FOR IMMEDIATE RELEASE

NAIC HOLDS PUBLIC HEARING ON CREDIT
RATING SYSTEM
Regulatory Improvements Lie in “Sensibly Reducing Reliance on Traditional
Credit Rating Agencies”

NATIONAL HARBOR, MD (Sept. 29, 2009) — The National Association of Insurance Commissioners (NAIC) recently held a public hearing to explore the reliance by financial and insurance regulators on ratings of creditworthiness produced by Nationally Recognized Statistical Ratings Organizations (NRSRO).

The recent economic turmoil has resulted in large part from the deterioration of the mortgage markets, for which many securities were given the highest quality rating by the NRSROs. During last week’s hearing, insurance regulators explored what occurred with mortgage-backed securities, and how the NRSROs were slow to detect these problems that were first evident during the third quarter of 2005, and why these signs of weakness were ignored by the rating agencies until late 2007.

Insurance regulators also examined the inherent conflicts of interest that exist within the current “issuer pays” rating agency model, and explored alternative approaches to resolve them. The public hearing included three segments designed to address various aspects of credit rating agencies, including panelists representing insurance consumers, Moody’s, Standard & Poor’s, Fitch and DBRS, investment experts, state insurance regulators, the Securities and Exchange Commission, critics of the rating agencies and representatives of the insurance industry.

“The one thing that virtually all the hearing participants, including the rating agencies themselves could agree on was that regulators have been too reliant on traditional credit rating agencies,” noted James J. Wrynn, New York State Insurance Superintendent and Co-Chair of the Rating Agency Working Group. “We believe that by sensibly reducing our reliance on traditional credit rating agencies, we can improve our regulatory system and set an example for other regulators around the world.”

“The hearing expands the informational platform on which we will base further analysis,” said Michael T. McRaith, Illinois Insurance Director and Co-Chair of the Working Group. “While integration of credit rating agency opinion remains an open question, we will be thoughtful and deliberative as we move forward on behalf of insurance consumers.”

The NAIC formed the Rating Agency Working Group earlier this year to examine the use of ratings by state insurance regulators and determine the risk that such ratings inject into the regulatory process.

Click HERE to access audio of the hearing, as well as written testimony and presentations.

The Working Group is accepting written materials, including comments on any of the materials or topics discussed during the hearing, until October 7th.

About the NAIC

Formed in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The NAIC has three offices: Executive Office, Washington, D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office, New York City. The NAIC serves the needs of consumers and the industry, with an overriding objective of supporting state insurance regulators as they protect consumers and maintain the financial stability of the insurance marketplace. For more information, visit www.naic.org.

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