The National Association of Insurance Commissioners (NAIC) is bolstering its oversight of insurance company investments with a focus on credit quality assessment. The NAIC’s Securities Valuation Office (SVO), a key component of the Capital Markets & Investment Analysis Office, plays a central role in this process, evaluating the securities held by state-regulated insurance firms.
The SVO’s responsibilities center around the day-to-day assessment of creditworthiness. Insurance companies are required to report their securities holdings to the Capital Markets and Investment Analysis Office when those securities appear on Schedule D, DA, or BA of the NAIC Financial Statement Blank. This reporting requirement ensures transparency and allows the SVO to monitor potential risks within the insurance sector’s investment portfolios.
The office maintains a series of lists and references crucial to its evaluation process. These include lists of bond and preferred stock Exchange Traded Funds (ETFs) identified by the SVO, as well as a list of U.S. Government Money Market Funds. Further, the SVO tracks fixed income-like SEC registered funds, non-registered private funds with bond or preferred stock characteristics, and transactions falling under SSAP No. 37 related to mortgage loans. A current list of counterparties and Qualified U.S. Financial Institutions (QUSFI) is also maintained, alongside a Sovereign NAIC Designation Equivalent list and a compilation of SIC Codes used by analysts.
Beyond simply assigning credit ratings, the SVO offers a Regulatory Treatment Analysis Service (RTAS). This service allows insurance companies and other interested parties to gain insight into the SVO’s analytical perspective on a security’s credit risk and the resulting regulatory accounting and reporting implications. Companies can submit securities for review and receive feedback on how the SVO would likely treat the investment. Contacting the SVO directly at SVOInquiryDesk@naic.org or 212-398-9000 provides access to this service.
The SVO leverages a comprehensive database, the Automated Valuation Service (AVS+), containing information on over 250,000 securities from more than 40,000 issuers. This database is a critical tool for analysts within the office, supporting their assessments and ensuring consistency in valuation practices.
The NAIC is actively seeking to expand the SVO team, as evidenced by a recent job posting for a Supervisor, Securities Valuation Office. This role, within the Regulatory Services division, involves leading and managing a team of credit analysts, overseeing their workloads, performance, and the quality of their analytical work. The demand for skilled professionals highlights the increasing complexity and importance of securities valuation within the insurance regulatory landscape.
The work of an SVO analyst, as outlined in a presentation, centers on preparing detailed credit analysis reports. Analysts are tasked with writing these reports, recommending credit risk designations, and determining security pricing. A significant portion of their time is dedicated to updating the SVO database with information on fixed income, equity, hybrid, and private placement securities. This continuous updating process is essential for maintaining the accuracy and relevance of the AVS+ database.
The SVO’s function is particularly important given the substantial assets managed by the insurance industry. Accurate credit assessments are vital for ensuring the solvency of insurance companies and protecting policyholders. By diligently evaluating the risks associated with insurance company investments, the SVO contributes to the overall stability of the financial system. The office’s work directly impacts the regulatory accounting and reporting treatment of these securities, influencing capital requirements and risk management practices.
The role of a Supervisor within the SVO, as advertised, emphasizes leadership and management skills alongside analytical expertise. The position requires overseeing a team, ensuring productivity, and maintaining high analytic quality. This suggests a growing emphasis on not only the technical skills of analysts but also their ability to effectively lead and collaborate within a team environment.
The NAIC’s commitment to maintaining a robust securities valuation process underscores the evolving challenges facing insurance regulators. The increasing complexity of financial instruments and the interconnectedness of global markets necessitate a sophisticated and proactive approach to risk management. The SVO, with its dedicated team of analysts and comprehensive database, is positioned to play a critical role in navigating these challenges and safeguarding the interests of policyholders and the financial system as a whole.
