Rating agency and financial analysis firm Demotech, Inc. has now been approved as a Nationally Recognized Statistical Rating Organization (NRSRO) by the United States Securities and Exchange Commission (SEC).
The approval came on July 12th and now the recognition by the SEC now positions Demotech alongside the other main financial services rating agencies that all have NRSRO recognition.
Demotech’s NRSRO recognition is for the class of credit ratings of insurance companies.
The SEC said that the information in Demotech’s application satisfied its requirements under Section 15E of the Exchange Act, so allowing the company to be registered as an NRSRO.
A credit rating agency is approved as a nationally recognized statistical ratings organization (NRSRO) when its assessment of the creditworthiness of a firm or financial instrument has been both registered and approved by the Securities and Exchange Commission (SEC), meaning that not all credit rating organizations are NRSROs.
The SEC’s Office of Credit Ratings oversees NRSRO’s, monitoring their activities and examining them to assess their compliance with statutory and SEC requirements.
The SEC sees the oversight of NRSRO’s as critical to its work to protect investors, by ensuring standards and transparency requirements are met.
The SEC also looks at NRSRO’s adherence to policies, procedures, and methodologies, so Demotech will have submitted its ratings methodologies to the significant scrutiny the SEC staff will have applied.
Joining the elite ranks of the NRSRO’s is another vote of confidence in Demotech’s approach to rating insurance companies and positions the rating agency well to further expand its business in future.
While Demotech already rates insurers outside of Florida, where it’s activities are perhaps best-known, the “nationally” recognised nature of the SEC accreditation suggests expanded activities would certainly be easier, as it joins the ranks of NSRSO’s.
