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.
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.