NAIC Announces Rating Model for Mortgage-Backed Securities
Earlier this year the NAIC formed the Rating Agency Working Group to look at the use of ratings by state insurance regulators and the risk posed by the use of these ratings in the regulatory process. Last week a [proposal was approved] by the NAIC membership that will result in a new model for determining the treatment of residential mortgage-back securities. In addition, it will produce ratings designations for roughly 18,000 of these securities for year-end 2009 RBC calculations. An independent third party will be partnering with the NAIC to develop the model and responses to an RFP were due last week. The selection will be announced mid-November according to a [press release] issued by the NAIC.
Time is of the essence as we rapidly approach year-end. Taking on a project of this scope on such a short timeline could be significant in demonstrating the effectiveness of state regulation over the solvency of insurers. NAIC President Roger Sevigny stated in the press release: "Compared to the rest of financial services, the insurance industry has weathered the impact of the credit crisis extremely well." This project could tell us quite a bit about how state insurance regulators are weathering the resulting regulatory challenges.
