Following a July 28 issuance of a request for proposals (RFP), the National Association of Insurance Commissioners (NAIC) has selected Blackrock Solutions to assist state regulators in determining risk-based capital (RBC) requirements for the commercial mortgage-backed securities (CMBS) held by insurers.
As the third-party financial modeler, Blackrock Solutions will assist in the assessment of more than 7,000 CMBS holdings by U.S. insurance companies at the end of this year, measured in terms of unique Committee on Uniform Security Identification Procedures (CUSIPs).
Blackrock Solutions will coordinate with the NAIC to develop expected losses for each CMBS CUSIP, allowing insurance companies to map their CMBS holdings to the appropriate RBC designation and accompanying solvency requirements.
The selection of Blackrock Solutions followed a review of 16 bids received by the NAIC in response to its RFP. The review was conducted by NAIC staff and financial consulting firm Oliver Wyman using a process similar to last year's efforts that resulted in the selection of PIMCO as the third-party vendor chosen to assist in the RBC modeling of residential mortgage-backed securities (RMBS).
‘The RMBS assessment process was a very important and successful step in our analysis of expected losses and related risk-based capital requirements for the insurance industry in 2009,’ says Jane L. Cline, NAIC president and West Virginia insurance commissioner. ‘Expanding this examination to CMBS holdings further enhances our analysis for another 43 percent of the structured securities owned by the insurance industry. These assessments continue to distinguish and supplement the stringent capital requirements of NAIC and state insurance regulators, which are based upon the expected losses and RBC for a particular company.’
Blackrock Solutions will coordinate with insurance regulators to develop a set of price ranges for NAIC designations one through six. These will apply to year-end 2010 statutory financial statements and will determine the RBC charges for each applicable security.
With respect to RMBS designations for year-end 2010, the NAIC will continue its relationship with PIMCO.
The NAIC says it will next concentrate on the development of macroeconomic assumptions with which Blackrock Solutions and PIMCO develop their models.