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November 22, 2006 at 09:40 AM
Representatives for insurers and Wall Street investment firms are criticizing actuaries’ efforts to update the rules for classifying the riskiness of hybrid securities.
The critics raised the complaints during a recent conference call organized by the hybrid risk-based capital working group, an arm of the National Association of Insurance Commissioners, Kansas City, Mo.
The critics said the actuaries developed a hybrid securities risk-classification work plan without input from industry.
The working group is trying to replace a set of temporary rules for classifying hybrids for RBC calculation purposes with a long-term solution.
The NAIC’s Securities Valuation Office put the controversy over hybrid securities risk classification in the spotlight earlier this year, when the SVO notified some companies that it would review the treatment of hybrid securities that the companies held in their portfolios.
The working group had asked the American Academy of Actuaries, Washington, to develop a work plan that could be discussed during the NAIC call.
Efforts to develop the work plan did not include industry because AAA calls are open only to AAA members, regulators said during the working group conference call.
Industry representatives said time and effort could have been saved if insurers had been involved from the start.
“What would have been so terrible?” said Martin Carus, a representative for American International Group Inc., New York. “We wouldn’t have been disruptive. We wouldn’t have had a sit-in.”.
But the AAA specifically says it represents actuaries, not companies, according to Doug Barnert of Barnert Global Ltd., New York.
“Issues are different for a CIO or a risk manager than for an actuary,” Barnert said. “Actuaries are one element of the profession. They do not represent the industry.”
Representatives for the AAA were not immediately available to comment on the discussion.
