Final answer:
The NAIC's early warning system to detect potential insolvency risks in insurance companies is part of the FAST system. The correct answer to the multiple-choice question, based on the given options, is (4) Early Warning System, although the formal name differs.
Step-by-step explanation:
The National Association of Insurance Commissioners (NAIC) operates an early warning system that uses data from insurers' annual statements to detect potential solvency risks among insurance companies. This system is designed to protect policyholders by identifying companies that may be at risk of insolvency and taking pre-emptive actions to ensure the stability of the insurance industry. This early warning system is known as the Financial Analysis Solvency Tracking (FAST) system, which is not one of the answer choices given.
The NAIC's role is akin to that of bank examiners who monitor banks' financial health to avoid systemic risks, and it's part of the broader spectrum of regulatory oversight aimed at maintaining financial stability within various financial sectors.
The correct answer to the posted question, considering the options provided, would be (4) Early Warning System, even though the formal name is different. It would be wise to refer to the NAIC's official resources or your textbook for the most precise terminology. However, for exam or quiz purposes, when given a multiple-choice question, you should choose the closest matching option.