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Toronto/London - June 17, 2008 -

Algorithmics, the world's leading provider of enterprise risk solutions, today identified a likely challenge for life insurance companies faced with calculating economic and regulatory capital figures under the Solvency II legislation. Algorithmics warns that coming up with these figures in the timeframe required under the new regulations is going to be very difficult based on life insurers' current approaches and it identifies portfolio replication as the way to overcome this challenge.

Several major European insurers are already proving that this approach works. One of Algorithmics' clients has cut its reporting time by 60% and at the same time increased the available risk information by more than 1000%.

Speaking at a recent Insurance & Risk Management Summit in London, Dr Andrew Aziz, Executive Vice President of Risk Solutions, Algorithmics, said: "Unless life insurers have an integrated view of their assets and liabilities globally they won't be able to calculate their economic and regulatory capital figures fast enough or accurately enough to use them confidently in their business decision making. This will require organizational, technological and cultural change. And, as we learned through the large banks we worked with on Basel II, a just-in-time approach isn't appropriate."

The key challenge for most insurers is that, traditionally, the asset and liability sides of the business have operated largely in silos, each with its own methodologies, systems and practices. The lack of a market consistent approach spanning both assets and liabilities precludes Solvency II compliance and will likely result in decisions being taken on misleading economic capital figures. Algorithmics believes that insurers need to adopt a scenario consistent risk and capital management approach that utilizes shared scenario projections as the mechanism for integrating assets and liabilities. For insurance firms this might firstly mean creating or expanding management roles so that someone is focused on bringing assets and liabilities together in such a way that their behavior can be compared.

A successful approach to achieve this is to implement portfolio replication techniques whereby a proxy portfolio is created consisting of standard capital market products to replicate the scenario-dependent payoffs generated by the company's existing liability projection systems. Portfolio replication enables insurers to calculate their economic and regulatory capital numbers faster, more transparently and accurately across the enterprise than existing methods. Under Solvency II, with the regulator's approval, the replicating portfolios can also be used as part of an internal model.

Algorithmics spoke at the Life & Pensions Insurance and Risk Management Summit 2008 on 11th June 2008 in London. For more information about Algorithmics' Insurance Risk Management solutions, please visit:
http://www.algorithmics.com/EN/solutions/myindustry/insurance.cfm

For further information please contact:

Heather Smith, Senior Communications Manager, Algorithmics (UK) Ltd
Direct line +44 (0) 20 7392 5820 Mobile +44 (0) 7515 974223
E-mail Heather.smith@algorithmics.com%20

Notes to Editors:
Life & Pensions - Insurance and Risk Management Summit 2008
Life & Pensions magazine's Insurance & Risk Management Summit took place on Wednesday 11th June 2008 in London and was specifically designed for insurers to share ideas, discuss risk management strategies, as well as examine the current market and regulatory challenges facing the European insurance industry. http://www.insurancerisksummit.com/

Algorithmics is the world's leading provider of enterprise risk solutions. Financial organizations from around the world use Algorithmics' software, analytics and advisory services to help them make risk-aware business decisions, maximize shareholder value, and meet regulatory requirements. Supported by a global team of risk experts based in all major financial centers, Algorithmics offers proven, award-winning solutions for market, credit and operational risk, as well as collateral and capital management. Algorithmics is a member of the Fitch Group. www.algorithmics.com

Algo Risk offers insurers, pension funds and asset managers a fully integrated, flexible platform for assessing future market risk across an organization in a single, consistent, rigorous environment covering all investment strategies across all risk factors and asset classes. It can also be offered as a managed service. It covers both traditional assets and sophisticated, structured products. The Mark-to-Future framework delivers accurate real-time analysis and allows users to assess the impact of a new deal on a portfolio's existing risk profile. It is designed to help firms achieve greater profitability in today's competitive world markets.

Replicating Portfolios
Leveraging the solution's full asset coverage and a proven, scenario-based portfolio optimization module, Risk and Economic Capital for Insurance can be used to help determine an optimal proxy portfolio of asset instruments that replicate the characteristics of a given set of scenario-dependent liability cash flows. This replicated portfolio can then be further simulated and stress tested to determine liability capital requirements. Liability cash flows can be imported from any existing actuarial projection system, providing consistency and integrated reporting across business lines and geographic borders. In particular, the replicated portfolio technique can be adopted as a computationally efficient method for modeling liabilities in a hedging analysis or economic capital calculation.

Fitch Group is the parent company of Fitch Ratings, a global ratings agency committed to providing the world's markets with independent, timely and prospective credit opinions. With 49 offices worldwide, Fitch Ratings' global expertise spans across capital markets in over 150 countries. Fitch Ratings is headquartered in New York and London.

The Fitch Group also includes Fitch Solutions, a distribution channel for Fitch Ratings products and a provider of data, analytics and related services; and Algorithmics, the world's leading provider of enterprise risk solutions.

The Fitch Group is a majority-owned subsidiary of Fimalac, S.A., headquartered in Paris, France. For additional information, please visit www.fitchratings.com www.algorithmics.com and www.fimalac.com

© 2008 Algorithmics Software LLC. All rights reserved. ALGO, ALGORITHMICS, Ai & design, ALGORITHMICS & Ai & design, KNOW YOUR RISK, MARK-TO-FUTURE, RISKWATCH, ALGO ALM, ALGO COLLATERAL, ALGO CREDIT ADMINISTRATOR, ALGO CREDIT DATA SERVICES, ALGO CREDIT ECONOMIC CAPITAL, ALGO CREDIT EXPOSURE, ALGO CREDIT LIMITS, ALGO CREDIT REGULATORY CAPITAL, ALGO CREDITVANTAGE, ALGO ETREASURY CREDIT, ALGO FIRST, ALGO MARKET ANALYTICS, ALGO OPDATA, ALGO OPVAR, ALGO RECONCILIATION, ALGO RISK, ALGO RISK SERVICE, and ALGO SUITE are trademarks of Algorithmics Trademarks LLC.

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