NU Online News Service, Sept. 21, 3:06 p.m. EDT
Moody's Investors Service, which had said last week it would not attend a hearing by insurance regulators concerning rating service failings, has changed its mind.
New York State Insurance Commissioner James Wrynn, who co-chairs the National Association of Insurance Commissioners' task force that has scheduled the proceedings for Thursday, reacted positively.
A spokesman for the department said Moody's had let the NAIC know last week that it would not attend.
"I am pleased that Moody's has decided to participate in Thursday's NAIC hearing on the credit rating system. Correcting the mistakes that led to the financial crisis is in everyone's interest, and insurance regulators will benefit from the rating agencies' insight as we work to keep the insurance industry strong and protect policyholders," said Mr. Wrynn.
NAIC has called all the top credit rating agencies and plans to question them as to why the commissioners shouldn't retain guidance from other firms in evaluating insurers' securities holdings.
Hampton Finer, deputy superintendent and chief economist with the New York Insurance Department, speaking with NU Online Sept. 10 noted that there had been a lot of criticism of rating agency findings.
NAIC evaluates the holdings of insurers, and based on how the Nationally Recognized Statistical Rating Organizations (NRSRO)s rate the carriers' securities, sets a minimum required amount of capital reserves that the insurer must hold against possible equity losses.
Mr. Finer said there was a "view that there's been an overreliance on rating agencies," mentioning recommendations by the U.S. Treasury and the Group of 20 Finance Ministers and Central Bank Governors.
He said the NAIC Rating Agency Working Group, which has invited insurance companies, pension funds and others to testify on the NAIC reliance on NRSRO ratings, will among other things ask about ratings of "structured securities where there's been a problem."
As an example, he mentioned residential mortgage backed securities that plunged in value after receiving satisfactory ratings from the NRSROs.
Mr. Finer said the Working Group has sent the NRSROs questionnaires and have received "voluminous responses that were quite helpful," but he said the NAIC wants clarification of some questions that were not answered completely.
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