FOR IMMEDIATE RELEASE
HYBRID SECURITIES CLASSIFICATION IS FOCUS OF JUNE 11 MEETING
Superintendent of Insurance Howard Mills today announced that a senior New York State Insurance Department (NYSID) executive will chair on Sunday, June 11 a public meeting of the National Association of Insurance Commissioners (NAIC) Valuation of Securities Task Force that will discuss the transparency of the current process governing the classification of insurer-owned hybrid securities.
"Assessing the investment risks insurers take when building adequate reserves, monies which are set aside to pay policyholders claims, goes to the very heart of our mission: to ensure the insurance industrys safety and soundness," Superintendent Mills stated. "Yet at the same time we recognize there are steps regulators can take to share information about our own decision-making process, especially when the ramifications of our decisions extend beyond the insurance industry."
The public session, to be chaired by Michael Moriarty, the director of the NYSIDs Capital Markets Bureau, will be held at 10:30 a.m. at the Wardman Park Marriott Hotel, 2660 Woodley Road, NW, Washington, D.C. as part of the NAICs regularly-scheduled summer meeting. Mr. Moriarty will invite interested parties to comment on the ways in which the NAICs Securities Valuation Office (SVO) can enhance communications to the financial services industry when classifying hybrid securities, and to what extent the SVO can offer a rationale for its classification decisions.
Hybrid securities are investments structured to have characteristics of both equity (common and preferred stock) and debt. The classification of these securities is of great importance to insurers because, when a hybrid security is determined by the SVO to be equity rather than debt, the insurer will face substantially higher risk-based capital charges. Furthermore, the SVOs determinations have impacted the pricing of similar investments in the capital markets, affecting insurance and non-insurance issuers and investors.
The SVO, headquartered at 48 Wall Street, Manhattan, is responsible for the day-to-day credit quality assessment and valuation of securities owned by all of the nations state-regulated insurance companies. Scheduled to join Mr. Moriarty, the Task Forces chair, at the June 11 meeting are his fellow Task Force members from 14 other states.