Valuation of Securities (E) Task Force
Valuation of Securities (E) Task Force Page
Joint Executive (EX) / Plenary Committee Summary Report
Winter 2009 Meeting Summaries Index

The Valuation of Securities (E) Task Force met Dec. 6, 2009. During this meeting, the Task Force:

• Adopted a motion to place residential mortgage backed securities (RMBS) under regulatory review in accordance with the procedure specified in Part Two Section 3 (e) of the Purposes and Procedures Manual of the NAIC Securities Valuation Office (Purposes and Procedures Manual).

  • Adopted a statement of interpretation pertaining to Statement of Statutory Accounting Principles (SSAP) No. 43R. SSAP No. 43R refers insurance companies to the Purposes and Procedures Manual for reporting instructions applicable to structured securities. The Task Force statement clarifies that references in SSAP 43R to the Purposes and Procedures Manual for reporting instructions applicable to structured securities other than RMBS are to the filing exempt rule in Part Four, Section 2 (d). References in SSAP 43R to the Purposes and Procedures Manual for reporting instructions applicable to RMBS are to the interim instructions drafted by NAIC staff and attached to the statement. The statement will be added to the 12/31/09 publication of the Purposes and Procedures Manual.

  • Adopted the report of the Chair on the Nov. 30 and Dec. 2 public meetings on RMBS model assumptions.

  • Adopted a motion  that the RMBS modeling process to be used for year-end 2009 will remain in effect until the long-term solution for how to determine the NAIC designation for RMBS has been adopted

  • Gave a status report on the RMBS modeling effort.

• Adopted the proposed charge for the Invested Asset (E) Working Group for 2010.

• Heard a proposal to delete the requirement in the Purposes and Procedures Manual that insurers file 6* securities with the SVO when they wish to assign a value greater than zero (0). The proposal was released for a 30 day comment period.

• Heard a report from the staff confirming that credit ratings of RealPoint LLC for commercial mortgage backed securities have been incorporated into NAIC systems and will be available in SVO products for year end reporting.

• Discussed what procedure should be utilized to assign NAIC Designations to hybrid securities not rated by an NAIC ARO. The staff was asked to amplify possible options and their associated benefits and detriments.

• NAIC’s adoption of Issue Paper No. 139 - Fair Value Measurements will require insurers to identify the valuation technique utilized. The Statutory Accounting Principles (E) Working Group has noted that valuation techniques used by the SVO in its operations are not identified. The Working Group has asked that the Task Force consider and advise whether the SVO can identify the valuation technique used for specific securities and the appropriateness of letting insurers who use SVO values to rely on SVO representations to fulfill their own reporting obligations. The SVO will consider the issues involved in this request and report to the Task Force by the NAIC Spring National Meeting.

• Discussed what the maximum percentage of second lien collateral should be permitted in the “Defined Multi-Class Residential Mortgage-Backed Securities” and “Defined Multi-Class Commercial Mortgage-Backed Securities” annual statement categories for them to qualify as “Defined” Current annual statement guidance does not provide instruction.