Podcast Center
Video Center
Webcasts
Resource Center
Events
October 06, 2009 at 08:00 PM
The American Council of Life Insurers wants to see the effects of residential mortgage-backed securities losses on risk-based capital tailored to reflect the expected severity of the losses.
Today, RBC rules rely on RMBS ratings, and the ratings reflect only the likelihood that there may be some kind of issuer default, not the total amount of expected losses, the ACLI, Washington, says in a proposal submitted to the Valuation of Securities Task Force at the National Association of Insurance Commissioners, Kansas City, Mo.
“A more logical approach for RBC purposes, and an approach more consistent with the goals of the RBC calculations, would be to determine an estimated or modeled loss from a base set of consistent assumptions applied to the individual characteristics of each security,” the ACLI says, according to a copy of the proposal posted on the VOSTF section of the NAIC’s website.
The NAIC’s Securities Valuation Office could hire an outside firm to model losses for the RMBS securities actually held by the insurance industry, the ACLI says.
“The modeling should be conducted on a security level basis and should use assumptions generally accepted by market participants for prepayments, home price levels, expected defaults, severities of loss, and performance of loans in good standing, along with other assumptions including interest rates,” the ACLI says.
