Sunday, May 31, 2009

Standard & Poor’s Cocktail Chatter

A couple of interesting points surfaced during the opening reception of Standard & Poor’s insurance conference this evening. The conference always draws terrific speakers and a lot of decision makers in the insurance industry.
Some of the talk over cocktails centered on:
--accounting for other than temporary impairment, a new accounting guideline that has some top financial executives and investment managers trying to figure out how to address the treatment. What are some of the problems? Well, for one, they say that the new requirements don’t really spell out what needs to be done. Rather they leave a lot up to discretion. So, company executives are left to explain why they are not treating bonds as OTTI. The longer those investments are impaired, the harder the explanation. Auditors have to explain to companies what their guidelines on the issue will be and when there is a difference, auditors may well have the last say.
Investment managers have to decide when something is OTTI. One famous bond investment manager says that if something is down less than 10% from par, then they might not consider it an OTTI issue or if the bond is part of a class that is down anyway because of the illiquidity of the market. Other factors considered are the company, the industry and just how much of the decline in value is due to outside factors that are not tied to the company.
The one thing that is certain is that it is an educated guessing game.
--Another analyst believes that there could be opportunistic buying of insurers when the market finally bottoms and starts to rebound. Those in run-off or in a weakened position could be vulnerable; and,
--the state of mortgage insurers is still up in the air since economic factors and measures for the real estate market do not yet suggest an end to the real estate downturn.
Stay tuned for two more days of coverage.

Friday, May 29, 2009

Annuity Standards and Owner Rights

A contract rights issue is brewing as regulators and insurers develop annuity standards for the Interstate Insurance Products Regulation Commission (see May 20 posting.) The issue could advance this coming week if an annuity subgroup passes up standards for variable and non-variable annuities with guaranteed living benefits. The IIPRC parent committee would then take up the issue and conceivably it could be fully adopted during the summer meeting of the National Association of Insurance Commissioners.
So, stay tuned. Life insurers argue that there is a distinction between individual investors and institutional investors and that if institutional investors are allowed to buy these contracts, or more specifically, these contracts with the GLBs, they will profit off of the arbitrage of different pricing.
Some regulators and members of the Life Insurance Settlement Association, Orlando, Fla., are arguing that there needs to be a healthy secondary market. The argument sounds similar to an argument made during the development of life settlement models at the National Association of Insurance Commissioners, Kansas City, Mo., and the National Conference of Insurance Legislators, Troy, N.Y.
A couple of interesting arguments are being made. Among them is the argument by interested party Brian Staples of Right LLC, Versailles, Ky., that if the product is a variable product, then the producer has a fiduciary responsibility to advise the client on account provisions, benefits and potential hazards of investing in this product . One of the potential hazards he says is not being able to sell these products or riders attached to it to those in the secondary market.
Regardless of the outcome, it is important to remember that states have the right to opt out of any standard that they don’t agree with. So, states may say ‘no way, we’re not going to do anything that may even be perceived to violate an owner’s right.
That possibility raises still another issue: how uniform will treatment the right to sell GLBs actually be if some states say ‘yes’ and others, ‘no’ on the issue.

Wednesday, May 27, 2009

RBC Mortgage Factors for '09 Advanced, Derivatives Discussed

A mortgage adjustment factor for life risk-based capital calculations was adopted by the Life Risk-based Capital “E” working group of the National Association of Insurance Commissioners, Kansas City, Mo. The mortgage factor is for year-end 2009. The factor is narrowed to a range of 75%-125% from a current range of 50% to 350%. It will be advanced only for 2009 while regulators and life insurers attempt to develop a more permanent change to calculating RBC for mortgages. The proposal will now be considered by the Capital Adequacy Task Force at the summer NAIC meeting in Minneapolis next month. California and New York abstained from the working group vote.

During the discussion, California regulator Sheldon Summers asked if the proposal will address a situation in which troubled mortgage loans are transferred to an insurer’s affiliate so it doesn’t get counted. John Bruins, a life actuary with the American Council of Life Insurers, Washington, responded that the group would look at the issue.

The ACLI also discussed a paper one of its subgroups consisting of 9 company representatives and two ACLI staff members developed. The companies included Lincoln National, Met Life, Northwestern Mutual Life and TIAA. It looks at how the use of derivatives to hedge can help manage risk. Consequently, industry representatives argued to regulators that RBC should reflect this managed risk when appropriate.
These presenters of the paper posed the question of ‘Why should RBC be adjusted to reflect hedging and observation that “it is important to recognize reduced risk from “purchased credit protection” when those insurers are “similarly situated.”
Derivatives also allow for more flexibility and protection at a cheaper price, according to the presentation to regulators. For example, derivatives can offer protection in a single transaction if many cash bond portfolios are involved rather than having to sell multiple pieces of bonds with different yields.

Hedging with derivatives can offer short-term protection against an event but still allow for a long-term yield. So, for example, if there was a short-term threat to a company’s bonds because the company is being sued, derivatives could protect the company’s bonds. If the suit is settled and the issue cleared, the company’s securities would have been protected and there would not be an impact on economic cost and asset-liability management.

The representatives of the ACLI subgroup said that any RBC credit should be proportionate to the risk that is reduced.

Saturday, May 23, 2009

Roll Up Your Sleeves

State insurance regulators at the National Association of Insurance Commissioners, Kansas City, Mo., are getting ready to roll up their sleeves at the summer meeting next month and continue to tackle the suitability of annuity sales.

Two drafts were just released on May 25. One addresses proposed training requirement provisions and a second, suitability recommendation provisions.
The American Council of Life Insurers, Washington, will be looking at the new drafts and considering its response.

The training requirements look at components including: competency, continued education and product knowledge. The draft requires shared responsibility. Insurers would have to certify that agents meet training requirements.

The recommendation provisions focus on the nuts and bolts of making sure that a product is suitably sold. For example, the new draft discusses the duties of an insurer if an annuity is sold and when failure by the consumer to provide information after the potential buyer has been interviewed will free them from suitability requirements.

The draft requires that there be a reasonable assessment by the insurance producer or the insurer, if no producer is involved, of facts disclosed by a consumer regarding investments and other insurance products, the consumer’s financial situation and needs.

Wednesday, May 20, 2009

Annuity Standards, Property Rights Argued

Annuity contract holder property rights continues to be the focus of the development of annuity product standards for the Interstate Insurance Product Regulation Commission, a single point of filing for life insurance products developed by the National Association of Insurance Commissioners, Kansas City, Mo.

The annuity subgroup hopes to have standards for annuities with guaranteed living benefits ready before the summer meeting next month so that they can pass those standards up through the IIPRC. That doesn’t mean that they would be adopted or that interested parties would not have additional time to comment on those standards before they are fully adopted by the full IIPRC body.

The issue of assignment started the discussion and whether limiting assignability is really limiting a contract holder’s rights. A discussion ensued over whether that would be the case for non-assignable contracts. One argument that was made was that if the contract is non-assignable, as long as that was disclosed properly at the time of sale, then that should not be an issue. There would not be a right to assign the contract. A counterargument was made that there has to be a right to make an assignment. Scott Cipinko argued that situations such as a contract with an irrevocable beneficiary had to be considered in the development of a standard.

A third argument was threaded into the conversation suggesting that a solution for the contract holder would be to do a 1035 exchange and exchange the non-assignable contract for an assignable annuity. But Florida said that technically, a contract holder would have to assign the annuity to the new insurance company who would then surrender it an issue a new contract, so an assignment would still be involved.
The discussion came full circle to the point of whether an annuity owner’s rights were being limited if they couldn’t assign a contract.

Cande Olsen, representing life insurers, explained that the reason the issue needs to be addressed is that insurers anticipate one type of behavior from individual contract holders and a different behavior from institutional contract holders and price their products accordingly. When an individual sells a contract to an institution, that behavior changes or has the potential to change.

Olsen said that companies should at least be able to say that if a contract with a guaranteed living benefit is assigned then that rider would terminate unless there was an instance such as it being assigned to a spouse.

But Brian Staples of Right LLC, said that it raises an issue of discrimination. “The settlement industry is not in favor of a restriction of the secondary market to help consumers with an exit strategy to an insurance product.”

Miriam Krol of the American Council of Life Insurers, countered that there was fair and unfair discrimination. Fair discrimination occurs when there is actuarial evidence that something will happen and occurs in differences in product pricing such as male/female and younger/older. And, there is a difference in behavior between individual and institutional contract holders, Olsen added.

Saturday, May 16, 2009

Musings On Treasury’s CPP and Confidence

With what seemed an interminable wait finally over, on May 14, the Treasury Department informed insurers that they have been given the preliminary green light to participate in the Capital Purchase Program.

Among the insurers who got the preliminary go ahead to participate in up to $22 billion in Treasury assistance, were Allstate Corp., Ameriprise Financial, Hartford Financial, Lincoln Financial, Principal Financial and Prudential Financial. Hmm. There are a lot of Financials there. When did the moniker of ‘life insurance company’ fall out of favor? OK, back to the main point.

Hartford was approved for $3.4 billion, Lincoln Financial, $2.5 billion and Principal, $2 billion. Allstate and Prudential say they are evaluating their options and Ameriprise said ‘thanks, but no thanks.” It says that it has adequate capital.
Standard & Poor’s responded that the announcement was generally favorable and that depending on the company, it could result in ‘negative’ outlooks being revised to ‘stable’ and, in some cases, combined with other factors, could result in an upgrade.

Previously, other rating agencies have also weighed in. In an article in, Stephanie McElroy, manager of ratings criteria for A.M. Best Co., says that the impact on ratings is neither a plus nor a minus and that companies applied “opportunistically” to the program. Moody’s Investors Service released an assessment stating that the program is a short-term plus. Whether it has a long-term impact on companies and ratings depends on a number of points including how the new capital is managed, Moody’s Vice President Ann Perry states.

A couple of things strike me. The first is why it took so long for Treasury to come to a decision and why the program was structured so that insurers had to jump through hoops like owning a bank, to even qualify for the program. The insurance industry is a big engine in the U.S. economy and shouldn’t be treated like the government’s step child while Washington throws money at banks.

The one exception, of course, is American International Group, which received $70 billion in funding from the government on the spot. But that situation was so immediate that it couldn’t be ignored. And, although no one can be entirely sure how the money was used because the government is mum on the issue, some of it might have gone back to banks. Which again speaks to my point: Why so easy for the banks and so difficult for insurers?

It also strikes me that as important as the capital is, the confidence that the offer of an infusion can instill is every bit as important. In the financial services world, public perception is a critical asset. And the fact that at least one company, Ameriprise, can decline the government’s offer, should only help affirm that confidence. It also speaks to Ms. McElroy’s point about companies applying to the program “opportunistically.”

Monday, May 11, 2009

NCOIL Weighs In On Systemic Risk Regulation

The National Conference of Insurance Legislators, Troy, N.Y., voiced what it considers are essential components for systemic risk regulation in a letter to the U.S. Sensate Banking and House Financial Services Committee leaders.
NCOIL leadership, led by New York state senator James Seward, urged for systemic risk regulation that brings regulators together rather than having a single risk regulator. The letter says state regulatory authority should be preserved, transparency is critical and insurance modernization efforts such as the Interstate Insurance Product Regulation Compact should not be diminished.

Model Investment Law Getting A Second Look

The financial meltdown last fall that took down investment banks and American International Group, New York, in part due to investments in credit default swaps and securitized investments prompted state insurance commissioners to take another look at laws that govern what investments insurers own.

That work has started this week with a discussion among regulators. The Model Investment Law or more formally known as the Investment of Insurers Model Act may be getting a makeover following a review by regulators at the National Association of Insurance Commissioners, Kansas City, Mo. A working group is at stage one of a two stage process: first determine if changes need to be made and then determine what those changes should be.

The focus of the work will be narrow, according to the NAIC’s Bob Carcano. It will not involve looking at risk-based capital charges. A report by the NAIC’s Kevin Driscoll reviewed the growth of securitizations to $40 billion from $22 billion over the last 15 years and noted that mortgage delinquencies could stand at 6-8% by the end of 2010. It is possible, according to the report, that junior securities related to mortgages could drop 4-5% and speculative securities could be downgraded 5-6 rating notches depending on the securities.

Driscoll noted that in fiscal year 2009, all hybrid security holdings will now have to be classified as bonds.

Among the possible actions to be considered would be to review the structured security asset class, to review the amount of assets of guarantors that companies could hold and whether there should be a limit for hybrids.

The report is being exposed for 90 days, as suggested by Carl Wilkerson of the American Council of Life Insurers, Washington.

Doug Barnert, executive director of the Group of North American Insurance Enterprises, New York, an industry expert who was involved in the initial development of the Model Law, adopted in October 1996, recommended face-to-face discussions as the most productive way to advance talks.

Barnert also asked if the working group had differentiated between the two model laws: one with defined standards and one with defined limits. Barnert recommended looking at both models during the discussion and identifying which one was being discussed as talks advance.

The working group also discussed sending out a survey to states on the issue.

Friday, May 8, 2009

LISA Tweets

Following up on some more tweets filed under Jimsconn on and Jim Connolly on Linkedin, here are some of the day’s highlights during the 15th annual spring meeting of the Life Insurance Settlement Association, Orlando, Fla.

Crowley Tweet

U.S. Congressman Joseph Crowley, D-N.Y., addressed LISA attendees this morning. Crowley spoke generally about how members of Congress are more accessible than people might think and how it is also more bipartisan than it is given credit for.

More specific to LISA, Crowley told attendees that the May 1 revenue rulings 2009-13 and 2009-14, is something that he will give attention to, talking with Congressman John Lewis, D-Ga., chair of the House Ways and Means Committee subcommittee on oversight. All information will be given proper analysis, he told attendees.

He noted the concern of LISA members regarding both the tax implications and the vagueness of the rulings. Crowley said that anyone who is concerned with the issue should contact members of Ways and Means. At least one attendee noted that the rulings will move business off shore to Europe.

Insurable Interest Tweet

A panel on life insurance litigation took attendees through many of the insurable interest cases addressing allegations of STOLI. Panelists said that how transactions are structured really is a state-by-state process since insurable interest laws differ by state. For instance, if there is a question of insurable interest, some jurisdictions allow questions to be raised beyond the contestability period. And, even if medical and financial underwriting is not allowed under contestability provisions used to contest a contract, it might still be used against individuals in a case. “You can’t put it in a box and act like it has been put in the basement.”

LISA Twitters

Look for more coverage of the 15th spring meeting of the Life Insurance Settlement Association at jimsconn on Twitter and jim Connolly on linkedin. Full coverage later.

Thursday, May 7, 2009

Connecting the Twitter Dots

Today the Life Insurance Settlement Association, Orlando, kicked off its first full day of its 15th spring annual conference here in New York, an event it says has around 400 registered attendees. To give you brief updates, I have been respectively filing updates on and linkedin under Jimsconn and Jim Connolly.
Now, I’m going to fill in the brief Twitter dots.
Top on the list of issues concerning LISA and the life settlement issue were just released IRS Revenue Rulings 2009-13 and 2009-14. The rulings address how both seller and buyer should treat gains, parsing, in a complex, sometimes byzantine way, what is ordinary income and what is capital gain. The ruling is creating concern since attendees say it is will hurt the life settlement industry. Some say that it will also hurt the life insurance industry and products including annuities. When asked whether LISA and the life insurance industry have a common interest, there was some agreement although a bit of doubt over whether the two can work together on the issue. There was agreement that Congress needs to be lobbied and lobbied HARD.
Alan Buerger, co-founder and CEO of Coventry, gave his assessment of some of the current issues facing the industry. Buerger sees potential for securitizations of life settlements. He refers to an American International Group, New York, securitization totaling $8.4 billion of life insurance which helped return $1.2 billion of money back to the federal government following a loan from the U.S. Treasury. Buerger thinks that there will be more securitizations that are use a smaller number of policies than the size of recent transactions.
On regulatory issues, Buerger says that the industry has to do a better job of getting the message out that it is helping the consumer by providing them with more money than they would have received from surrendering life insurance contracts.
Buerger also criticized a recent hearing on life settlements conducted by U.S. Sen. Herb Kohl’s special committee on aging. Buerger says that up until the last moment the special committee provided no information on who would be testifying and what would be said. He said that he felt Coventry was being set up and had declined to participate in the hearing. “We knew that this was a hit job.” So, he continues, an hour after his company pulled out, the special committee staff opened up with information. Ultimately, after information was released, Buerger said his firm did agree to testify.
At the state level, Buerger advises LISA attendees to watch out for an Attorney General initiative in California which will tax benefits to the beneficiary if there is not an insurable interest.
Mmmm. In an age where states are cash starved, could this be a trend?
If the California initiative has legs, it may well affect COLI and BOLI, Buerger says.
And, Buerger capped off his talk to the room full of attendees on an upbeat note. Now there are too few dollars for too many policies. But a year from now, that will reverse, he predicts.
Kurt Gearhart, a director of the life insurance group with Credit Suisse Securities in New York, has some advice for the life settlement industry. The quality of life policy originations needs to improve in order for the industry to grow and advance. The more doubt there is about how policies are originated, the more that they will back away from the life insurance as an asset class, he says.
On the issue of life expectancies, there was an interesting juxtaposition. As a session on a life settlement mortality study conducted by Watson Wyatt was being discussed, attendees were venting their anger over how life expectancies were less than accurate and impacting the willingness of investors to invest in life settlements.
Among the issues raised by the audience was how there could be a 4-5 year disparity of life expectancies. One broker complained that from the seller’s viewpoint, there is a lack of credibility that is keeping them away. The panel countered that they have not been presented with questions from investors who say they need a certain return or a certain life expectancy.
Another broker claimed that providers of life expectancies have swung to the right and are unduly conservative to protect themselves.

Blow by blow coverage of LISA meeting

Visit jimsconn on Twitter and Jim Connolly on linkedin.

Wednesday, May 6, 2009

Cocktail Chatter

LISA Kicks Off 15th Annual Spring Conference

Picking up on Cocktail tweets available on Twitter from Jimsconn, here is a more complete version.

The Life Insurance Settlement Association, Orlando, Fla., is kicking off its 15th annual spring conference at the Sheraton Hotel in New York as we speak.

During the kick-off cocktail hour, Brian Staples of RIGHT, LLC., of Versailles, Ky., a former insurance regulator, thinks that life settlements could be the test case for the feds stepping in and establishing a federal regulatory system for life insurance and related products.

Doug Head, LISA’s executive director, did not directly discuss that possibility but did say that at least in terms of market conduct, the life settlement and life insurance industries should move in tandem. He says that he is not speaking about solvency.

Separately, cocktail chatter suggests that while business is still recovering from the worldwide financial meltdown, the life settlement industry is showing signs of new robustness. One attendee says that he is working on 2 securitizations: on rated and a second, unrated. Another attendee reports that life expectancy reports are on the upswing, and a third reports that while business isn’t what it was pre-worldwide meltdown, it is still strong and starting to gain momentum.

Daniel Goldman of All Financial Group, Stamford, Conn., promises that during a Friday May 8 session, he is going to have plenty to say on whether brokers share the same interest as the investors they service or whether investors should be going directly to life insurance contract owners. Stay tuned. Sounds interesting.

Monday, May 4, 2009

Ratings Roundup

For the week of April 26, rating agencies including A.M. Best, Oldwick, N.J., and Moody’s Investors Service and Standard & Poor’s Corp., both in New York, weighed in on how the industry is faring.

Insurer’s financial strength was rated as follows:
Fortis SA/NV and Fortis N.V., collectively referred to as Fortis has had its ratings revised to positive from developing on the CreditWatch placement of it’s ‘BB’ long-term counterparty credit ratings and the ‘B’ short-term counterparty credit ratings by Standard & Poor’s Corp. The action reflects the “upside potential” from a deal between the Belgian government and BNP Paribas which is expected to alleviate some uncertainties such as Fortis’ liquidity and capital positions. S&P also maintained the ‘A’ long-term counterparty credit and financial strength ratings on Fortis Insurance Belgium on CreditWatch with negative implications and will look at FIB’s stand-alone credit profile, particularly given a difficult operating environment.

Horace Mann Educators Corporation’s ‘Baa3’ senior debt rating and the ‘A3’ insurance financial strength ratings of its property-casualty and life insurance subsidiaries have been affirmed by Moody’s Investors Service. A ‘stable’ rating has been assigned to all of the insurer’s ratings.
The P-C group’s operating returns have matched its peers although natural catastrophes have caused returns to be more volatile, according to Moody’s. However, the rating agency also noted the company is “pruning” costal exposures and the “near doubling of single-event reinsurance protection since 2005.”
The life insurance group, led by Horace Mann Life, is strongly capitalized as witnessed by its holding of preferred stock and hybrids, Moody’s says. The life unit also has a good liquidity profile.

Share ratings were released by S&P as follows:
Aetna’s ‘buy’ recommendation has been lowered to ‘hold’ by S&P. The rating agency cites the company’s reserve methodology, given an unfavorable reserve development. However, S&P did note that before net realized capital losses, the company’s first quarter earnings per share of $0.96 vs. $0.92 beat S&P’s estimate by $0.03 on higher than expected revenue.

CIGNA has been assigned a ‘hold’ recommendation following first quarter adjusted earnings per share of $0.87 before $0.11 in net one-time charges vs. $0.93 before $0.74 in net one-time charges, $0.05 below S&P’s estimate. The “worse” than expected results were on the non-health units.

Cincinnati Financial has been downgraded by S&P to a “strong sell” following the company’s post of operating earnings per share of $0.23 vs. $0.66 in the first quarter, “well below consensus and our $0.67 estimate.” The results according to S&P, reflect “subpar underwriting and investment results, in our view.” The company has an underwriting loss reflected in a 107.5% vs. 98.6% combined ratio compared to a profit from many of its peers, S&P stated.

Humana’s rating has been raised to ‘Buy’ from ‘Hold’ by S&P as first quarter earnings per share rose to $1.22 vs. $0.47 beating S&P’s estimate by $0.07. Operating revenues rose 11.2% to $7.64 billion vs. 8.3% growth as higher pricing and 16% more Medicare Advantage members outweighed the impact of 34% fewer Medicare Part D members.

Travelers Corp.’s ‘buy’ recommendation has been retained by S&P following Travelers’ $1.34 vs. $1.60 first quarter operating earnings per share, $0.01 above the consensus estimate. S&P maintains that in spite of a difficult investment environment, Travelers is among the better-positioned underwriters to leverage opportunities for growth amid the turmoil surrounding AIG and others.

An assessment of the industry as a whole was provided as follows:

A.M. Best noted that Singapore’s insurance market is “defying odds and growing amid a worldwide economic slowdown, a result of a high savings rate and an aging population. The growth comes in spite of the fact that it is already a developed insurance market.

Moody’s said that the troubled asset relief program’s capital purchase program would be a positive development for insurance companies experiencing short-term capital and liquidity pressure, although it did note uncertainty whether insurers will receive relief from the program. The program would provide “bridge capital and liquidity support to qualifying firms until the economy and capital markets recover.”
The rating agency says TARP money could change the competitive landscape but also notes the uncertainty over who will receive funding.

Moody’s also addressed the industry’s impaired assets which it said would likely pressure insurers through 2009. As profitability erodes and losses mount, charges related to impairments of intangible assets will pressure insurers’ 2009 earnings, the rating agency says. Moody’s notes that “In recent reporting periods, insurance companies have reported continuing impairments of intangible assets such as goodwill, deferred acquisition costs ("DAC"), and value of business acquired ("VOBA"), on their
financial statements.”
While intangible assets do not have an effect on liquidity, they do have an impact on the intrinsic economic value of a firm, Moody’s notes.

Friday, May 1, 2009

New York, NAIC Offer Tips To Foil Swine Flu

Eric Dinallo, New York superintendent and the New York Insurance Department just released a notice to consumers and insurers on the H1N1 virus, also known as the swine flu. Consumers were told that they should know the answer to questions including:
--co-payments for H1N1 treatments such as Tamiflu and Relenza as well as coverage limitations such as the number of doses per prescription or per year;
--out-of-network co-payments if doctors in a network are overwhelmed with patients in a heavily affected area; and,
--whether there is a preauthorization requirement for hospital admission or other services, if needed.
For more information on New York health insurance, a consumer helpline is available at (800) 342-3736.

For insurers, the New York department’s notice recommends that companies keep their employees healthy by offering them educational tips such as washing hands more frequently and keep their companies in operation by reviewing pandemic flu plans as well as the ability to continue to pay claims in an efficient manner.

The National Association of Insurance Commissioners, Kansas City, Mo., also released consumer tips to help minimize H1N1. It recommends a checklist with items such as having a health insurance ID card handy and reviewing health insurance policy provisions.

Tips on travel insurance are “typically specific” according to the NAIC, and may not cover epidemic or pandemic situations. And, on business interruption insurance, the NAIC advises checking out triggers of coverage and notes that triggers generally do not result from epidemic or pandemic warnings or alerts from public officials. Business owners should rely on existing risk management and business continuity plans to mitigate losses, the NAIC notes.