Culminating a four-year-long process, a key working group of
insurance regulators has adopted new standards for determining
whether an investment held by an insurance company should be
characterized as a "bond" evidencing a "creditor
relationship." This "principle-based" bond
definition will have broad implications for insurance company
statutory reporting and Risk-Based Capital calculations. The action
is of particular relevance for asset-backed securities (ABS) that
are based on underlying equity interests, such as collateralized
fund obligations (CFOs).
On Aug. 13, the Statutory Accounting Principles Working Group
(SAPWG) of the National Association of Insurance Commissioners
(NAIC) adopted revisions to Statement of Statutory Accounting
Principles (SSAP) No. 26R (Bonds) and SSAP No. 43R (Asset-Backed
Securities). The adoption, with an effective date of Jan. 1, 2025,
occurred at SAPWG's session as part of the NAIC's Summer
National Meeting in Seattle. The revisions