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Bond Market Association Commends NAIC for Interim Decision on Classification and Treatment of Hybrid Securities
New York,NY
September 12, 2006
The Bond Market Association today applauds the Financial Condition (E) Committee of the National Association of Insurance Commissioners (NAIC) for providing an interim solution regarding the classification of hybrid securities that may encourage insurance companies to re-enter the hybrid securities market. The Bond Market Association says the decision, which results in securities defined by the NAIC as hybrid securities being classified as preferred securities, may result in greater stability in the market and increase the likelihood that insurance companies will participate in the hybrid securities market.
At a meeting today, the Financial Condition (E) Committee unanimously accepted the interim solution and definition of hybrid securities proposed by the NAIC hybrid working group. This decision results in the classification of defined hybrid securities as preferred securities, subject to differing ratings resulting in different reserve requirements. The decision is subject to final approval by the NAIC.
We commend the NAIC for reviewing this important matter and adopting an interim solution that may revitalize insurance company participation in the market, said Mary Kuan, vice president and assistant general counsel at the Bond Market Association. In addition, we appreciate the opportunity to work with NAIC on the long-term solution, which we believe should be risk-based, and applaud them for engaging market participants in the process.
The interim decision will remain in place until either the NAIC agrees on a longer-term solution or January 1, 2008, subject to final NAIC approval. As the NAIC continues the process of developing a longer-term solution, the Bond Market Association looks forward to continued involvement with the NAIC on developing a long-term solution which focuses on risks, if any, that may be associated with hybrid securities, and working on related issues such as increasing transparency in decision making and ensuring that dissemination of material information reaches all market participants at the same time.
The Bond Market Association, with offices in New York , Washington , D.C. and London , represents securities firms, banks and asset managers that underwrite, invest, trade and sell debt securities and other financial products globally.
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