b'INSURANCE REGULATORY|US/NAICAn SVO staff review of a sample of privatelystatistical rating organization (NRSRO) rated securities, where the NAICpeers and methodology, or (iii) compared to designations equivalent to the CRPs ratinga spread implied rating, and, if not, to differed significantly from the staffs owndetermine whether a full filing and SVO analysis (being three to six notches higheranalysis would be appropriate.than staffs estimates); and 2.Conduct an in-depth study of the NAICs use An IAO analysis of both publicly rated andof CRP ratings and SVO-assigned NAIC privately rated securities, showingdesignations as to their consistency and significant rating notch differences betweencomparability for regulatory purposes, CRPs that rated the same security.specifically the determination of RBC factors.The IAO staff pointed out the potential for3.Put the CRP process under a contractual significant distortion of an insurers RBC ratio thatrelationship by offering NRSROs the opportunity can result from a CRP rating that does not reflect ato respond to a request for qualifications reasonable assessment of a securitys risk.(RFQ). The RFQ would look at historical Accordingly, the IAO memorandum concludes bycoverage, consistency, persistence, listing four alternatives that the IAO believes thecomparability and predictiveness of each CRPs NAIC should consider in 2022, either individually orrating along with any other analytical and in combination, to begin the process of activelyqualitative benefit they may provide to the NAIC managing and overseeing its use of CRP ratings.for its regulatory purposes. Under this process, The IAO notes that these alternatives are consistentthe NAIC would enter into a contract with only with the recommendations made by the Ratingthose CRPs that adequately meet the RFQ Agency (E) Working in its final report dated April 28,criteria. In many respects this process would be 2010, which was subsequently adopted by the Esimilar the RFP process for CMBS/RMBS.Committee, in response to the global financial crisis4.The VOS TF can instruct the SVO to remove any of 2007-2008. The four alternatives are to: rating agency from the CRP list at any time.1.Require at least two (or more) CRP ratingsThe VOS TF did not take any action on the IAO for every security and use the lowest ratingmemorandum at the December 12, 2021 meeting to determine the NAIC designation. If aother than to receive it as a starting point for security has only one rating, require it to bediscussion in 2022. That discussion, which will be reviewed by the SVO to determine whetherconducted under the auspices of the new VOS TF the SVO deems the rating reasonable (i)chair, Carrie Mears of the IID, and will likely involve pursuant to its own analysis, (ii) wheninput from industry representatives as well as VOS benchmarked to nationally recognizedTF members and other regulators, could lead to important new developments in the coming year.70|Global Insurance Industry Year in Review 2021'