Examination Oversight (E) Task Force
March 31, 2008

The Examination Oversight (E) Task Force met on Monday, March 31, 2008.

During this meeting, the Task Force heard reports from the following groups:

• Report of the Audit Software Working Group : The Audit Software Working Group held conference calls on February 12, 2008 and March 17, 2008. During the conference calls, the Working Group received an update on TeamMate usage, the Citrix Server, ACL and TeamMate Training and the Exam Tracking System. The Working Group also discussed the sale of the TeamMate software product to Wolters Kluwer and the Working Group’s progress in communicating performance issues to the new owners . Finally, the Working Group discussed the integration of IT examinations within the risk-focused examination approach. This discussion led to the creation of a framework document, which will be presented to the Risk Assessment Implementation Subgroup for feedback. After receiving feedback, the Working Group plans to work on the details of the integration project at its interim meeting in May. The report of the Working Group was received by the Task Force.

• Report of the Financial Analysis Research and Development Working Group: The Financial Analysis Research and Development Working Group held a regulator to regulator conference call on March 26, 2008. During the call, the Working Group discussed, and approved unanimously, enhancements to existing confidential regulator only financial analysis solvency tools. In addition, the Working Group received a referral from the Risk Assessment Prioritization Subgroup of the Risk Assessment Working Group regarding confidential regulator only financial analysis solvency tools . The report of the Working Group was adopted by the Task Force.

• Report of the Financial Examiners Handbook Technical Group: The Financial Examiners Handbook Technical Group met via conference call on March 13, 2008. During this call, the Technical Group received a report from its Sampling Revisions Subgroup on its progress in revising guidance on sampling techniques. In addition, the Technical Group discussed a referral from the Valuation of Securities Task Force on fair value of investments and a comment suggesting revisions to Exhibit A – Examination Planning Procedures Checklist. Finally, the Technical Group discussed and voted to exposed proposed guidance to be adopted into the Financial Condition Examiners’ Handbook:

• Revisions to the Handbook regarding business continuity and third-party administrators in accordance with recommendations made by the Government Accountability Office.
• A new examination repository for investments in accordance with a referral from the Risk Assessment Implementation Subgroup of the Risk Assessment Working Group.
• Guidance related to derivative risks in accordance with a referral from the Valuation of Securities Task Force.
• Revisions to the Handbook related to accreditation requirements on review of reinsurance contracts and the use of a credentialed actuary.

The report of the Technical Group was adopted by the Task Force.

• Report of the Financial Examiners Qualifications & Compensation Technical Group: The Financial Examiners Qualifications & Compensation Technical Group (FEQCTG) met via conference call on March 17, 2008. During this meeting, the Technical Group reviewed a memo to be presented by the chair of the Group to the Task Force recommending that each of the charges of the Group be transferred to the Task Force to streamline work on the charges. The report of the Technical Group was received by the Task Force.

After receipt of the report, the Task Force discussed and adopted the proposal to move the charges of the FEQCTG up to the Task Force level and to disband the Technical Group.

• Report of the FHLB Custodial Subgroup: The FHLB Custodial Subgroup met via conference call on February 21, 2008 and conducted business via e-mail on March 7, 2008. During these meetings, the Subgroup discussed the appropriateness of allowing the Federal Home Loan Banks (FHLBanks) to operate as authorized custodians of insurance company assets. In addition, the Subgroup Discussed proposed revisions to Model #295 – Model Act on Custodial Agreements and the Use of Clearing Corporations and Model #298 – Model Regulation on Custodial Agreements and the Use of Clearing Corporations to allow the FHLBanks to be included in the definition of a custodian. Finally, the Subgroup adopted a recommendation to the Examination Oversight (E) Task Force to create a guideline change to the models allowing the Federal Home Loan Banks to meet the definition of an authorized custodian of insurance company securities. The report of the Subgroup was received by the Task Force.

After receipt of the report, the Task Force discussed and voted to expose the proposed changes to Model #295 and Model #298 for 45 days as recommended by the Subgroup.

• Report of the Hazardous Financial Condition Model Revisions Subgroup: The Hazardous Financial Condition Model Revisions Subgroup held a conference call on February 20, 2008. During this meeting, the Subgroup discussed and exposed proposed revisions to Model #385 – Model Regulation to Define Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition for a 45 day comment period. The report of the Subgroup was adopted by the Task Force.

After hearing reports from its groups, the Task Force discussed its 2008 charges noting that progress was being made on all of its projects.

Action Items:

• Received the report of the Audit Software Working Group.
• Adopted the report of the Financial Analysis Research & Development Working Group.
• Adopted the report of the Financial Examiners Handbook Technical Group.
• Received the report of the Financial Examiners Qualifications & Compensation Technical Group and adopted a proposal to move its charges up to the Task Force level and disband the Technical Group.
• Received the report of the FHLB Custodial Subgroup and voted to expose the proposed changes to Model #295 and Model #298 for 45 days as recommended by the Subgroup.
• Adopted the report of the Hazardous Financial Condition Model Revisions Subgroup.