News & In Print
Impactful innovation is core to our DNA. Maybe that’s how we stay ahead of the game in what we do. Here, in our News & In Print Center, our team shares our media coverage and our guidance on best practice. Discover all the latest developments of our growing business.
Warren Buffet famously said, “You can’t tell who’s swimming naked until the tide goes out.”
Liquidity Matters: A Panel of Experts' Discussion explores the regulatory and practical considerations with liquidity management in the insurance industry. With a troubled banking system in the backdrop, along with possible changes to NAIC reserving, and balance sheet and liquidity management guidelines, understanding practical considerations with liquidity management couldn't be more critical.
Join Amnon Levy on a panel with Bill Poutsiaka, who had first hand experience recapitalizing AIG as a CIO after their collapse, Geoffrey Cornell, former CIO of Corebridge Financial and Michael Ashton, the Inflation Guy on a panel moderated by InsuranceAUM.com's Stewart Foley to explore these issues.
The proposed model-based designations for CLOs, and the broader move away from agency ratings, is resolving in some dimensions and increasingly uncertain in others. With the NAIC and regulators citing concerns over rating agency commercial interests biasing risk assessments and the appropriateness of using agency ratings in capturing tail risks, questions remain over what designations are intended to measure, and the degree to which the proposed intrinsic-price approach is an improvement. This report benchmarks the performance of NAIC intrinsic price designations against market-based measures, and explores the lessons learned from the treatment of structured assets across regulatory jurisdictions. We find that:
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Intrinsic-price-based designations benchmark poorly to market spreads when compared to agency ratings. Despite data quality limitations, our analysis suggests the poor performance is, in part, inherent with the methodology whereby credit will generally receive higher quality designations as it approaches maturity. This maturity effect is a departure from the C1 framework, and can result in shorter dated, high-spread credit with low quality agency ratings (e.g., BB or B) assigned high quality intrinsic price designations (e.g., 1.a or 1.d)
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Other regulatory frameworks often differentiate credit across agency rating categories and remaining maturity. Our estimates suggest remaining maturity may receive more punitive capital treatment under intrinsic-price-based NAIC designations than any other regulatory framework explored, including Solvency II and IAIS ICS
Critical to the discussion, we provide possible approaches that can more closely align the intrinsic price approach with the C1 RBC framework and identify characteristics that are associated with assets whose designations benchmark poorly, which can be used as a starting point for a more comprehensive study that can be used by the NAIC to improve upon their methodologies.
We hope you find this resource helpful – it is consistent with our goal of bringing value to our community.
By Amnon Levy and Brett Manning
Our report, Benchmarking the Treatment of CLOs, was recently featured in Green Street's Asset Backed Alert!
Our latest publication in Insurance Asset Risk. The NAIC and regulators have been deliberate about ensuring the process of revising the treatment of CLOs remains transparent and importantly, have been open for feedback and discussion, with requests by the NAIC staff for actionable alternatives to proposed models. While increased involvement from interested parties will involve distillation of more information, we believe the end result will lead to an improved framework.
An important trend is taking place in financial services: the formation of Advisor-As-Owner (AAO) insurance entities. This corporate form has critical governance and regulatory implications centered on conflict of interests. As a result of these implications and the complex jurisdictional fabric of insurance and advisory regulation, the growth of AAOs has drawn the attention of multiple regulatory bodies. These organizations are in various stages of forming policy responses. Our discussions with senior industry leaders confirm that the potential business benefits enabled by the AAO model are closely aligned with the governance and risk controls (both operational and portfolio related) essential to its implementation. Our goal with this paper is to make recommendations on these AAO-related governance policies and management practices, many of which also apply to non-AAO insurers investing in alternatives.
By Bill Poutsiaka, Deborah Gero and Amnon Levy
Level-setting risks across credit segments is an ongoing challenge for capital markets. The National Association of Insurance Commissioners (NAIC)'s initiative to have NAIC designations no longer be based on agency ratings may have far reaching implications for the insurance industry and more broadly. In our most recent Insurance Asset Risk article, Bridgeway Analytics' William Poutsiaka and I explore the aspirational standards that need to be achieved in order to address this critical issue, and how other regulatory bodies have navigated similar challenges.
Stewart Foley and I explore the evolving US insurance regulatory landscape on his InsuranceAUM.com podcast. Discussions at the recent National Association of Insurance Commissioners (NAIC) Summer National Meeting reaffirmed that the rate of change to the rules that govern insurance investments is accelerating. More than ever, the insurance and regulatory community need smart tools to navigate ever increasingly complex capital markets and regulations that promote competition and fair practice.
CLOs have been called out by the NAIC and insurance regulators as an asset class that should be treated differently than other credit assets. Broad limitations with the C1 framework were acknowledged in the 2021 redesign effort, and evidenced by the debate for how to level-set the differentiated risks of corporate bonds and CLOs. The challenges with using the C1 factors to describe lifetime loss of assets other than 10-year corporate bonds, can be inferred from the observed differences in recovery, maturity, offsetting coupons, and other risk factors.
The rate of change to the regulatory landscape governing US insurance investments is only accelerating, with broad implications for investment strategy. This report explores the evolving guidelines from the National Association of Insurance Commissioners (NAIC) and the International Association of Insurance Supervisors (IAIS) and assesses implications for US insurers and capital markets more broadly.
Amnon Levy, Brett Manning and Nitsa Einan
The NAIC is proposing to change the treatment of insurers' ~$200 billion CLOs holdings, moving away from relying on agency ratings and toward a modeled-based approach in assigning designations. The changes can have a material impact on CLO investment strategies. With a comment period ending December 5, insurers, insurers’ asset managers, and participants in the syndicated loan market are assessing the potential implications of this proposal in the context of the broader changes to NAIC guidelines.
Amnon Levy led the team that redesigned the NAIC c1 factors that governing $3 trillion in US insurers’ credit assets. An important milestone and a testament to consensus building through collaboration with the NAIC, ACLI, the insurance industry and regulators
The velocity of change to the rules that insurers must navigate is staggering. The implications transcend insurers' investment strategies and business models across the US and Europe with potentially profound implications for capital markets.
Insurers use of ETFs is growing, but continues to remain at a formative stage with newly designed products by BondBloxx and others better addressing unique and varied needs. This highly efficient vehicle can transform insurers' investment process in ways we are only beginning to understand. Thankfully, proper oversight by the National Association of Insurance Commissioners (NAIC) and state insurance regulators will avoid past pitfalls. Thrilled to have Bridgeway Analytics' latest thought piece published in Insurance Asset Risk.
Thrilled to explore the National Association of Insurance Commissioners (NAIC)’s efforts in possibly improving the treatment of investment risk with Vincent Huck of Insurance Asset Risk. With a desire to refine guidelines for structured assets in 2022, the RBC framework will possibly increase in granularity and hopefully better level-set an articulation of risk across investments, providing regulators with the needed tools to better identify potentially weakly capitalized companies.
Bridgeway Analytics showcased in Green Street's Asset-Backed Alert.
The Changing Climate of Credit Risk Management, ABA Banking Journal
Exploring why credit investors should care about climate
The impact of accounting standard on credit portfolio management can be substantial, with far reaching implications to various business models.
Still a bestseller! Amnon’s book on credit risk measurement and management
The impact of accounting standard on credit portfolio management can be substantial, with far reaching implications to various business models.
Join Amnon and other panelists as they discuss implications of regulatory changes the upcoming ACLI Senior Investment Management Seminar
The effects of COVID-19 coupled with the ongoing impact of structural economic change – and policy responses to both – have resulted in unparalleled uncertainty around future interest rate and credit environments. This uncertainty calls for a heightened focus on duration risk management.
Designing regulatory capital aware investment strategies
A comprehensive list of publications, including technical material
