b'TABLE OF CONTENTSNew NAIC Working Group to StudyMethodologies for capturing the risk (including tail Revisions to RBC Factors risk) that exists with such assets (e.g., ratings-determined bond factors, a modeling process akin A new working group has been establishedto the current commercial mortgage-backed under the Cap Ad TF called the Risk-Basedsecurities (CMBS)/residential mortgage-backed Capital (RBC) Investment Risk and Evaluation (E)securities (RMBS) approach, or other proposals);Working Group (the RBC IRE WG). The new working group has been charged withHow a consultant or consulting actuary could be performing a comprehensive review of the RBCused by the NAIC to determine the appropriate investment framework for all business types,charge based upon certain data;which could include: The need for review outside of Life RBC (i.e., Identifying and acknowledging uses that extendHealth and property-casualty (P&C));beyond the purpose of the Risk-Based CapitalWhether residual tranches in ABS structures can (RBC) for Insurers Model Act (#312); be evaluated in conjunction with and under Assessing the impact and effectiveness ofsimilar methodologies as the debt tranches; andpotential changes in contributing to theSpecific proposals for addressing RBC treatment identification of weakly capitalized companies;of residual tranches to reduce arbitrage incentives.i.e., those companies at action level; andComments are due by February 28, 2022.Documenting the modifications made over time to the formulas, including, but not limitedNAIC Investment Analysis Office to, an analysis of the costs in study andAnalyzes Variability in Ratingsdevelopment, implementation (internal and external), assimilation, verification, analysis andThe NAIC Investment Analysis Office (IAO), which review of the desired change to the RBCreports to the VOS TF, consists of the SVO, the formulas and facilitating the appropriateStructured Securities Group (SSG) and the Capital allocation of resources. Markets Bureau. In recent years, the IAO has The RBC IRE WG is expected to receive andexpressed concerns about what it regards as the coordinate input from other key NAIC units, includingNAICs extensive reliance on CRP ratings to assess the Cap Ad TF, the VOS TF and the SAP WG.investment risk for regulatory purposes, and many of the recent actions of the VOS TF have been The RBC IRE WG held its first meeting on Januarytaken in response to those concerns. 12, 2022. At that meeting a request for comment was made to solicit feedback regarding the reviewAt the December 12, 2021 VOS TF meeting, the VOS of the RBC treatment of ABS including CLOs, CFOsTF received a memorandum from the senior staff of or other similar securities carrying similar types ofthe IAO reiterating the IAOs concerns about CRP tail risk. Feedback was specifically requestedratings. The memorandum included reports on:regarding the following:MAYER BROWN |69'