The National Association of Independent Insurers issued a bulletin congratulating regulators at the NAIC meeting for adopting a proposal by the New York Insurance Department to exempt securities rated by a nationally recognized statistical rating organization (NRSRO) from being filed with the Securities Valuation Office (SVO) of the National Association of Insurance Commissioners.
“NAII is very pleased that the NAIC has adopted this regulatory streamlining proposal and we applaud the New York Insurance Department for its expert leadership and guidance during the process at the NAIC,” stated Stephen Broadie, NAII assistant vice president, financial and regulatory issues. “This proposal expands the regulators earlier decision to exempt NRSRO-rated investment-grade securities from filing with SVO, effective January 1, 2004. The exemption is Phase 3 in New York’s four-phase proposal to modernize the SVO’s operation.”
Broadie explained that the NAIC’s SVO Oversight Working Group also plans to begin work on Phase 4 which involves examining alternatives to filing unrated securities with SVO.
In other financial actions at the NAIC, regulators withdrew a proposal to increase the factor used in calculating the Authorized Control Level in the property/casualty Risk Based Capital (RBC) formula from 50 to 75 percent. The proposal, which was initially rolled out at the summer 2003 meeting, resulted from regulator dissatisfaction with the current RBC formula, a perceived failure to indicate when insolvent companies began to have significant financial problems.
The Ad Hoc RBC Subgroup dropped the proposal as a result of NAII and the industry’s unanimous opposition. Industry objections included the fact that a significant increase in industry capital would be required if the increase was adopted and that regulators already had a myriad of tools at their disposal, which could be used more effectively to identify, troubled companies. “The NAII is pleased that this proposal was dropped and has offered to work with regulators on alternatives, including a possible trend test similar to that found in the life insurance RBC formula,” Broadie indicated.
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