Insurers who hold bonds in their portfolios impacted by downgraded bond insurers will have an option to retain those higher ratings, according to Chris Evangel, representing the Securities Valuation Office of the National Association of Insurance Commissioners.
Evangel made his remarks during one of the opening sessions of 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, Kansas City, Mo., Evangel told state insurance legislators. Companies concerned that bond holdings will lose the highest NAIC-1 designation because of ratings downgrades of bond insurers backing those issues can have the holdings reviewed for the standard $2,600 per issuer, a process that should take approximately 2 weeks, he 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.
Insurers, and property-casualty insurers in particular, hold $420 billion of $2.5 trillion in these securities, Evangel told legislators during the NCOIL session of the Financial Services and Investment Products Committee. About $145 billion of these securities are wrapped by bond insurers, he added.