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NAIC Panel Looks at FDIC-Backed Notes

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The Valuation of Securities Task Force is considering the possibility of granting some notes backed by the Federal Deposit Insurance Corp. (FDIC) an exemption from Securities Valuation Office (SVO) filing requirements.

The task force, an arm of the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., was asked to look at notes backed by pools of assets from failed financial institutions that have been placed in receivership.

If defaults in an asset pool exceed a certain level, the FDIC is supposed to provide a guarantee. FDIC officials have said the guarantee is backed by the full faith and credit of the U.S. government.

The NAIC tries to help insurers and their regulators hold down insurer investment risk levels by having insurers submit some types of investments for reviews by the SVO. The NAIC exempts some securities, such as direct obligations of the U.S. government and obligations from entities backed by an unlimited pledge of the full faith and credit of the U.S. government, from the SVO review requirements, according to Bob Carcano, senior counsel of the SVO.

Regulators are trying to decide whether the government’s support for the FDIC-guaranteed notes is unlimited or is limited by a $100 billion federal FDIC borrowing limit.

- Allison Bell