NAIC RELEASES REQUESTS FOR PROPOSALS TO MODEL VALUATIONS FOR COMMERCIAL AND RESIDENTIAL MORTGAGE-BACKED SECURITIES
WASHINGTON, D.C. – February 17, 2015 – (RealEstateRama) — The National Association of Insurance Commissioners (NAIC) released separate requests for proposals (RFP) for vendors to model expected losses on approximately 6,000 commercial mortgage-backed securities (CMBS) and 24,500 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 U.S. insurance companies.
Beginning with year-end 2009 for RMBS and 2010 for CMBS, probability weighted net present values were produced under NAIC supervision by selected vendors (one for RMBS another for CMBS) using 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, each 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. Consistent with NAIC policy, the NAIC periodically submits third-party contracts to competitive rebidding.
Applicants must have the following qualifications to be considered:
- Be a nationally recognized firm with a minimum of five years experience in performing valuations of complex structured securities.
- Have the capability to assign sufficient qualified staff to this project.
- Have a methodology that can be quickly modified and implemented.
- Have access to loan level details for the universe of CMBS and RMBS.
- Have the data processing capability required to generate these valuations by mid-December of each year of the contract.
- Have safeguards in place to avoid conflicts of interest.
- Have the capability to model new issuance.
- Be a financially sound entity.
Responses to the RFPs are due by March 10, 2015. Responses will be reviewed by NAIC senior management and a recommendation will be made to the NAIC Executive Committee for their consideration in mid-2015.
Click HERE to access the RMBS RFP.
Click HERE to access the CMBS RFP.
About the NAIC
The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For more information, visit www.naic.org.
