1. REINSURANCE REGULATORY MODERNIZATION ACT OF 2009

2. Need for Reinsurance Modernization Need for more capacity for reinsurance in the U.S. Need for uniformity across the states, especially in dealing with foreign reinsurers and foreign jurisdictions Need for a single U.S. regulator to deal with foreign reinsurers and foreign jurisdictions Need for consistent collateral and credit for reinsurance standards Need for mechanism to work toward mutual recognition standards

3. Framework Structure Reinsurance regulatory modernization concepts had been in play for at least a decade at the NAIC Framework concept began in 2007 December 2008 – NAIC Plenary adopted Framework Proposal (with 2 additional principles to protect small states) Reinsurance Task Force charged with drafting a federal bill to fit the Framework

4. Key Framework Components Two new classes of reinsurers – National and Port of Entry (POE) Mechanism for recognition of foreign jurisdiction insurance supervisory systems Mechanism for single state supervisor for National and POE reinsurers Collateral requirements from 0%-100% based on reinsurer’s rating based on financial strength

5. Key Components (cont’d) Establishment of Reinsurance Supervision Review Department (now Board) “Federal tools” approach (Federal enabling legislation) New model state legislation or amendments for reinsurance collateral standards for National and POE supervisory states

6. Reinsurance Regulatory Modernization Act of 2009 Establishes Reinsurance Supervision Review Board (RSRB) Establishes two new types of reinsurers: National and POE Establishes authority to the Board and supervisory states Pre-empts any inconsistent state laws for reinsurance ceded to National or POE reinsurers

7. Reinsurance Supervision Review Board (RSRD) Established as a federal entity Members appointed by the President –10 from the states –5 from federal agencies

8. Duties of the RSRB Evaluate supervisory systems of states to determine qualification for certification as Home State or POE Supervisors Evaluate supervisory systems of non-US jurisdictions to determine eligibility for recognition –Treatment of U.S. companies entering non-U.S. jurisdiction is a factor when evaluating jurisdiction for recognition Develop supervisory recognition, information sharing and regulatory cooperation agreements for use by POE supervisors and non-US jurisdictions

9. Steps To Implementation Passage of federal legislation –Appointment of RSRB members Development of uniform standards for certification of Home State and POE Supervisors Development of processes for evaluating the regulatory systems of non-US jurisdictions Approval of NAIC model laws by NAIC and participating states for credit for reinsurance

10. Other Considerations Coordinate with other NAIC committees –Accounting and reporting –Risk based capital –Financial analysis Current reinsurance structure remains, if companies prefer that Ceding companies free to negotiate additional collateral requirements in its reinsurance contracts

11. Benefits of the Proposed Bill National plan Supervision remains with the existing experts (the state insurance departments) More comprehensive structure than existing proposed bill (Non-admitted and Reinsurance Reform Act) Uniform standards –For supervisors –For reinsurers

12. Benefits (cont’d) Speed to implementation –Only states that need to pass model credit for reinsurance legislation are those that wish to become Home State or POE supervisors Reasonable and fair balance on collateral requirements –Focus on financial strength of reinsurer –No requirement of 100% for foreign reinsurers

13. Next steps Proposed Act approved by the NAIC Government Relations Leadership Council at the September 2009 national meeting as fitting within the Framework approved in December 2008 NAIC will now seek Congressional sponsors

14. Questions????