On December 2, 2009, the NAIC Valuation of Securities (E) Task Force adopted final assumptions (the Assumptions”) for the financial model used in determining risk based capital (“RBC”) for insurer owned residential mortgage-backed securities (“RMBS”).
The Assumptions came in response to complaints from insurers that national securities ratings agencies were valuing their holdings at too low a rate, consequently, requiring such insurers to maintain more capital than needed. The new Assumptions use home price appreciation (“HPA”) and interest rates as key factors in determining RBC requirements. The NAIC considered various HPA scenarios in developing the Assumptions and, according to industry reports, plans to finalize RBC ranges by the end of 2009, thereby allowing insurers to prepare their 2009 annual reports using the new Assumptions in determining RBC requirements.
Click here for a copy of the Assumptions.
Click here for the questions and responses related to the Assumptions.
