NU Online News Service, Dec. 8, 2003, 6:02 p.m. EST, Anaheim, Calif. – Regulators here for the winter meeting of the National Association of Insurance Commissioners, Kansas City, Mo., have given initial approval to a proposal to exempt lower-rated securities purchased by insurers from routine review by the NAIC’s Securities Valuation Office.[@@]
During the meeting, regulators agreed to exempt securities that the SVO rates a 3-6 if those securities also are rated by a nationally recognized statistical rating agency.
The SVO unit is the NAIC’s securities filing and rating unit. At the SVO, 1 is the highest investment rating and 6 is the lowest.
In March, the New York State Insurance Department began a project to streamline the SVO.
The first phase of the effort exempted securities rated 1 and 2 from SVO scrutiny. The second part of the streamlining will exempt securities in the 3-6 category.
Changes to the electronic filing system to reflect the exemption for 1- and 2-rated securities should be in place starting Jan. 1, 2004. The SVO will make the changes for the lower-rated securities later, according to regulators who spoke at an SVO oversight working group meeting.
The streamlining efforts are part of an effort at the NAIC to make all regulatory oversight more efficient.
Insurance industry representatives say instituting a second phase of SVO filing exemptions is a good move.
“We are very supportive of the New York department’s proposal,” says Doug Barnert, president of Barnert International, New York. “Clearly, it demonstrates that the SVO has been echoing the work of [the] rating agencies.”
Barnert notes that an insurer that wants a security exempted from SVO review still will have to get a rating agency to sign off on the security.
Most states already have laws that limit the amount of lower-rated securities that an insurer may hold, Barnert adds.
Another change at the SVO will be a move to new headquarters at 48 Wall St., New York. The SVO has been operating in temporary headquarters near Times Square since the Sept. 11, 2001, terrorist attacks destroyed its old headquarters at 7 World Trade Center.