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~~~~ “The National Association of Insurance Commissioners is exploring expanding its financial-ratings system over the issue of derivatives valuations and their effect on insurers.

Sandy Praeger, president of the organization of state insurance regulators and insurance commissioner of Kansas, says some insurance companies have been downgraded by the rating firms because of their investments in derivatives that had been given high marks for safety by the same firms, which include Moody’s, Fitch Ratings, A.M. Best and Co. and Standard & Poor’s.

The insurers are being downgraded for owning derivatives that the rating agencies told them it was OK to own. The effect needs to be more fully examined,” Ms. Praeger said.

A.M. Best and Standard & Poor’s didn’t comment Thursday.

The NAIC said it is considering applying to the Securities and Exchange Commission to become a nationally recognized statistical rating organization, such as Moody’s, S&P and Fitch.

The NAIC rates some securities within insurance companies’ investment portfolios that aren’t rated by the credit-rating firms, for other state regulators. The NAIC wants to expand its credit-rating services to the general market.” ~~~~

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