Amidst detractors noting a possible conflict of interest, the
On November 17, the NAIC selected bond-fund company
The conflict of interest charges involve PIMCO’s owner and its clients. PIMCO is a unit of a global insurer
A spokeswoman for the Allianz life insurance unit said that well under 1% of the company's investments were involved in the NAIC review, noted the Journal.
The NAIC, meanwhile, took pains to assure the marketplace that their choice of financial modeler was legitimate. Several weeks ago, the NAIC released documents to an untold number of bidders, asking them to identify current or potential conflict of interests as well as "ethical walls and procedures" in place "to mitigate or minimize potential conflicts affecting the NAIC or other clients."
"PIMCO is extremely honored to have been selected by NAIC for this important assignment," said a PIMCO spokesman in the Journal’s report. " PIMCO has significant experience in managing these types of mandates, including establishing strict 'walls' to prevent potential conflicts of interest."
As part of its normal operating procedures, the NAIC is expected to issue a statement addressing any unresolved issues, including possible conflicts, Michael Moriarty, a deputy superintendent in the insurance department in New York, told the greater press.
The new NAIC model will calculate expected carrying value for each RMBS security held by insurers. Insurers will be able to map these values to the appropriate NAIC designation and accompanying RBC requirements.
"This is a critical step in developing the new designation methodology," said Roger Sevigny, NAIC President and New Hampshire Insurance Commissioner. "We are acting carefully to make sure insurers hold adequate capital to meet their obligations to consumers, while moving quickly and openly to address an issue at the core of the financial meltdown."
The draft, which is available for public comment, presents the analytical framework and economic assumptions for use in PIMCO's models for the new designation process for RMBS. Specifically, it will discuss the use of home price appreciation (HPA) and projected interest rates as key variables. The NAIC will evaluate each security using a set of HPA projections representing moderate (or base), aggressive and conservative expectations.
The task force will discuss the draft during a conference call (open to the public) on November 30, at 11:00 a.m. EST. In addition, an overview of the proposal and process is scheduled for December 7, during the NAIC Winter National Meeting in San Francisco (see NAIC Meetings Web page for details).
Regulators plan to finalize designations and RBC price ranges by year-end. Companies will be able to report their 2009 annual statement results due March 1, 2010, using the appropriate, new designations.