The National Association of Insurance Commissioners (NAIC) has selected PIMCO to help state regulators determine the risk-based capital requirements for residential mortgage-backed securities (RMBS).
The NAIC received more than 20 responses to its request for proposals for a third-party vendor. Following analysis by NAIC staff and financial consultancy Oliver Wyman, PIMCO was selected from a short list of 11 vendors.
The NAIC's objective was to identify a vendor with a sound assessment methodology, proven ability to process a large amount of transactions in a very short timeframe and processes and procedures in place to address potential conflicts of interest, the group says.
"Creating this new assessment process is an important step toward providing more transparency about these complex securities," adds Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner. "This unique treatment of residential mortgage-backed securities distinguishes the NAIC as the only regulator to analyze these securities and require capital based upon the expected loss amount for a particular company."
PIMCO will work with regulators to develop a set of price ranges for designations one through six to be used by insurers in their statutory financial statements and to calculate the risk-based capital charges for each specific security they own. These designations will apply only to year-end 2009 reporting.
Approximately 18,000 RMBS are owned by U.S. insurers.