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NAIC Ponders Own Rating Agency

October 27, 2008

Kansas City, Mo. — In light of the recent criticisms leveled at raters such as Moody's, Standard & Poor's and Fitch Ratings, the National Association of Insurance Commissioners (NAIC) is considering becoming a nationally recognized statistical rating organization.

Currently, the NAIC rates some securities within insurers' investment portfolios that aren't rated by the commercial firms, for other state regulators.

The NAIC said it is considering applying to the Securities and Exchange Commission to expand its credit-rating services to the general market.

The performance of the rating agencies has come under scrutiny in recent months. Many insurers now face the prospect of being downgraded for having derivatives in their portfolios; despite the fact these derivatives had the imprimatur of the same ratings firms.

"The insurers are being downgraded for owning derivatives that the rating agencies told them it was O.K. to own," says Sandy Praeger, Kansas insurance commissioner and president of NAIC. “The effect needs to be more fully examined.”

Source: Wall Street Journal

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