Insurers that hold bonds affected by bond insurer downgrades may get to use the bonds’ old ratings.
Chris Evangel, a representative for the Securities Valuation Office of the National Association of Insurance Commissioners, Kansas City, Mo., talked about the SVO’s response to bond insurer downgrades here at the summer meeting of the National Conference of Insurance Legislators, Troy, N.Y.
Starting July 1, companies can apply to the SVO to have bond holdings reviewed by the securities valuation arm of the NAIC, Evangel told state insurance legislators.
Companies concerned that bond holdings will lose the highest NAIC-1 designation because of cuts in the ratings of the bond insurers backing those issues can have the holdings reviewed for the standard $2,600 per issuer, a process that should take about 2 weeks, Evangel said.
Bonds are rated NAIC-1 to NAIC-6 by the SVO, with NAIC-1 the highest rating.
A drop in the rating affects a company’s risk-based capital charge, the amount of money that a company must set aside to help insure financial soundness.