State Insurance Commissioners Hire Moody’s Critic Kolchinsky

July 25, 2013 by Zeke Faux

Eric Kolchinsky, the former Moody’s Investors Service analyst who told Congress the ratings company cared more about money than accuracy, was hired by the National Association of Insurance Commissioners.

Kolchinsky will be director of the NAIC’s new structured securities group in New York, the organization said in an e- mailed statement. He had been a consultant for the NAIC since 2009, helping end its reliance on credit ratings to evaluate home-mortgage bonds, according to the statement.

Regulators are looking for new ways to judge risks of the investments held by the companies they oversee, instead of relying on credit ratings generated by Moody’s and Standard & Poor’s. Kolchinsky told a House panel in 2009 his old employer favored “revenue generation over ratings quality,” and the Financial Crisis Inquiry Commission called Moody’s work on mortgage bonds in 2006 “disastrous.”

Moody’s disputed his allegations at the time, and Michael Adler, a spokesman for Moody’s, declined to comment today. The ex-analyst dropped a defamation lawsuit in January amid mounting legal costs, his lawyer told Reuters at the time.

The NAIC also said it hired Charles A. Therriault from Bank of New York Mellon Corp. to head its securities valuation office, which assesses the risk of insurance firm holdings. The organization includes chief insurance regulators from the U.S. states and territories, who cooperate to set standards and coordinate oversight, according to the NAIC website.

The group has turned to money managers Pacific Investment Management Co. and BlackRock Inc. to assess securities instead of the ratings companies. The new system is “more accountable, it’s more transparent, it’s better geared toward a regulatory need,” Kolchinsky said in a telephone interview.

Editors: Rick Green, Dan Kraut