b'INSURANCE REGULATORY|US/NAICH.Bonds issued by Real Estate Investment Trustsquestion, however, of why 1940 Act registration is or similar property trusts; required for a fund to be considered an operating I.Bonds issued by business developmententity. Why should an unregistered fund engaged corporations (BDCs), closed-end funds, orin the same activity not be treated similarly?similar operating entities, in each caseAn ABS is defined as a bond issued by an entity (an registered under the 1940 Act; ABS Issuer) created for the primary purpose of J.Convertible bonds issued by operating entities,raising debt capital backed by financial assets or including mandatory convertible bonds; cash generating non-financial assets owned by the ABS Issuer, whereby repayment is primarily derived K.Fixed-income instruments specifically identified: from the cash flows associated with the underlying I.Certifications of deposit that have a fixeddefined collateral rather than the cash flows of an schedule of payments and a maturity date inoperating entity. The proposal states that an ABS excess of one year from the date ofwill be a bond if both of the following conditions acquisition; are satisfied:II.Bank loans that are obligations of operating1.The assets owned by the ABS Issuer must be entities, issued directly by a reporting entityeither financial assets or cash-generating or acquired through a participation,non-financial assetsdefined as assets that are syndication or assignment; expected to generate a meaningful level of cash flows toward repayment of the bond III.Hybrid securities issued by operating entities,through use, licensing, leasing, servicing or excluding surplus notes, subordinated debtmanagement fees, or other similar cash flow issues which have no coupon deferral featuresgeneration (and not just through the sale or and traditional preferred stocks; and refinancing of the assets).IV.Debt instruments in a certified capital2.The holder of a debt instrument issued by an company (CAPCO). ABS Issuer must be in a different economic Bonds issued by 1940 Act-registered BDCs andposition than if the holder owned the ABS closed-end funds are included on the above list ofIssuers assets directlyas a result of issuer credit obligations, but unregistered funds aresubstantive credit enhancement through not. We think this is due to the fact that debtguarantees (or other similar forms of recourse), securities and preferred stock issued by registeredsubordination and/or overcollateralization. funds have long been a major investment class forRegarding the creditor relationship life insurers, and ever since the now-supersededrequirement, the proposal states:draft issue paper was exposed for comment in March 2020, industry representatives have stronglyThe analysis of whether a debt instrument that advocated that the treatment of this investmentrelies on cash flows from underlying equity class as bonds be preserved. It does raise theinterests for repayment represents a creditor 62|Global Insurance Industry Year in Review 2021'