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SFA Signs Joint Trade Letter to NAIC on Subscript S Proposal

article by Structured Finance Association

On June 29, 2023, SFA signed a joint trade letter to the National Association of Insurance Commissioners (NAIC), responding to the NAIC’s request for comment on an exposure draft amending Subscript S of the Purposes and Procedures Manual of the NAIC Investment Analysis Office. The draft from the NAIC would modify the calculation risk of non-payment or default in certain securities, as well as how insurance regulators account for such risk. The letter highlights the industry’s concerns surrounding the proposed expansion of responsibilities and scope of the Securities Valuation Office (SVO). Furthermore, SFA and the other trades request transparency of the processes leading to the implementation as well as the potential impact of changes in question.

Key Points:

  • The proposed changes to the P&P Manual could grant the SVO and the Structured Securities Group the authority to notch securities for other non-payment risks, The trades request further transparency and clarity regarding the scope and impact of combining NAIC designations and Subscript S Non-Payment Risk. The letter emphasizes the need for clear guidelines in the methodology for assessing and notching securities for other non-payment risks.


  • The letter requests further clarification on the intended consequences of changes made and suggests a formal referral to the Capital Adequacy Task Force (CATF) in order to align with the NAIC’s risk-based capital changes and the original intent of regulators.