The Massachusetts Secretary of the Commonwealth, William Galvin, recently announced an investigation into how credit rating agencies evaluate and rate the securitization of life settlements (i.e. life insurance policies sold by the insured to a third party). The Massachusetts Securities Division has directed a specific rating agency, DBRS, to provide it with information regarding its rating methodology, compensation calculation, and method for monitoring securities after rating assignment.
According to the announcement, the investigation comes in response to concern that rating agencies may be assigning higher than warranted ratings to bundled life insurance policies, and that such practice may parallel the rating of subprime mortgages that contributed to the current financial crisis.
DBRS has been directed to respond to the investigation by October 7, 2009.