Insurers have a given a “thumbs up” to a proposal by the New York Insurance Department to improve the efficiency and effectiveness of the operation of the National Association of Insurance Commissioners’ (NAIC) Securities Valuation Office (SVO).
The proposal, now being considered by the NAIC’s SVO Oversight Working Group, would exempt insurers from submitting SVO filings on all securities that have an investment grade rating from a Nationally Recognized Statistical Rating Organization (NRSRO), such as Standard and Poor’s or Moody’s.
“We strongly support New York’s SVO proposal for the overall insurance industry savings and efficiencies that would result and for the enhancements and benefits the reallocation of limited SVO resources would provide to state insurance regulators,” said Stephen Broadie, assistant vice president – financial legislation & regulation for the National Association of Independent Insurers (NAII).
In a letter to the NAIC’s SVO Oversight Working Group, Broadie said that, “the NRSROs have greater resources and expertise at rating these securities than the SVO, and in fact, the SVO currently relies on NRSRO ratings in almost all cases. There is no reason to require insurers to incur the significant extra expense of preparing and making SVO filings on these securities, nor to impose extra expenses on the SVO office to process and store the filings.”
“In the longer term, expanding the filing exemption to include all NRSRO rated securities would continue to free-up limited SVO resources and allow the SVO to focus more on its function as regulators’ eyes and ears on the capital market,” Broadie said. “We also agree with New York that the Working Group should consider alternatives to SVO filing of securities that are not NRSRO-rated, including development of an appropriate system for qualified insurers to self-rate their own unrated securities.”
NAII is encouraging the Working Group to adopt the proposal’s first two phases, the filing exemption for investment grade securities and a procedure for stronger regulatory supervision of the SVO at the NAIC Summer Meeting in June, 2003.
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