UPDATE: Moody's Reverses; To Attend Insur Regulators' Meeting
September 21 2009 - 12:27PM
Dow Jones News
After being criticized for turning down an invitation to attend
a planned meeting of insurance regulators, Moody's Investors
Service, a unit of Moody's Corp. (MCO), changed course and said it
will attend a Thursday meeting of the National Association of
Insurance Commissioners, or NAIC.
The meeting comes as the NAIC considers alternatives to relying
on ratings agency grading of securities. Rival rating agencies
Standard & Poor's, Fitch Ratings, and DBRS Ltd. were scheduled
to speak at the meeting but, until mid-morning Monday, Moody's had
declined the invitation, which prompted two members of the
committee to suggest Moody's could suffer as a result.
After Moody's changed course and said it would attend, James J.
Wrynn, New York's insurance superintendent and co-chair of the
NAIC's rating agency working group, said in a statement that he was
pleased by the change of heart.
"Correcting the mistakes that led to the financial crisis is in
everyone's interest, and insurance regulators will benefit from the
rating agencies' insight as we work to keep the insurance industry
strong and protect policyholders," he said in the statement, issued
Monday.
Hampton Finer, New York's deputy insurance superintendent, had
said over the weekend that Moody's refusal to attend the hearing
could result in the company being taken off the acceptable rating
organizations list for NAIC, the organization that represents state
insurance regulators, Reuters reported Saturday.
Michael McRaith, director of the Illinois Division of Insurance
and chair of the rating agency group of the NAIC, said a decision
by Moody's not to appear would be considered a "strategic decision"
that could have negative repercussions for Moody's.
As of early Monday morning, Moody's had said it wouldn't attend,
McRaith said. By mid-morning, he said Moody's changed course and
told the group it will appear at the Thursday meeting in Washington
D.C.
The rating agency working group has been re-evaluating
regulators' reliance on rating agencies after the economic downturn
resulted in ratings being slashed for many securities, forcing some
insurers to raise more capital to hold against the downgraded
securities. Insurance regulators use credit ratings to help
determine capital-reserving levels for insurance companies that
hold nearly $3 trillion in rated bonds.
The group will evaluate the effect of the use of agency ratings
on "public confidence and public perception of regulatory oversight
quality of insurance," according to information on the NAIC's Web
site.
Shares of Moody's traded down 3.8% recently to $22.69.
McGraw-Hill Cos. (MHP), which owns Standard & Poor's, recently
traded down 1.6% to $26.37.
-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141;
lavonne.kuykendall@dowjones.com