NAIC releases RFPs to model valuations for commercial and residential mortgage backed securities

Written by Adam Cadle

22/02/2021

The National Association of Insurance Commissioners (NAIC) has released separate requests for proposal (RFP) for vendors to model expected losses on approximately 6,000 commercial mortgage backed securities (CMBS) and 24,000 residential mortgage backed securities (RMBS).

This process will produce valuations for state insurance regulators to set risk-based capital for CMBS and RMBS owned by US insurance companies.

For over 10 years, probability weighted net present values have been produced under NAIC supervision by financial modellers using their proprietary financial models with defined analytical inputs approved by the NAIC Valuation of Securities Task Force of the Financial Condition (E) Committee. Under adopted procedures, the vendor provides the NAIC with a range of net present values for each security corresponding to each NAIC designation category (NAIC-1 to NAIC-6). The reported NAIC designation for a security is then determined by the insurance company, based upon an NAIC proprietary formula.

Proposals are due by 29 March 2021. Bidders are welcome to submit one proposal for one of the two RFPs or in response to both. Responses will be reviewed by NAIC senior management and a recommendation will be made to the NAIC executive committee for its consideration in mid-2021.

Related Articles