The National  Association of Insurance Commissioners (NAIC) has chosen Blackrock  Solutions to assist state regulators as they determine risk-based  capital (RBC) requirements for the CMBS held by insurers.

Serving as the third-party financial modeler, Blackrock will provide help in the assessing over 7,000 CMBS holdings by U.S. insurance firms at the end of  2010, as measured in terms of unique Committee on Uniform Security Identification Procedures  or CUSIPs.

Blackrock will be coordinating with the NAIC to develop expected losses for each CMBS CUSIP. This would let insurance firms to map their CMBS holdings to  the appropriate RBC designation and accompanying solvency requirements.

The selection of Blackrock Solutions followed a review of 16 bids received by the NAIC in response to RFP #1403: Assessment of  Commercial Mortgage-Backed Securities, which wasposted on the NAIC  Web site on July 28.

The review was done by NAIC staff as well as independent financial consulting firm Oliver Wyman utilizing a process  that is similar to last year's efforts that resulted in the selection of PIMCO as the third-party vendor chosen to assist in the RBC RMBS modeling.

The NAIC employed  the same selection criteria used for that process to select a financial modeler for CMBS, which are  sound methodology; ability to process a significant amount of data; policies and procedures in  place to address potential conflicts of interest; and a  cost-effective price.

"The RMBS assessment process was a very important and successful step in our analysis of expected losses and related risk-based  capital requirements for the insurance industry in 2009," said Jane  L. Cline, NAIC president and West Virginia insurance commissioner. "Expanding this examination to CMBS holdings further enhances our  analysis for another 43% of the structured securities owned by the  insurance industry. These assessments continue to distinguish and  supplement the stringent capital requirements of NAIC and state  insurance regulators, which are based upon the expected losses and RBC for a particular company."

Blackrock will be coordinating with insurance regulators to make a set of price ranges for NAIC designations one through six. These will apply to year-end 2010 statutory financial statements and  will determine the RBC charges for each applicable security.

In terms of RMBS designations for year-end 2010, the NAIC will still have its relationship with PIMCO. The NAIC was pleased with lthe previous year's results and thinks that consistency  of process is important as added classes of structured securities are modeled.

"We were very pleased with the results of the RMBS assessment and  PIMCO's work in 2009 and look forward to benefiting from their  continuing efforts this year," Cline said. "We anticipate similar  success with the CMBS assessment with the support and expertise we  expect to receive from Blackrock Solutions."

The NAIC will focus next on the development of macro-economic assumptions with which both Blackrock and PIMCO develop their models. The NAIC will also schedule public meetings to talk about these assumptions as well as other issues that are important to the designation process.

More details about CMBS and RMBS, will be available on the  NAIC's structured securities page when the data becomes available.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.