The National Association of Insurance Commissioners' (NAIC) revealed in its proposed 2012 budget that a significant loss in projected investment income in the third quarter due to volatile markets has eliminated the $3 million projected total net revenue margin for the NAIC for 2011 initially projected back in June.
The NAIC also said in its budget proposal that further fluctuation of the market value of the NAIC’s portfolio is expected through the end of 2011 due to the volatility.
The NAIC uses Prairie Capital Management LLC and investment managers, and has parameters on investments with U.S. publicly-traded equities targeted at 32.50% of allocation of investments, but allowing for a range between 23% and 63%. Foreign equities are not to exceed 10% of the account’s market value, with a minimum requirement of 3%. The principal subcomponent of the income securities category, which is not to exceed 67% of the account’s market value, is U.S. publicly traded domestic fixed income securities, but these cannot exceed 38% of the account’s market value.
The NAIC leadership approved a report from a consulting firm on Sept. 22 to change the NAIC’s liquid operating reserve from a flat 80% to a target range of 80% to 91%. The liquid reserves are projected to increase to 83.9% by the end of 2012 from 79.3% at the end of 2010. By the end of this year, the liquid reserve is expected to be at 82%. These numbers exclude the structured securities project.