While the NAMIC paper supports a proposal that is being looked at by the SVO working group–a subsequent exemption of securities–it noted the need for broader changes. A subsequent exemption would exempt securities that had already been filed with the SVO from having to be refiled. A preliminary exemption is also available to companies. (Preliminary exemptions are filing exemptions given to securities that meet set SVO criteria.)
Bill Boyd, financial regulation manager with NAMIC, questioned the need to rate securities such as government agency debt.
"Yes, some do have risk. But how many have failed in the past and have caused problems in the past?" he said.
The American Council of Life Insurers in Washington also supports the subsequent exemption proposal, said Bill Schreiner, an ACLI life actuary.
The subsequent exemption proposal complements the preliminary exemption proposal, he added. Mr. Schreiner noted there are about 60,000 securities that are highly-rated NAIC 1 and 2 securities that meet the provisional exemption requirements, but there are more that are sent to the SVO and could be candidates for the subsequent exemptions.
The risk inherent in government agency securities needs to be looked at in terms of probability of a credit risk issue and not just the possibility of a credit risk issue, he adds.
In fact, according to Steve Broadie, assistant vice president of financial legislation and regulation with the National Association of Independent Insurers in Des Plaines, Ill., "We dont see any reason why any security rated by an NRSRO should have to be filed."
During the meeting, Broadie also questioned why the SVO was charging $1,000 for a face-to-face meeting if an appeal on a security rating was filed. It was pointed out to insurance representatives that face-to-face meetings involve a considerable amount of preparation and the efforts of two or more analysts.
When the issue of preliminary exemptions and subsequent exemptions was raised during the meeting, regulators said that alternative efficiency proposals also need to be considered.
During a discussion on efficiency, Michael Moriarty, chair of the meeting and a New York regulator, raised the issue of how that goal could be advanced. He noted that alternatives to the P-E and the S-E proposals should be considered, and that the New York department would work on an alternative for the next meeting.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 7, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
