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US Insurance Regulators Weighing Options To Supplant Ratings Agencies

Regulators are going to discuss the credibility of CRAs in estimating the quality of bonds that are backing insurance policies

US state regulators are contemplating whether to establish an organisation for the purpose of grading insurers’ bond holdings, thus potentially replacing credt ratings agencies (CRAs) such as Moody’s and S&P that have lost their credibility – reported Bloomberg.

Of late, CRAs are under severe criticism for conflict of interest as the sup-prime crisis has exposed weaknesses in some of their top-rated securities. Reportedly, regulators are going to discuss the credibility of CRAs in estimating the quality of bonds that are backing insurance policies.

In a telephone interview to the news agency, Thomas Sullivan, Insurance Commissioner of Connecticut, said: “We at the National Association of Insurance Commissioners are studying the viability of creating our own rating agency, a not-for-profit one. The fundamental issue is if the bar is always moving, that makes it very difficult. Magically overnight, what we thought was AAA is no longer AAA. That’s a big problem.”