NAIC CAPITAL MARKETS BUREAU: 2010 CMBS ASSESSMENTS
PRODUCE LITTLE IMPACT ON INSURER CAPITAL REQUIREMENTS
WASHINGTON, D.C. (April 14, 2011) — The Capital
Markets Bureau of the National Association of Insurance
Commissioners (NAIC) announced that assessments for commercial
mortgage-backed securities (CMBS) did not result in substantial
shifts in risk-based capital designations. Based on insurer
financial filings, the Capital Markets Bureau provided analysis of
the NAIC‘s assessment efforts that began year-end 2009 for
residential mortgage-backed securities (RMBS) and year-end 2010 for
"Our assessment of structured securities is integral to
understanding their true impact on risk-based capital requirements
for the insurance industry," said Susan E. Voss, NAIC President and
Iowa Insurance Commissioner. "This process not only reduces the
NAIC‘s reliance on nationally recognized statistical ratings
organizations, it also increases our oversight of the process and
ensures greater consistency over how NAIC designations are
Starting with year-end 2010, the NAIC began assessing more
than 5,100 CMBS holdings, based on a common set of economic
scenarios. Models developed in coordination with third-party
financial modeler Blackrock Solutions identified expected losses and
recovery values for each insurer‘s holdings, assuming the securities
were held to maturity. The results were compared to the insurer‘s
carrying value for that security.
Prior to 2010, the NAIC relied upon ratings by nationally
recognized statistical ratings organizations (NRSROs) for CMBS. This
method came under scrutiny following the financial crisis in 2008,
given the role attributed to NRSROs in mortgage volatility.
With respect to RMBS designations for year-end 2010, the
NAIC continued its relationship with PIMCO. The NAIC was pleased
with the results of the assessment process for year-end 2009 RMBS
holdings, which became the model for the NAIC‘s approach to
Further details regarding CMBS and RMBS modeled securities are
available on the NAIC‘s Structured
Markets Bureau is located in the NAIC‘s New York City office.
Its mission is to support state insurance departments and NAIC staff
on matters affecting the regulation of investment activities at
state regulated insurance companies.
Markets Weekly Special Reports are available by email
subscription for regulators and the public. The reports focus on
detailed and specific analysis of issues that have the potential of
impacting insurance company investment portfolios.
Subscribe online HERE.