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March 19, 2009 at 08:00 PM
A rating agency panel ought to consider whether insurance regulators should use improved communications to reduce the risk that agency actions will disrupt insurers.
Staff members at the Securities Valuation Office, an arm of the National Association of Insurance Commissioners, Washington, have included that suggestion in a report given to members of the NAIC’s Rating Agency Working Group.
The staffers prepared the report, and a report summarizing public documents describing rating agency shortcomings, in response to concerns that inaccurate ratings may have contributed to the current market turmoil.
Creating new, formal lines of communication between the major rating agencies and regulators might be a way to improve management of situations in which changes in ratings could hurt the affected insurers, the NAIC staffers write.
The Rating Agency Working Group also could consider using Web links to help consumers get more information from the rating agencies and understand the limitations of the ratings, the staffers write.
Another approach might be to “increase regulatory content in capital markets decisions by routinely responding to rating agency pronouncement and thereby [provide] a better context for rating agency decisions,” the staffers write.
