b'Insurance Regulatory | US/NAIC | NAIC Investment-Related Initiatives The next meeting of the VOS Task Force is scheduled2. Assets held in the trust/SPV predominantly repre-for March 22, 2021, where it is likely that a revised formsent contractual obligations to make payments of the SVO proposal will be adopted. It is hoped that(bond-like cash flows);any proposal that is adopted will give insurers sufficient3. The contractual obligations to make payments and timely insight into how their investments will be(assets held in trust/SPV) are owed by many treated for statutory reporting and RBC purposes todiverse payers; and enable them to make appropriate investment deci-sions. Too much uncertainty as to capital treatment4. Each securitization distributes periodic perfor-could have the unfortunate effect of deterring insurersmance reports to investors that provide from pursuing the attractive yields and credit out- information about the underlying collateral com-comes available in the private credit market. position, credit quality of obligors and payment performance.Changes to the Rules on Structured Securities Are Coming Soon At the SAP WG meeting on October 13, 2020, which was called to discuss the comments on the draft On March 18, 2020, the SAP WG exposed forissue paper, the focus shifted to a new proposal comment a preliminary (and partial) draft of an issuefrom the Iowa Insurance Division that was exposed paper on potential substantive changes to Statementfor a comment period ending December 4, 2020, of Statutory Accounting Principles (SSAP) No. 43Rand that many believe charts a path forward. TheLoan-Backed and Structured Securities. The draftIowa proposal offers a principles-based definition for issue paper suggested that whether certain types ofassets to qualify for reporting on Schedule D (i.e., structured securities that do not meet the SECfixed-income treatment). Bonds would be defined as definition of ABSwith collateralized fund obliga- any securities representing a creditor relationship, tions (CFOs) being top of mindshould no longerwhereby there is a fixed schedule for one or more be classified within the scope of SSAP No. 43R andfuture payments, and which qualify as either issuer should not be eligible for reporting on Schedule Dobligations or ABS under the following definitions:as fixed-income securities. The narrowed definition Issuer obligations represent the debt of operating of structured securities eligible for SSAP No. 43Rentities, which have a purpose other than the treatment that was proposed in the issue paperpass-through of investment proceeds. Examples of would have administered shock therapy to theissuer obligations include (among others): investment portfolios of life insurers, and the indus-try protested vigorouslywith a consortium of lifeTreasury securitiesinsurers submitting a 67-page comment letter beforeUS government agency securitiesthe comment period ended on July 31, 2020. Municipal securitiesThe draft issue paper proposed that structuredCorporate bonds, including Yankee bonds and securities that do not meet the SEC definition of ABSzero-coupon bondscould still be considered for eligibility to remain inConvertible bonds, including mandatory con-scope of SSAP No. 43R if they satisfy four principles:vertible bonds1. Securitization and issuance of debt securities Bank loans issued directly by a reporting entity are from a trust/SPV that is separate and distinct or acquired through a participation, syndication as well as bankruptcy remote from the or assignmentsponsoring organization;62 GLOBAL INSURANCE INDUSTRY|YEAR IN REVIEW 2020'