The National Association of Insurance Commissioners (NAIC) has selected BlackRock Solutions as the sole vendor to conduct financial modelling for the next three years, for both residential mortgage-back securities (RMBS) and commercial mortgage-back securities (CMBS).
The NAIC made a decision in 2009 to no longer rely on ratings provided by agencies for RMBS, and again in 2010 for CMBS. The organisation has used a select vendor to model the expected losses of RMBS and CMBS under various economic scenarios.
The modelled results of RMBS and CMBS when compared to insurers’ reported values determine an insurer’s risk-based capital requirements.
It is the NAIC’s standard practice to periodically submit third-party contracts to competitive rebidding.
In February, two separate requests for proposal were issued, seeking firms to model CMBS and RMBS, respectively. The NAIC has used BlackRock Solutions to perform financial modelling of CMBS since 2010. The organisation had previously used PIMCO on RMBS.
NAIC president and Montana insurance commissioner Monica Lindeen, commented: “BlackRock Solutions has provided the NAIC with excellent analytical products on CMBS over the last five years, allowing both insurance regulators and insurers to better assess the risk of loss with these securities.”
"We are pleased to continue and expand our productive working relationship with BlackRock Solutions.”
Looking forward, the NAIC has begun working with BlackRock to evaluate the potential impact of the change in vendors.
The results of this impact analysis will be shared with the insurance industry to allow insurers to gauge the likely impact to carrying values and risk-based capital requirements.
