(10-44) - 2008 1111 - International Association of Insurance Supervisors Solvency & Actuarial Issues Subcommittee -Summary of the Bonn Meeting, Nov. 11-13, 2008
Presented to the NAIC's International Solvency and Accounting (E) Working Group
Joe Fritsch (US-NY) reported about credit default swaps, statutory accounting, and the Solvency Modernization Initiative. He said the NAIC drafted a document that compares the US solvency system to the proposed Solvency II framework. He said that Edward Liddy (AIG CEO) did a presentation and he described the changes in the AIG agreement.
(2-39) - 2008 1204 - NAIC/CONSUMER LIAISON COMMITTEE - Dec. 5, 2008--Grapevine, TX
2. Received a presentation on concerns regarding the American International Group (AIG) bailout that focused on the lack of accountability and follow-up regarding potential buyers of AIG.
3. Received a presentation on transparency and unfair discrimination as it relates to AIG and the current economic crisis.
2008 1205 - OPENING SESSION - 2008 Winter National Meeting - National Association of Insurance Commissioners -
December 5, 2008 PRESIDENTIAL ADDRESS Sandy Praeger, NAIC President
(1-4) - ESPRIT DE CORPS AWARD PRESENTATION - Sandy Praeger. NAIC President
It has been a challenging year in many ways. The pressures for an optional federal charter required a re-energized strategy in Washington. During the AIG situation, the New York State Insurance Department, under the leadership of Superintendent Eric Dinallo, was instrumental in working with Pennsylvania and other states in mobilizing the NAIC's pursuit of consumer protection. Under Eric's leadership, members of the New York department serve on many NAIC committees, task forces, and working groups. Most notably, the Life Insurance & Annuities Committee, Financial Condition Committee, Capital Adequacy Task Force, and Receivership & Insolvency Task Force.
In addition, Eric has testified before Congress numerous times, serving as an outstanding ambassador for state-based insurance regulation, and resources for our colleagues on the Hill.
(1-6) - In addition, we have kept busy working with the media on almost a daily basis. Our coordination of the AIG crisis, led by New York and Pennsylvania, was yet another example of the responsiveness of our state-based system. With the challenges facing AIG, and the crisis on Wall Street, we aggressively worked to disseminate timely information to help consumers and reporters make sense of complex issues. I think we surely set a record for the number of national TV interviews done by commissioners in one year.
(4-2) - 2008 1205 - Executive (EX) Committee - 3. Consider Adoption of the Report of the AIG Special Task Force - Commissioner Praeger reported that since the last national meeting, the AIG Special (EX) Task Force has maintained weekly to biweekly calls in executive session to allow all U.S. regulators to be briefed by the New York Department of Insurance regarding the status of the American International Group (AIG) U.S. insurance subsidiaries; details regarding activities of the AIG Holding Company; and activities related to the Federal Reserve. Superintendent Dinallo has also given periodic updates to representatives from international regulatory jurisdictions regarding the status of AIG. Commissioner Bowman made a motion to adopt the report of the AIG Special Task Force. The motion was seconded by Director Hall and passed.
2008-4, NAIC Proceedings - 2008 1206 - Life Insurance and Annuities (A) Committee - (6-2) - 1. Discussion of Replacements - Superintendent Dinallo said he is seeking input from Committee members and interested parties on approaches to address issues related to predatory practices involving replacements. He noted that this issue first arose with the American International Group (AIG) insurance companies, but now is spreading to other insurance companies based on unfounded rumors of insolvency as to those companies. Superintendent Dinallo said the New York State Insurance Department issued a circular letter on the issue, but would like to hear suggestions on approaches to address the problem beyond simply issuing a bulletin or circular. Commissioner Dilweg suggested that the Committee request comments from regulators and interested parties. Commissioner Voss said Iowa also had issued a bulletin. She noted, however, that the Iowa Insurance Division has not received any complaints regarding replacements. Commissioner Hampton said he had issued a bulletin as well, but has
received few complaints. Ron Panneton (National Association of Insurance and Financial Advisors—NAIF A) suggested that the Committee ask companies about their replacement activity. After additional discussion, the Committee decided to request comments from Committee members and interested parties on approaches to address the issue of replacements by Dec. 17, 2008.
2008-4 NAIC Proceedings - 2008 1207 - Government Relations Leadership Council (EX) Task Force - (4-102) - Mr. Sonnichsen (NAIC) mentioned... After passage of a stimulus package and then a budget, Congress would certainly focus on financial regulatory reform, including insurance, to create accountability for the $700 billion taxpayer bailout program. Insurance might have been an afterthought were it not for misperceptions about the role of insurance and insurance regulation in the turmoil at American International Group (AIG).
2008-3, NAIC Proc. - 2008 0922 - NAIC Proceedings - 2008 Fall National Meeting - National Association of Insurance Commissioners - September 22, 2008
(p1-9) - PRESIDENTIAL ADDRESS - Given at Executive (EX) Committee Meeting Sandy Praeger, NAIC President
It has been a long week—a lot of hard-won battles.
Of course, I am talking about AIG.
It was a war on many fronts—the battle to ensure that the solvent, strong insurance subsidiaries wouldn't become collateral to the financial missteps of the parent holding company.
This week we mobilized to ensure that policyholders of the insurance subsidiaries remained protected.
We actively participated and aided the efforts to shore up the federally regulated portions of AIG that were under intense stress.
Insurance regulators from every state—under the leadership of New York State Superintendent Eric Dinallo and Pennsylvania Insurance Commissioner Joel Ario—have been involved in every step of this process...
Remember: The reason for the financial difficulties at AIG was the lack of understanding—through lack of transparency—by the financial holding company regarding the financial instruments it had purchased.
State insurance regulators also suggest that federal banking regulators look to state insurance regulation regarding, among other things, restrictions on derivative activities; limits on high concentrations in investment types; and appropriate minimum capital and surplus requirements.
2008-3, NAIC Proceedings
10-236-240 - 2008 0730 - Accounting Practices and Procedures (E) Task Force 09/23/08 - Drafted: 7/22/08 Statutory Accounting Principles (E) Working Group Conference Call - July 30, 2008
1. Security Lending Transactions
Mr. Fritsch advised that the purpose of this conference call was to begin discussing the securities lending guidance included within paragraphs 56-59 of SSAP No. 91—Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SSAP No. 91) and obtain information from industry regarding how the guidance is currently interpreted and applied.
Ms. Van Beck <AIG> stated that they look at available liquidity and the extent of liquidity necessary for their securities lending program. Although securities are written down for severity (decrease in value), this does not mean that AIG would be forced to sell the investment. Although the loans are short in tenure, she stated that the security lending market is a very large, fungible market and the securities market has held up even with the past year of market disruptions. She noted that by looking at historical experience, AIG can assess the liquidity necessary to maintain the securities lending program.
Mr. Smith inquired whether companies make assumptions that security lending transactions will roll-over at the end of the stated period. Ms. Van Beck stated that AIG makes assumptions that they will maintain a certain volume of securities lending and that they will have the ability to do so, Ms, Whitmore stated that the borrower can put the security back at short-notice and retrieve their collateral, thus the issue for assessing impairment is more of the ability to 'hold to maturity' and not 'an intent to sell'. Mr. Smith noted that this is likely where more clarification is needed. Ms. Whitmore stated that one would not typically see an assumption that the security lending transaction would be rolled-over since the counterparty has the ability to return the security and retrieve collateral at short-notice.
10-239 - stated that even in the current market, AIG has not had any forced sales
of any of the collateral assets within the past year as they have managed the liquidity in the program. She noted that such
transactions open and close on a regular basis and that it seems there are variations between the AIG and CNA securities lending programs.
Ms. Marcotte inquired whether the off-balance sheet collateral is invested in admissible assets consistently. Ms. Van Beck noted that AIG is limited to investing the collateral in accordance with an approved investment plan and it can only include investments that they can invest in directly. Typically, the investment guidelines for the collateral are more restrictive than AIG's own investment guidelines. It was noted that investments typically fall within the 'confirming criteria' required to obtain the lower RBC charge.
2-9 - LIAC - Adopted the Wisconsin OCI insurer bulletin and consumer alert related to replacement solicitations in light of the AIG
events.
AIG Special (EX) Task Force (Attachment Nine) 4-34
Birny Birnbaum (Center for Economic Justice—CEJ) and Brendan Bridgeland (Center for Insurance Research) provided a presentation on the transparency and public accountability necessary on behalf of the NAIC. Mr. Birnbaum stated that the failure of American International Group (AIG) was largely due to a lack of public accountability and a lack of transparency in the regulatory environment. Mr. Birnbaum highlighted the following regarding transparency: he urged the NAIC to issue a resolution immediately opposing the AIG bailout and against using it politically to push the need for the Federal Option (Paulsen Plan); he stated emphatically that state regulation was not the cause of the AIG collapse, but that it demonstrates how important it is for states to step up and take appropriate action;
10-390 - 2008 0922 - Reinsurance (E) Task Force
Director McRaith suggested that the latest developments in the financial markets, and specifically the AIG situation, would demonstrate the success of state regulators in their role of protecting insurer solvency.
12-2 - 2008 0923 - International Insurance Relations (G) Committee
b. Financial Stability Forum
Commissioner Gross reported that Superintendent Dinallo was invited to participate in the meeting of the Financial Stability Forum on Sept. 29. He was expected to discuss the regulation of financial guaranty insurers and the recent activity involving financial troubles in the AIG holding company.
4-140 - 2008 0924 - Government Relations Leadership Council (EX) Task Force
Ethan Sonnichsen (NAIC) ....He also stated that turmoil at American International Group (AIG) would be
politicized as justification for and against federal insurance regulation, but at a minimum, there would be a significant focus on broad financial services regulatory reform in the next Congress. While much of that reform will be aimed at federal regulators, state insurance regulators will certainly be a part of the equation, as insurance is a significant part of the financial and economic landscape.
a. Federal regulation/OFC/OII - The Optional Federal Charter (OFC) legislation currently pending in the House and Senate will not move in the current Congress. Kanjorski
Again, given the turmoil at AIG, federal regulation supporters will attempt to spin the situation to justify need for an OFC, or perhaps even a stand-alone federal regulator with no counterpart in the states. While state insurance regulators have clearly performed well with respect to AIG's insurance subsidiaries, there is a perception that more coordination is needed to address the problems created by the AIG holding company, so that regulators (whether state or federal) have an enterprise-wide view of complex companies.
Wisconsin OCI Draft Replacement Bulletin Related to AIG Events (Attachment Five) 6-43
Life Insurance and Annuities (A) Committee Proposed 2009 Charges (Attachment Six) 6-45
6-2 - 2. Discussion of Wisconsin OCI AIG Consumer Alert and Insurer and Insurance Intermediary Bulletin
(Dinallo) He also noted that the New York State Insurance Department set up an AIG consumer hotline and received around 1,000 calls the first day.
6-41 - Example - Consumers Urged to be Cautious about Liquidating or Replacing Their Annuities - Wisconsin
Consumers should be particularly cautious if they are approached to liquidate annuities issued by an AIG
insurance company because of the recent activity concerning AIG Holdings, Inc.
Commissioner Dilweg said, "The AIG insurance companies are separately regulated by state insurance regulators and do not have the financial stress that AIG Holdings, Inc. is experiencing.
6-43 - 2008 0918 - Wisconsin letter to Insurers / Agents
You are reminded that you are legally obligated to ensure that AIG Life and Annuity policyholders are not subject
to misleading, or unsuitable, replacement solicitations.
Any strategy to replace life and annuity
products of AIG insurers primarily on the basis that they are AIG products will be viewed as an unsuitable replacement. Misrepresentations about the status of these companies in order to induce fear into consumers will not be tolerated and appropriate enforcement action will be taken on those who improperly replace these policies.
10-1 - Solvency Modernization Initiative Group Issues From Dreams to Reality Presented by Charlie Shamieh (AIG) (Attachment Three-C7) 10-60
10-1 - Market Value of Liabilities for Insurance Firms Presented by Charlie Shamieh (AIG) (Attachment Three-C 10) 10-75
10-365-367 - To: Receivership and Insolvency (E) Task Force Members
From: Structured Settlement Advisory Group
Date: September 18, 2008
RE: Structured Settlements in the Insolvency Context