Insurance industry representatives have expressed concern over a decision by the nation's regulators to maintain their Securities Valuation Office rating on securities not rated by other agencies.

At the summer meeting of the National Association of Insurance Commissioners earlier this week, a subgroup of the Valuation of Securities Task Force reported that there is really no alternative to SVO rating for those securities not rated by a National Recognized Statistical Rating Organization.

Such securities are for the most part private placements and play a greater role in the life industry than in property-casualty.

The task force will expose the report for 30 days, after which it could move up the NAIC hierarchy.

Nonrated securities remain the last form of investments that are no longer rated by the SVO. The industry has succeeded in persuading regulators that if rating firms such as A.M. Best Co. or Standard & Poor's have weighed in on them, there is no need for the SVO to repeat the process.

Jim Olsen, director of insurance accounting and investment for the Property Casualty Insurers Association of America (PCI), said he was concerned that the subgroup came to its decision after discussions during two closed conference calls over the past few months.

“We have a lot of smart people in the industry, and maybe we could have come up with some alternative to SVO rating,” he said.

Since SVO has been shorn of most of its ratings duties, the NAIC along with other stakeholders have been looking for a new role for the agency.

“The SVO is somewhat in flux,” Mr. Olsen said.

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NAIC Says It Needs SVO Check On Unrated Securities

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