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AMY BACH, United PolicyholdersBIRNY BIRNBAUM, Center for Economic JusticeKERMITT BROOKS, Guardian Life Insurance Company of America

BILL CHURNEY, Verisk

MICHAEL CONWAY, Colorado Division of InsuranceROB FALZON, PrudentialLUCY FATO, AIGDAMON HART, Liberty MutualDOUG HELLER, Consumer Federation of AmericaEDMOND JORDAN, Louisiana House of RepresentativesPETER KOCHENBURGER, University of Connecticut School of Law

CAROLYN KOUSKY, Environmental Defense Fund

TOM SANTOS, proxy for Laura Lazarczyk, Zurich North AmericaJOHN SEO, Fermat Capital ManagementCASSADRA SOUCY, proxy for Andrew Stolfi, Oregon Division of Financial RegulationJULIE SPORE, TransamericaBETSY WARD, MassMutualJOE WAYLAND, Chubb GroupDepartment of Treasury Staff Present:

STEVEN SEITZ, Director, FlOSTEPHANIE SCHMELZ, Deputy Director, FIO

ELIZABETH BROWN, Senior Insurance Regulatory Policy Analyst, FlOJOHN GUDGEL, Senior Insurance Regulatory Policy Analyst, FIOBRET HOWLETT, Senior Insurance Regulatoiy Policy Analyst, FIOJEREMY PAM, Senior Insurance Regulatory Policy Analyst, FIOAlso Present:KENNETH FRINO, AM BestMICHAEL PORCELLI, AM Best
that can help provide a nationwide understanding of the availability and affordability of insurance and it will

help assess how insurance coverage is being affected by climate-related risk. This data collection builds onother steps that FIO has taken in the past 18 months to bolster its climate work, including ramping up itsengagement with the insurance sector domestically and internationally, and producing an upcoming report thatwill focus on assessing climate-related issues or gaps in the supervision and regulation of insurers.

Welcome and Opening Remarks by FACI Chair John Doyle

Chairman Doyle opened the meeting and gave introductory remarks. He then welcomed one new FACT

member: Carolyn Kousky, Associate Vice President for the Environmental Defense Fund. He provided an

overview of the agenda, and then introduced FlO Director Steven Seitz.

Director Seitz Update on FIO ActivitiesDirector Seitz thanked John Doyle for agreeing to be FACI chair. He also welcomed new member CarolynKousky. He then provided an update on FIO activities.

He noted that FlO continues to work closely with the White House’s Office of the National Cyber Director and

the Cybersecurity and Infrastructure Security Agency (CISA) to access the need for some form of federal

insurance response in connection with potential catastrophic cyber incidents involving critical U.S.

infrastructure. He also noted that the Administration’s new national cybersecurity strategy, released earlier thismonth, includes an objective to explore a potential federal insurance backstop.FIO recently became a full member of the International Forum of Terrorism Risk Reinsurance Pools (IFTRIP),consisting of member countries that support the insurance and re-insurance of terrorism risk. FlO participated

in an IFTRIP meeting in London earlier this month.

FIO continues to monitor recent market developments and the potential effects on the life and retirement sector,

including the increased use of offshore affiliated and non-affiliated reinsurance by U.S. life insurers. FIO has

been engaging with the Bermuda Monetary Authority on its proposed targeted enhancements toward increasedregulatory oversight of Bermuda life insurers. FIO is also monitoring the investment strategies in the life sector

that involve greater amounts of non-traditional and alternative investment allocation.

FIO is also continuing to work with the International Association of Insurance Supervisors (IAIS) on theInsurance Capital Standard (ICS). This year, key decisions will be made by the IAIS on the structure of theglobal insurance standard. FIO is working closely with our state and federal partners with a focus on improving

the ICS framework to include design elements to better reflect U.S. markets, business practices, and products.

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Ken Frino, Managing Director of AM Best’s Life Health Group and Mike Porcelli, Senior Director ofthe Life

and Annuity Ratings Group gave a presentation on life and retirement market developments and trends.Ken Frino first discussed the outlook for the life and annuity segment. In December 2022 AM Best maintaineda stable outlook on the life and annuity segment, explained by high levels of risk adjusted capitalization andfavorable earnings in the marketplace. There have been strong liquidity profiles, new entrants picking upcapacity, and robust sales in the marketplace, both on the life side and the annuity side. Offsetting these

favorable trends is market volatility, as well as both the unrealized position of organizations and companies’

liability profiles and the potential for increased lapses or surrenders within their portfolio. Factors that could

change this outlook include widening of credit spreads, tightening of access to capital markets, spikes in interest

rates, the level and scale of unrealized losses, and increases in lapses and surrender activity. Next Mr. Frinoreviewed U.S. life and health rating activity, comparing “under-review” (increased from 2020), “upgrades”

(increased from 2020), “downgrades” (increased from 2020), “initial ratings” (increased from 2020), and“affirmations” (decreased from 2020).

Mike Porcelli next discussed US Life/Annuity’s Bond and Stock Unrealized Gains/Losses. He noted there is

volatility in unrealized gains and losses that will work itself out as long as we do not run into any problematic

credit conditions. Also, there is an increase in sector high-risk asset exposure likely due to the proliferation ofnewer companies, which tend to be private equity backed, with a tendency to take on higher asset risk. While

AM Best’s capital model also takes a similar approach, there is an increase creeping up in high-risk assets.

Member Heller noted on the high-risk asset slide that the increase from 62 percent in 2008 to 70 percent in 2018

is very significant, and he then asked about the implications. Mr. Porcelli replied that this could be problematicfor the industry.Member Bach asked if long-term care product lines are included in this reporting. Mr. Frino answered yes, any

company, multi-line company or single company that is exposed to long-term care would be included in all

these exhibits. Ms. Bach then asked for the number of policies in force in the United States today that provide

some measure of long-term care. Mr. Frino answered that he did not know, but he could get that information.However, the participants are the largest players in that marketplace and would have pretty significant exposure.

John Seo asked about the high-risk asset slide, which ends in 2018, and asked ifthe trend continues through

2022. Mr. Porcelli answered that AM Best was close to compiling 2022 information. As part of their rating

process, AM Best gets additional non-statutory information that companies self-reported -something called our

supplemental ratings questionnaire or SRQ.

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Member Birnbaum asked if AM Best is in a position to judge any macro threats to financial stability based on

their assessment ofthe accumulation of individual company risk management techniques. Mr. Porcelli

answered that AM Best is not in a position to assess systemic risk, but there are certain companies that, if there

were to be a failure, would signal to the entire market that there are fundamental flaws.Presentation by Availability and Affordability of Insurance Products Subcommittee — 2023 Priorities

Subcommittee Chair Member Birnbaum opened by noting that the subcommittee will offer some responses to

FlO’s request for member views on the life insurance industry’s role in retirement and savings markets,

specifically: 1) the impact of recent legislation, Secure 2.0, and the Index-Linked Annuities Act, 2) the

insurance industry role in providing lifetime income products, and 3) the evolution of and consumer protectionissues in life insurance and annuity markets. The subcommittee as a whole did not have a consensus view, so it

presented the views of industry members, consumer perspectives, and regulator perspective separately.

Giving the industry perspective, Member Spore stated that the life insurance industry is committed to helping

provide financial security to Americans at all stages of life. However, in the US, significant gaps exist in both

insurance protection and retirement savings. Many Americans lack adequate death and disability protection,and most retirees fear that their savings are inadequate. The life insurance industry aspires to close these gaps.

Secure 2.0 will help close the retirement gap by enabling more Americans to access workplace retirement plans,

with the greatest beneficiaries likely to be middle class and working-class Americans. The industry’s capacityto meet the needs of Americans is shaped not merely by legislation but by competition and innovation inresponse to evolving demographics, market preferences, and economic conditions. The take-up of insuranceproducts might be increased by policy solutions. Some policy measures that merit further exploration includerequiring all but the smallest employers to offer retirement plans. Legislation has been drafted permitting

certain guaranteed lifetime income products to qualify as default investment options within qualified retirement

plans, promoting financial literacy through various means ranging from state education requirements to ad hoc

efforts online. Also, the lack of industry-wide standards for annuity data integration is an impediment for

providing insurance and annuity solutions within financial planning and portfolio management tools. Therecent legislation to streamline the SEC filing for registered index-linked annuities (RILAs) is a recent success,

but impediments remain. Another nascent product line is contingent deferred annuities (CDAs) which arevariable annuity type guarantees attached to an external investment fund. Federal recognition of CDAs as adistinct type of annuity would encourage state approval of CDAs.

Speaking from the consumer perspective, Member Birnbaum stated that insurance is essential for individual and

community economic development and well-being. The promise of retirement security has not been fullyrealized and fixing regulatory gaps and weaknesses can really help. In addition, better use of federal resources

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illustrations are the primary sales and marketing tool for life insurers. In 2015, NAIC developed guidance toaddress unrealistic assumptions regarding accumulation values and index universal life illustrations. State

regulation permits life insurers’ illustrations to project historical returns into the future. No other investmenttype product is permitted to project future returns based on past results. The illustrations assume a constant

annual return resulting in depictions of the rewards of risky types of investments without showing the risk. Inclosing, the life insurance industry has the products and resources to promote retirement security for all, butgaps and weaknesses in regulatory guidance must be addressed.

From the regulator perspective, Member Conway stated that both Secure 2.0, and the Index-Linked AnnuitiesAct are going to help increase access to tools for consumers to build out resources for retirement. This is

particularly important given the kind of inflation we are currently experiencing. It is also important for us to

evaluate any impact on historically underserved communities. The NAIC needs to review some of its modelacts to make sure that they are in line with the requirements of the new laws. State regulators are going to want

to monitor the implementation and the new products that may arise as part of the new acts. Also, it is important

to ensure that there is education about the new legislation and the benefits to consumers. In Colorado we have

focused on a variety of different mechanisms to make sure that insurance products are properly marketed to all

communities. People need to understand the automatic enrollment components, the student loan paymentmatching, and no penalty for emergency expense withdrawal. Annuities and insurance products should keeppace with changes to the economic landscape, technology, and consumer needs, and this is important in

evaluating and understanding who is utilizing or not utilizing annuities and insurance products for retirement.

Update on International Subcommittee Activities

Chair Doyle gave an update on the activities ofthe International Subcommittee. At its first 2023 meeting in

March, FIO staff proposed several areas in which the views and advice of the subcommittee could be ofassistance including IAIS work streams and bilateral engagements with non-US regulators. The subcommitteewill make decisions as to where to focus its work. The subcommittee also heard a presentation from FlO’s staffon the recent TAIS Committee meetings and its ongoing work.

Update on Climate-Related Financial Risk Subcommittee Activities and FlO’s Climate-Related WorkBret Howlett provided an overview of the meeting of the FACT Subcommittee on climate-related financial riskheld virtually on March 3, 2023. During this meeting, the FlO team discussed FIOs proposed data collectionand engaged with subcommittee members on various topics related to the proposal, including the questions

posed in the Federal Register notice. FIO has also had individual follow-up meetings with several members of

FACI. Next, Mr. Howlett gave a status update on the proposed data collection. FlO received 35 separatecomments in response to its request for comment. FlO received comments on a range of topics including data

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Dialogue Project and its climate-related workstreams. FlO is also continuing to participate in the Sustainable

Insurance Forum (SIF).

Member Bach asked if FIO has a general timeline of when it will initiate the data call. Director Seitz answered

that it is critical for FlO to get engagement from FACT, the NAIC, and the states, and that it is a FIO priority.

Member Kochenburger asked if the EU-U.S. Insurance Dialogue Project meeting in Seattle was open to all

interested parties. Director Seitz said that the meeting will be open to the public.

Update on Comments to FlO’s Catastrophic Cyber RFIJeremy Pam provided an update on comments to FIO’s request for information (RFI) on a potential federal

insurance response to catastrophic cyber incidents. He first noted that, earlier this month, the NationalCybersecurity strategy was released. The strategy has five pillars, and Pillar 3 is to shape market forces to drivesecurity and resilience. Strategic Objective 3.6 under Pillar 3 is to explore a federal cyber insurance backstop.FlO, in coordination with CISA, published the RFI in the Federal Register on September 29, 2023. FlU

received 55 comments from a wide range of commenters, based on which FlO identified six initial themes.

First, there was broad support for developing some type of federal insurance response while a few commenters

expressed the view that adopting a federal insurance response now would be premature, citing the stilldeveloping cyber insurance market. Second, there was general agreement that any federal insurance response

should address cyber hygiene. Third, commenters proposed a range of ideas for the structure of a potentialfederal insurance response. Fourth, there were different views regarding the adoption of key structural elementsfrom TRIA/TRIP. Fifth, commenters suggested numerous structural elements not featured in TRIA. Sixth,

there was support for considering cross-border scenarios while assessing catastrophic cyber insurance. In

closing, Mr. Pam noted that FlO, in coordination with CISA and ONCD, is now conducting post-RFIengagements with various commenters and other public/private sector stakeholders, including internationalcounterparts, to further inform the analysis.

New Business/Update on Old Business

Member Heller asked about the status of the FlU Auto Report. Director Seitz responded that the Auto Report

remains a top FlO priority on which we’re actively working on and hoping to move forward on as quickly as we

can.

Chairman Doyle confirmed that FACI members had no additional new business, then adjourned the meeting.

MEETING ADJOURNED AT 3:17 PM.

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