August 13, 2026

Insurers, rating firms push back on NAIC credit rating oversight plan

Regulators received about 90 pages of pushback from insurers, credit rating agencies, trade groups and other stakeholders on their plan to step up oversight of credit ratings agencies.

The Credit Rating Provider Working Group met Wednesday at the National Association of Insurance Commissioners’ summer meeting in Columbus, Ohio. The panel is considering a due diligence process for evaluating the credit rating providers whose ratings insurers rely on to determine regulatory capital requirements.

Regulators want to end the blind reliance on external credit rating agencies to help ensure that insurance companies are not hiding high-risk assets behind inflated credit grades. Industry ratings have come under fire recently for a variety of reasons.

Jake Garn is director of the Financial Regulation and Licensing Division at the Utah Insurance Department. He also chairs the working group.

“Neither the NAIC nor the framework will tell [credit ratings providers] what their methodology must be or how to do their jobs,” Garn said at the outset of the meeting. “The framework is simply the NAIC taking another step in becoming more responsible, educating educated users of ratings, and in doing so, aligning ourselves with the purpose and objective of the 2006 Credit Rating Agency Reform Act.”

The proposal will not improperly regulate nationally recognized statistical rating organizations, or NRSROs, a responsibility reserved for the Securities and Exchange Commission, Garn said.

Regulators said no action will be taken on the proposal until regulators review the comments and work with staff and consultant PwC to prepare a revised draft.

So many questions

The American Council of Life Insurers, joined by the Private Placement Investors Association and the National Association of Securities Valuation Analysts, said it supports establishing a framework but urged regulators to implement it carefully because remediation actions could have significant effects on insurers and capital markets.

Several key elements, including how securities will be segmented, how spreads will be compared and what standards will trigger remediation, remain undeveloped, noted Adam Knepp, senior director of accounting policy at the ACLI.

“As the framework evolves, we encourage regulators to continue providing transparency and opportunities for public comment, consistent with the approach taken for this initial proposal,” he added.

The groups urged the NAIC to continue providing public comment opportunities as the proposal evolves.

Representatives of major credit rating agencies expressed support for the NAIC’s goal of strengthening confidence in ratings used for insurance regulation but argued the framework should focus on rating performance and governance rather than comparing one agency ratings.

Fitch: Be consistent

In its letter, Fitch Ratings recommended evaluating agencies using historical default and transition data, consistent with SEC oversight and banking regulators’ practices in the United States, Europe and the United Kingdom.

KBRA similarly supported a structured, risk-based framework but warned that differences among rating providers should not automatically be viewed as evidence of weak analysis.

“The focus should remain on the integrity of a credit rating provider’s governance, controls, transparency, and analytical processes, not on convergence of independent rating opinions,” said Ryan Mensing, managing director of regulatory and government affairs for KBRA. “The analytical viewpoints are critical to healthy and competitive credit markets and help promote market efficiency, innovation, and resilience.”

Independent methodologies are essential to healthy credit markets and warned against creating incentives for agencies to produce similar ratings, S&P Global Ratings pointed out.

The company argued that encouraging convergence could increase systemic risk by promoting “herd behavior” among rating agencies.

“Adopt an approach that distinguishes between legitimate analytical diversity among CRPs, including whether securities have the benefit of being rated by multiple CRPs, and genuine outliners that warrant further information,” said Diana Hui, industry outreach director in the Chief Client Office at S&P Global.

‘Unchecked discretion’

Pinpoint Policy Institute Executive Director Eric Ventimiglia was among the proposal’s strongest critics, arguing the framework could exceed the NAIC’s authority by effectively evaluating rating methodologies that federal law reserves to the SEC.

The organization also questioned whether the proposal provides adequate due process, legal authority and cost-benefit analysis for actions that could remove rating providers or asset classes from regulatory use.

The NAIC has declined to define terms such as “reasonable,” “material,” “equivalent,” “systematic disagreement,” Ventimiglia said.

“A framework that can result in CRP de-admittance or asset class removal, while avoiding definitions for its own triggering standards, is not a framework. It is unchecked discretion,” he said.

In addition, Ventimiglia raised concerns about expanding confidential data submissions following a cybersecurity incident involving the NAIC and urged regulators to strengthen data protection commitments before moving forward.

Working group members acknowledged recurring concerns about how the framework would evaluate newer asset classes, customized investments and private credit, where limited historical performance data often exists.

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