Wednesday, November 18, 2009

Insurance Commissioners Pick PIMCO to Model RMBS

Posted on the Housing Wire by Diana Golobay:

The National Association of Insurance Commissioners (NAIC) selected global investment management firm PIMCO to aid in an assessment on residential mortgage-backed securities (RMBS) as part of an effort that will determine risk-based capital requirements.

PIMCO will assist NAIC in forming a model — established under a recent proposal — that will produce expected losses at the RMBS security level for insurers to map their holdings to the appropriate risk-based capital requirements.

PIMCO will develop a set of price ranges for six designations insurers will use to calculate risk-based capital charges for each security. These designations will apply only to year-end 2009 reporting, NAIC said.

“Creating this new assessment process is an important step toward providing more transparency about these complex securities,” said Roger Sevigny, NAIC president and New Hampshire insurance commissioner, in a statement Tuesday. “This unique treatment of [RMBS] distinguishes the NAIC as the only regulator to analyze these securities and require capital based upon the expected loss amount for a particular company.”

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