Six Market Vectors fixed income exchange-traded funds have received risk-based capital ratings from the Securities Valuation Office (SVO) of the National Association of Insurance Commissioners (NAIC).
Ratings assess credit quality of fixed income securities and can allow for favourable risk-based capital treatment when a fund is added to portfolios of state regulated insurance companies.
SVO ratings range from one to six, with one being highest in terms of credit quality. The ratings are:
Investment Grade Floating Rate Note ETF (FLTR) – 1
Intermediate Municipal Index ETF (ITM) – 1
Emerging Markets Local Currency Bond ETF (EMLC) – 2
International High Yield Bond ETF (IHY) – 3
Emerging Markets High Yield Bond ETF (HYEM) – 3
High Yield Municipal Index ETF (HYD) – 4
“We’re very pleased to have received SVO designations for six of our funds, as these ratings help provide state regulated insurance companies with guidance as to the credit quality of a fund’s underlying holdings,” says Susan Marino, senior vice president and director of national accounts at Van Eck Global. “We’re pleased to offer insurance companies these Market Vectors ETF solutions as they take a closer look at opportunities to expand their investment choices.”
“Insurance companies are increasingly looking to use ETFs based on their flexibility, transparency and low-cost structure,” says Bill Best, managing director, institutional sales and investor relations at Van Eck Global. “NAIC ratings are a critical tool allowing insurance general account managers to utilise this fast growing and dynamic part of the market while also efficiently managing their risk-based capital requirements.”
NAIC, the US standard-setting and regulatory support organisation, was created and is governed by the chief insurance regulators of the 50 states, the District of Columbia and five US territories. The SVO is responsible for day-to-day credit quality assessment and valuation of securities owned by state regulated insurance companies. The assignment of an NAIC designation allows a fixed income ETF to be reported as a bond, and therefore receive a more favourable risk-based capital treatment.