Valuation of Securities (E) Task Force
March 30, 2008

The Valuation of Securities (E) Task Force met on Sunday, March 30, 2008. During this meeting, the Task Force:

• Discussed an organizational statement conveying the actions taken by the Task Force to reconstitute the Invested Asset Working Group and confirm its charges and membership,

• Adopted interim meeting minutes of the Task Force and of the Invested Asset (E) Working Group,

• Reported on the credit rating status of monoline (i.e. financial guaranty) insurers; i.e., those rated by NAIC Acceptable Rating Organizations (NAIC AROs) (i.e., nationally registered securities rating organizations - NRSROs). With the exception of the ACA Financial Guaranty Corp., whose credit rating was withdrawn, all other monoline insurers continue to be rated by a rating organization. This permits insurance companies that own bonds insured by the monolines to continue to report the securities as filing exempt.

• Clarified that the new valuation methodology adopted for the Purposes and Procedures Manual is effective for year-end 2008 instead of for 2009. Confusion arose due to uncertainty about the progress of the blanks component of the proposal. The blanks proposal will be adopted in time to permit the implementation of the valuation rules for year-end 2008.

• Heard an SVO report on the results of operation for the 2007 filing year,

• Discussed potential enhancements that could be made to the NAIC internet process developed to disclose SVO opinions on securities that are also rated by an NAIC-AROs,

• Discussed a proposed amendment to language in the Purposes and Procedures Manual governing the Regulatory Treatment Analysis Service provided by the SVO. The amendment would clarify the obligation of the recipient of an SVO opinion to indicate that the opinion is given for regulatory purposes. The RTAS process can be utilized by broker-dealers and issuers as well as by insurance companies: It replaces the Advanced Rating Service – Emerging Investment Vehicle process which was offered to insurers only.

• Considered a proposed Statement to clarify how insurers should report capital company (CAPCO) securities. State economic legislation permits CAPCOs to offer premium tax credits to insurers in return for an investment in a sector deemed of importance to the state. The Task Force also heard a recommendation that the content of the text be added to the Purposes and Procedures Manual.

• Clarified the process that applies to private placements that are rated and monitored by an NAIC ARO. Insurance companies have the option to file evidence with the SVO that the security is rated and monitored in which case it will be entered into the VOS database as a rated security, or to not file with the SVO, in which case the insurer will maintain documentation of rating status for state regulators,

• Heard a recommendation that the staff develop a blanks proposal to amend Schedule DA Part 1 to add a column for CUSIP numbers. This will permit the staff to compare the funds listed on the approved NAIC Lists to those reported by insurance companies as eligible for bond treatment.

• Heard a report form the Chair of the Fair Value Subgroup of the Statutory Accounting Principles (E) Working Group on the activities and objectives of the subgroup.