vital to the ongoing analysis of the current financial crisis:

• Were the financial models used in some of today's troubled financial institutions simply incorrect?
• Did management and/or regulators of these firms understand what the models were and were not saying?
• Was there adequate communication between the companies and their regulators?

"As global pioneers in the application of risk-based solvency standards applied to insurers through the application of risk-based capital laws and standards, the NAIC continues to develop and expand the use of risk-management tools in monitoring the solvency of insurance companies," Gross added.

The NAIC will work closely with the world's insurance regulators to objectively answer these questions and to ensure insurance regulation keeps up with market conditions, while maintaining the robust consumer protections that American policyholders have every right to expect.

About the NAIC

Formed in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The NAIC has three offices: Executive Office, Washington, D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office, New York City.

The NAIC serves the needs of consumers and the industry, with an overriding objective of supporting state insurance regulators as they protect consumers and maintain the financial stability of the insurance marketplace. For more information, visit www.naic.org.

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