US insurance regulators move to kill CLO arbitrage
Capital charges on collateralised loan obligations will be model-based after 2024
US regulators are taking steps to end the regulatory arbitrage that arguably has helped fuel buying of collateralised loan obligations (CLOs) by insurers in recent years.
Last week, the National Association of Insurance Commissioners moved forward with a rule change that from the end of 2024 will link CLO capital charges to the regulator’s own modelling rather than CLO ratings.
The switch to a modelled approach is expected to remove an inconsistency in existing charges that means insurers hold
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