CHICAGO (November 18, 2008) - In testimony today before the House Committee on Financial Services in Washington, D.C., D. Cameron Findlay, executive vice president and general counsel of Aon Corporation, urged the U.S. Department of Treasury to address a primary cause of the current U.S. liquidity problem - the hundreds of billions of dollars of illiquid assets that reside on the ledgers of America's financial institutions.

Testifying on behalf of the Council of Insurance Agents and Brokers, Findlay said, "Insurance plays a fundamental role in the operation of the world's financial markets. Any coordinated effort to combat the turbulence roiling those markets should consider the potential for an insurance component."

Findlay added, "As long as the problems created by depressed valuation of these assets in the capital markets remain, no matter the volume of capital infusions, financial institutions will have a difficult time playing their critical role in the functioning of our economy.

"That is why the Council of Insurance Agents and Brokers and its members believe that the Department of Treasury should vigorously exercise the authority granted to it in Section 102 of the Emergency Economic Stabilization Act, and establish a program to insure the value of troubled and illiquid financial instruments."

In response to an October 2008 request for comments from the Treasury Department, Aon submitted a plan to strengthen America's economy by insuring troubled assets. This plan, drawing on the precedents established in dealing with other seemingly insurmountable risks, such as the Price-Anderson Nuclear Industry Indemnity Act, would implement an insurance program that uses a combination of risk retention, risk pooling and government backstop liquidity that would benefit taxpayers, financial institutions saddled with illiquid assets, and homeowners.

"Such a plan, largely self-funding and drawing inspiration from the Price-Anderson Act, involves the sharing of risk by participants in an entity that we refer to as the asset stabilization pool," Findlay said. "Participants in the asset stabilization pool would have a portion of the principal and interest from specific, illiquid assets guaranteed."

The Aon program would insulate an asset holder from the decline in value resulting from the non-payment, or expected non-payment, of principal and interest. Asset holders would be required to retain a small percentage of the shortfall of principle and interest, subject to a maximum annual payout per asset. Asset holders would be reimbursed from the pool for a shortfall in principal or interest once such amounts exceed their retention in a single year.

To receive the benefit of such coverage, participating institutions would have to pay premiums into the pool. Each year, actuaries would calculate the level of premium needed to fund guarantee payments for the following year. Premium payments to the pool would be capped by the government.

In the event that payments from the pool exceeded premium collections, the government would lend the pool the funds needed to make good on the guarantees. The government would be reimbursed by premium collections in following years. The Treasury Department could calibrate liquidity by speeding up or slowing down the collection of premiums.

A copy of the testimony before the House Financial Services Committee and Aon proposal to the Treasury Department are available by clicking on the link and document found below.

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About Aon
Aon Corporation (NYSE:AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its 36,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was named the world’s best broker by Euromoney magazine’s 2008 Insurance Survey. In 2008, Aon ranked highest on the Business Insurance ranking of the world’s largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues. Aon also was ranked by A.M. Best as the number one insurance broker based on brokerage revenues in 2007 and 2008, and was voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 and 2008 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com/.
 

For further information, contact:
   David Prosperi
   312-381-2485
   david_prosperi@aon.com
 

Click herefor the Testimony of Cameron Findlay, Executive Vice President and General Counsel, Aon Corporation.