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chart; (iii) including a summary of material changes to the ORSA from the prior year; and (iv) providing group risk capital in a comparative format. The proposed revisions to the OGM were recently released for comment and have not yet been adopted by the NAIC.

The 2012 ORSA Feedback Pilot Project also resulted in referrals to the drafters of the Financial Analysis Handbook and Financial Condition Examiners Handbook. Pursuant to these referrals, guidance will be drafted for the review of ORSA.

The NAIC intends to conduct a 2013 ORSA Pilot Project, which will include a number of key changes from the 2012 ORSA Pilot Project. Significantly, there will be additional time for insurers to prepare an ORSA Summary Report and additional time for review. The results of the 2013 ORSA Pilot Project may result in additional revisions to the OGM and will be used to guide the drafting of inclusion of the ORSA requirement into financial condition examinations and financial analysis.

b) Update Regarding State Adoption of Amendments to the Model Insurance Holding Company System Regulatory Act and Regulation

In late 2010, the NAIC adopted amendments to the Model Insurance Holding Company System Regulatory Act and Regulation (“Model HCA Amendments” and “Model HCA Regulation Amendments,” respectively) to respond to perceived gaps in the regulation of insurance holding company systems. These changes increase the group-level reporting requirements of such systems, including the annual filing of an “enterprise risk report” by the ultimate controlling person of regulated insurance companies, and also increase regulators’ access to information about non-insurer affiliates.

While Rhode Island, Texas and West Virginia were the first states to enact changes substantially similar to the Model HCA Amendments in 2011, other states and jurisdictions followed in 2012, namely: California, Connecticut, Indiana, Kentucky, Louisiana, Nebraska, Pennsylvania and Puerto Rico. Rhode

Island and West Virginia have also promulgated regulations that are substantially similar to the Model HCA Regulation Amendments, while several states, including New York, have proposed some amendments to their holding company regulations. The NYSDFS published its proposed amendments to the holding company act regulation in the New York State Register on December 26, 2012 and will be accepting public comments for 60 days. However, the NYSDFS has indicated in commentary regarding its proposed amendments that its adoption of the enterprise risk report requirement will be accomplished through the adoption of a separate regulation that will apply not only to Article 15 insurers that are members of an insurance holding company system, but also to Articles 16 and 17 domestic insurers that own or invest in subsidiaries. The NAIC’s Financial Regulation Standards and Accreditation (F) Committee has moved the effective date for holding company analysis accreditation standards and guidelines to January 1, 2014. Nonetheless, we anticipate that quite a few states will introduce legislation in their 2013 sessions that incorporates the Model HCA Amendments, as well as seeking to promulgate the Model HCA Regulation Amendments. Further, under the state laws already adopted to date, many companies may find that their first enterprise risk reports are due in 2013.

c) Corporate Governance

In December 2011, as part of its charge to assess U.S. corporate governance principles for use in U.S. insurance regulation and to develop regulatory guidance for the corporate governance of U.S. insurers, the Corporate Governance (E) Working Group (the “Working Group”) finalized a summary of existing corporate governance requirements affecting U.S. insurers. The summary was organized based on the seven core principles developed by the NAIC in 2010 to illustrate financial solvency insurance regulation in the U.S., as set forth in the United States Insurance Financial Solvency Framework.

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In 2012, the Working Group also conducted a comparative analysis of existing U.S. and international corporate governance requirements and standards, including the IAIS ICPs, in order to identify areas where U.S. requirements would satisfy international requirements or areas where enhancements to the U.S. system would be beneficial. The Working Group prepared a draft document summarizing the results of this analysis and comparison, the “Proposed Response to a Comparative Analysis of Existing U.S. Corporate Governance Requirements” (“Draft Proposal”), which was developed with the assistance of the industry and proposes 16 enhancements to the existing U.S. system. The proposed enhancements include proposals to: (i) require more regular and timely information on corporate governance practices in a confidential supplement to a domestic insurer’s annual financial statement regarding insurer governance practices; (ii) develop a common methodology for assessing corporate governance that is flexible enough to distinguish between governance expectations for large and small insurers; (iii) consider insurers’ corporate governance best practices in developing and approving resolution/contingency plans; (iv) add a section to the Model Audit Rule requiring insurers exceeding a certain size to maintain an internal audit function; and (v) request the addition of any necessary procedures and guidance to incorporate elements of the IAIS ICP 5 (suitability of directors, officers and management), IAIS ICP 7 (corporate governance) and IAIS ICP 8 (risk management and internal controls) into the financial examination process. In addition, the Working Group suggested in the Draft Proposal that a confidential, standardized assessment template be created to assist regulators in assessing the corporate governance practices of insurers in specific areas.

The Draft Proposal was exposed for comment at the NAIC’s 2012 Summer National Meeting, and received a number of detailed comments. At the 2012 Fall National Meeting, the Working Group announced that it would seek additional time to reach resolution on certain corporate governance

subjects because certain issues, most notably confidentiality of disclosed information, had not been sufficiently resolved. Therefore, it re-exposed certain exhibits of the Draft Proposal, and the deadline for finalization of the Draft Proposal was extended to the 2013 Spring National Meeting.

d) Group Supervision and Issues Relating to the Identification of the Lead State

Among the SMI activities related to group supervision are efforts by the NAIC to: (i) increase U.S. insurance regulators’ participation in, and the efficacy of, international supervisory colleges; and (ii) enhance communication between regulators and clarify the role of the U.S. lead state regulator both with respect to U.S. holding company system analysis and participation in supervisory colleges for international insurance groups.

In 2012, U.S. and international regulators continued to address issues arising out of the U.S. insurance regulatory system’s reliance on a “lead state” regulator, which is typically the domiciliary state insurance regulator of the insurance company parent (or the largest insurer in the group by premium written). The NAIC’s Financial Analysis Handbook currently includes a number of factors for determining an insurance group’s lead state insurance regulator. Ultimately, the determination of the lead state is up to the domestic state insurance regulators of the group and certain insurance groups are assigned multiple lead state regulators depending on the groups’ businesses and legal entities.

NAIC staff was recently charged with working to establish one single lead state for the U.S. insurance company groups that have multiple lead states. The NAIC’s goal is to identify a single lead state regulator for each insurance group to serve as the single point of contact and coordination for various examinations; the lead state regulator could also be used as the point of contact with international regulators.9

9 _{We note that the lead state with respect to the filing of the Form F Enterprise}

Risk Reports is determined in accordance with the Financial Analysis Handbook except in instances where the lead state regulator has not yet adopted the amendments to the NAIC Model Holding Company Act. The lead

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