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SFA Urges S&P Global to Address Fatal Flaws in Their Proposed Changes to Insurer Ratings Criteria

Published on May 4, 2022

SFA Urges S&P Global to Address Fatal Flaws in Their Proposed Changes to Insurer Ratings Criteria

The Structured Finance Association (SFA) responded to S&P’s recently proposed changes to their insurer risk-based capital adequacy methodology and assumptions.  If implemented as proposed, the changes would greatly impact the credit quality assessments of investments rated solely by the other rating agencies as well as those that are unrated, creating far reaching impact in the market by embedding inefficiencies in the allocation of insurance company capital in financial markets. SFA has deep concerns over the inconsistency of the assumptions to the empirical data, lack of transparency, and the disruption it will cause to liquidity and capital in financial markets.

“S&P Global has proposed a very significant set of changes that could materially impact how structured products are held and traded by some of the world’s largest investors.  SFA strongly believes that a market evolution of this magnitude would have at least come with significantly more data and transparency around the reasoning and analytics behind this move,” said Michael Bright, CEO of the Structured Finance Association. “We always appreciate the opportunity to work with market participants to ensure that our markets can fairly and equitably serve all American consumers and investors.”

A full copy of SFA’s public comment letter is attached and available online here.