Insurers, Regulators Tussle Over Getting Written Opinion On Securities
A makeover of the securities rating arm of the National Association of Insurance Commissioners is focusing on the value of written opinions on securities ratings.
Both regulators and insurers have been working to streamline the Securities Valuation Office, based in New York.
Securities are rated on a 1 to 6 basis, with 1 being the highest. Regulators recently decided to exempt from filing requirements highly rated securities that would receive a rating agency equivalent of a 1 or 2 rating. That part of the project will be advanced when a way is finalized to make it revenue neutral.
Additionally, efforts are under way to expand that project and exempt the remaining securities in the 3-6 categories.
However, differences exist over whether SVO analysts who rate a security purchased by an insurer should provide a written decision explaining why the security received the assigned rating.
Insurers say that a written explanation is standard business procedure that would provide transparency and make the process more efficient.
The SVO maintains that there is written documentation that regulators can access to help them make regulatory decisions.
A written explanation that is part of a formalized appeals process would minimize the likelihood of getting different answers from different SVO staff, according to Bill Schreiner, a life actuary with the American Council of Life Insurers, Washington. It will also be instructive for insurers, he continued, because they will learn if they are assessing securities in the same way as the SVO and can purchase future securities based on that knowledge.
Written documentation is just part of the normal process of making filings such as annual statement or product filings, according to Martin Carus, representing American International Group, New York. Such a procedure will improve transparency, or the availability of information, he added.