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).
