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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 CMBS.

"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 determined."

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 CMBS.

Further details regarding CMBS and RMBS modeled securities are available on the NAIC‘s Structured Securities page.

The Capital 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.

Capital 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.


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

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Scott Holeman

Jeremy Wilkinson
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Miun Gleeson
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Erin Johnson
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