BlackRock to Evaluate Commercial Mortgage Holdings for Insurance Industry

BlackRock Inc., the world’s biggest money manager, was hired by state insurance regulators to assess the industry’s potential losses from holding commercial mortgage-backed securities.

BlackRock will review more than 7,000 securities by year- end, the National Association of Insurance Commissioners said yesterday in a statement released on its website. The New York- based firm will calculate loss expectations for the holdings, which will determine how much capital insurers must hold to cushion potential declines, NAIC said.

“These assessments continue to distinguish and supplement the stringent capital requirements of NAIC and state insurance regulators,” Jane Cline, NAIC president, said in the statement.

Insurance regulators are searching for an alternative to Moody’s Investors Service and Standard & Poor’s, whose ratings were cited by some as one cause of the financial crisis. Last year, the NAIC named Pacific Investment Management Co. to evaluate insurance firms’ home-loan securities.

Insurance companies hold investments in CMBS, backed by loans on office buildings, shopping centers and other commercial property, whose value has plummeted during the brecession. Delinquencies for U.S. bonds backed by commercial mortgages rose to a record in the second quarter, according to the Mortgage Bankers Association.

BlackRock advised financial companies and governments during the credit crisis on how to value mortgage-related assets. It won the NAIC contract from among 16 bidders.

Pricing Securities

BlackRock is led by Chief Executive Officer Laurence D. Fink, who three decades ago helped pioneer collateralized- mortgage obligations as a bond trader at New York-based investment bank First Boston Corp., now a part of Zurich-based Credit Suisse Group AG. The BlackRock Solutions unit uses proprietary systems to price fixed-income securities, and has advised the U.S. government on debt once held by American International Group Inc. and Bear Stearns Cos.

Pimco, the Newport Beach, California-based manager of the world’s largest bond fund, assessed insurers’ home-loan securities for NAIC. Pimco was chosen from among 11 vendors by the association in November to help evaluate more than 21,000 securities.

Brian Beades, a spokesman for BlackRock, declined to comment. As of the end of last year, BlackRock’s financial- markets advisory unit had advised assets valued at $4.5 trillion.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net.

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