{"id":105614,"date":"2025-01-28T13:11:11","date_gmt":"2025-01-28T18:11:11","guid":{"rendered":"https:\/\/www.bloomberg.com\/professional\/insights\/financial-services\/naic-principles-based-bond-classification-a-data-driven-approach\/"},"modified":"2025-01-29T14:00:35","modified_gmt":"2025-01-29T19:00:35","slug":"naic-principles-based-bond-classification-a-data-driven-approach","status":"publish","type":[3762],"link":"https:\/\/www.bloomberg.com\/professional\/insights\/financial-services\/naic-principles-based-bond-classification-a-data-driven-approach\/","title":{"rendered":"NAIC principles-based bond classification: A data driven approach"},"content":{"rendered":"<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-6a0c447ad838b'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-7\"\n    style=\"\"\n    >\n    <p><div\n    class=\"bbg-spacer bbg-spacer--lg\"\n    >\n<\/div><div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p class=\"small\"><strong><span style=\"font-size: 14px; letter-spacing: 1px; color: #0062dd;\">ARTICLE<\/span><\/strong><\/p>\n\n<\/div>\n<div\n    class=\"bbg-spacer bbg-spacer--sm\"\n    >\n<\/div>    <h1 class=\"bbg-metadata bbg-metadata--title\">NAIC principles-based bond classification: A data driven approach<\/h1>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 50px !important\"\n    >\n<\/div>    <ul class=\"bbg-categories_list\">\n                    <li>\n                <a href=\"https:\/\/www.bloomberg.com\/professional\/insights\/category\/data\/\" rel=\"category tag\">\n                    Data\n                <\/a>\n            <\/li>\n                    <li>\n                <a href=\"https:\/\/www.bloomberg.com\/professional\/insights\/category\/financial-services\/\" rel=\"category tag\">\n                    Financial Services\n                <\/a>\n            <\/li>\n                    <li>\n                <a href=\"https:\/\/www.bloomberg.com\/professional\/insights\/category\/regulation\/\" rel=\"category tag\">\n                    Regulation\n                <\/a>\n            <\/li>\n                    <li>\n                <a href=\"https:\/\/www.bloomberg.com\/professional\/insights\/category\/technology\/\" rel=\"category tag\">\n                    Technology\n                <\/a>\n            <\/li>\n            <\/ul>\n<\/p>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-5\"\n    style=\"\"\n    >\n    <div id=\"\" class=\"wpb_content_element bbg-single-image align-left\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"800\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/320126413-1.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"Office building\" title=\"Office building\" \/>\n        \n            <\/figure>\n<\/div>\n\n\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-none row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-6a0c447ae6953'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-6 bbg-column--m-width-6\"\n    style=\"\"\n    >\n    <p>    <p class=\"bbg-metadata bbg-metadata--date\">January 28, 2025<\/p>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><strong>Bloomberg Professional Services<\/strong><\/p>\n\n<\/div>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2 bbg-column--valign-middle bbg-column--m-width-2 bbg-column--s-padding-right-2\"\n    style=\"\"\n    >\n    <div class=\"bb-tts\"\n\tdata-selector=\"main\"\n\tdata-label=\"Speak this page\"\n\tdata-custom-play=\"Play\"\n\tdata-custom-pause=\"Pause\"\n\tdata-custom-stop=\"Stop\"\n\tdata-overlay=\"false\"\n\tdata-invert=\"false\"\n\tdata-no-time=\"false\"\n\tdata-no-button-text=\"false\"\n\tdata-one-button=\"true\"\n\tdata-one-style=\"true\"\n\tdata-hide-stop=\"true\"\n\tdata-voice=\"Gordon\"\n\tdata-pitch=\"1\"\n\tdata-speed=\"1\"\n\tdata-align=\"flex-start\"\n>\n<\/div>\n\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-compact row-padding--bottom-compact bbg-row--full-bg-bleed\" data-anchor='row-6a0c447aea478'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><i><span style=\"font-weight: 400;\">This article was written by Kate Lee, Global Head of Regulatory Enterprise Data, Jason Palsgrove, Regulatory Product Manager, and Thomas Labbe, Global Regulatory Product Manager at Bloomberg<\/span><\/i><\/p>\n<p><span class=\"TextRun SCXW47216778 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW47216778 BCX0\">H<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">ow much <\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">will <\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">this new regulation <\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">impact<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\"> my company\u2019s capital requirements? How can I make sure I have a robust process in place to <\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">ensure compliant classification of holdings<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">? Are <\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">there<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\"> any grey areas where consensus on interpretation has still not been met<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">? <\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">These are some<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\"> of<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\"> the questions we receiv<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\">e<\/span><span class=\"NormalTextRun SCXW47216778 BCX0\"> on a daily basis from industry participants in the insurance sector.<\/span><\/span><span class=\"EOP SCXW47216778 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-ccp-props=\"{}\"><span class=\"TextRun SCXW164917066 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW164917066 BCX0\">The National Association of Insurance Commissioners (NAIC) <\/span><span class=\"NormalTextRun SCXW164917066 BCX0\">has introduced<\/span><span class=\"NormalTextRun SCXW164917066 BCX0\"> significant changes <\/span><span class=\"NormalTextRun SCXW164917066 BCX0\">regarding<\/span><span class=\"NormalTextRun SCXW164917066 BCX0\"> how insurance companies must report assets<\/span><span class=\"NormalTextRun SCXW164917066 BCX0\"> beginning in January 2025.<\/span> <span class=\"NormalTextRun SCXW164917066 BCX0\">In a nutshell<\/span><span class=\"NormalTextRun SCXW164917066 BCX0\">, the <\/span><span class=\"NormalTextRun SCXW164917066 BCX0\">revised<\/span> <span class=\"NormalTextRun SCXW164917066 BCX0\">guidance<\/span><span class=\"NormalTextRun SCXW164917066 BCX0\"> stipulates that insurers must classify bonds with an emphasis on the substance of a bond, as opposed to <\/span><\/span><span class=\"TrackChangeTextInsertion TrackedChange SCXW164917066 BCX0\"><span class=\"TextRun SCXW164917066 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW164917066 BCX0\">a <\/span><\/span><\/span><span class=\"TextRun SCXW164917066 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW164917066 BCX0\">legal<\/span><span class=\"NormalTextRun SCXW164917066 BCX0\"> form, which was previously a determining criterion.<\/span><\/span><span class=\"EOP SCXW164917066 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span> <\/span><\/p>\n\n<\/div>\n\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-none row-padding--bottom-none bbg-row--margin-top-compact bbg-row--margin-bottom-compact bbg-row--full-bg-bleed\" data-anchor='row-6a0c447aed44d'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <div\n    class=\"bbg-column\"\n    style=\"\"\n    >\n    <div class=\"bbg-interstitial\" aria-label=\"interstitial\" tabindex=\"0\">\n\t<style>\n\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\tbackground: url(https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Interstitial_bg.png);\n\t\t\t\tbackground-repeat: no-repeat;\n\t\t\t\tbackground-position: center center;\n\t\t\t\tbackground-size: cover;\n\t\t\tpadding: 104px;\n\t\t\t\n\t\t\t\n\t\t}\n\t\t.bbg-interstitial #card_1.bbg-card_hasCta .bbg-card__content, .bbg-interstitial #card_1.bbg-card_hasCta .bbg-card__content p{\n\t\t\tcolor:white;\n\t\t}\n\t\t@media (max-width: 768px) {\n\t\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\t\tpadding: 80px 32px;\n\t\t\t}\n\t\t}\n\t\t@media (max-width: 480px) {\n\t\t\t.bbg-interstitial #card_1.bbg-card_hasCta{\n\t\t\t\tpadding: 80px 18px;\n\t\t\t}\n\t\t}\n\t<\/style>\n\t<div class=\"wpb_content_element bbg-card  bbg-card-dark bbg-card_hasCta has_interstitial\" id=\"card_1\" data-card_type=\"no_image\">\n  \n  \n  <div class=\"bbg-card__innerwrapper\">\n    <div class=\"bbg-card__content\">\n      \n      \n                      <h3 class=\"bbg-card__title\">Empower your work with Enterprise Data & Technology monthly insights<\/h3>\n      \n              <div class=\"bbg-card__wysiwyg bb-wysiwyg\"><p>Sign up for the newsletter <\/p>\n<\/div>\n          <\/div>\n\n          \n<div\n  id=\"cta_4572476787027757236\"\n  class=\"wpb_content_element bbg-cta icon icon-arrow\">\n  <style>\n    \n    \n    \n  <\/style>\n  <div\n    class=\"bbg-cta-link link-holder\"\n    data-links-type=\"cta-links\">\n    <p class=\"bbg-cta-p right\">\n      <a\n        class=\"bbg-cta-link link interstitial_cta\"\n        href=\"https:\/\/www.bloomberg.com\/professional\/insights\/newsletter\/enterprise-data-and-tech\/\"\n        target=\"\"\n        rel=\"\"\n        data-section-name=\"\"\n                role=\"button\"\n        aria-label=\"Learn more\"\n        >\n                <\/a>\n    <\/p>\n  <\/div>\n<\/div>\n\n      <\/div>\n\n  <\/div>\n\n<\/div>\n\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-none bbg-row--full-bg-bleed\" data-anchor='row-6a0c447b00d40'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>Ongoing efforts and data challenges<\/h2>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-ccp-props=\"{}\"><span class=\"TextRun SCXW149030929 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW149030929 BCX0\">Insurance companies filing periodic reports with their respective <\/span><span class=\"NormalTextRun SCXW149030929 BCX0\">sta<\/span><span class=\"NormalTextRun SCXW149030929 BCX0\">te<\/span><span class=\"NormalTextRun SCXW149030929 BCX0\"> insurance regulators must implement a process to classify all existing positions <\/span><span class=\"NormalTextRun SCXW149030929 BCX0\">on their books<\/span><\/span><span class=\"TrackChangeTextInsertion TrackedChange SCXW149030929 BCX0\"><span class=\"TextRun SCXW149030929 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW149030929 BCX0\">,<\/span><\/span><\/span><span class=\"TextRun SCXW149030929 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"> <span class=\"NormalTextRun SCXW149030929 BCX0\">as well as assign classifications automatically and systemically to new investments going forward.<\/span> <span class=\"NormalTextRun SCXW149030929 BCX0\">Significant time<\/span><span class=\"NormalTextRun SCXW149030929 BCX0\"> has been spent during 2024 by companies evaluating solutions and reviewing their portfolios.<\/span><span class=\"NormalTextRun SCXW149030929 BCX0\">\u00a0<\/span><\/span><span class=\"EOP TrackedChange SCXW149030929 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span> <\/span><\/p>\n<p><span data-ccp-props=\"{}\"><span class=\"TextRun SCXW73308702 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW73308702 BCX0\">While much progress has been made, intensive efforts continue, and this change will require continued effort and vigilance throughout the coming year<\/span><\/span><span class=\"TrackChangeTextDeletionMarker TrackedChange SCXW73308702 BCX0\"><span class=\"TextRun SCXW73308702 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun TrackChangeTextDeletion SCXW73308702 BCX0\">,<\/span><\/span><\/span><span class=\"TextRun SCXW73308702 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW73308702 BCX0\"> as the industry adapts and clarifies some of the remaining questions surrounding the classification.<\/span><\/span><span class=\"EOP SCXW73308702 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span> <\/span><\/p>\n<p><span class=\"TextRun SCXW41216323 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW41216323 BCX0\">This can <\/span><span class=\"NormalTextRun SCXW41216323 BCX0\">largely be<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\"> characterized as<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\"> a data problem in which filing firms need to <\/span><span class=\"NormalTextRun SCXW41216323 BCX0\">identify<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\"> data elements, understand how they can be used to drive classification of assets<\/span><\/span><span class=\"TrackChangeTextInsertion TrackedChange SCXW41216323 BCX0\"><span class=\"TextRun SCXW41216323 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW41216323 BCX0\">,<\/span><\/span><\/span><span class=\"TextRun SCXW41216323 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW41216323 BCX0\"> and formulate a plan to store attributes to be able to adequately <\/span><span class=\"NormalTextRun SCXW41216323 BCX0\">demonstrate<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\"> compliance<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\">.<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\"> The <\/span><span class=\"NormalTextRun CommentStart SCXW41216323 BCX0\">biggest<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\"> challenge by far sits with Asset-Backed Securities (ABS), around which guidance is vague, and collateral data is not consistently available.<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\"> Add to that the fact that \u201csubstantive credit support\u201d <\/span><span class=\"NormalTextRun SCXW41216323 BCX0\">continues to be <\/span><span class=\"NormalTextRun SCXW41216323 BCX0\">open to interpretation<\/span> <span class=\"NormalTextRun SCXW41216323 BCX0\">with a lack of consensus among insurance companies<\/span><span class=\"NormalTextRun SCXW41216323 BCX0\">.<\/span><\/span><span class=\"EOP SCXW41216323 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>Considerations for ABS evaluation<\/h2>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span class=\"TextRun SCXW44122402 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW44122402 BCX0\">When evaluating ABS, the first question that must be answered is whether the bond <\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">represents<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\"> a financial or non-financial asset. <\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">Financial assets<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\"> include loans on residential properties, commercial properties, and automobiles, among other things.<\/span> <span class=\"NormalTextRun SCXW44122402 BCX0\">The level of original credit enhancement is the primary determining factor <\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">regarding<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\"> these assets. The combination of the seniority of the bond in the structure as well as the overcollateralization of the structure contribute to this number. Ultimately, <\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">determining<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\"> whether a bond has a \u201csubstantive\u201d level of enhancement is <\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">subjective<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">. <\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">Notably<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\"> however, <\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">Bloomberg provides quantitative data<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">,<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\"> where available<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\">,<\/span><span class=\"NormalTextRun SCXW44122402 BCX0\"> to enable systemic evaluation of large numbers of securities.<\/span><\/span><span class=\"EOP SCXW44122402 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span class=\"TextRun SCXW91491805 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW91491805 BCX0\">Non-financial assets are most commonly lease <\/span><span class=\"NormalTextRun SCXW91491805 BCX0\">payments<\/span><\/span><span class=\"TrackChangeTextDeletionMarker TrackedChange SCXW91491805 BCX0\"><span class=\"TextRun SCXW91491805 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun TrackChangeTextDeletion SCXW91491805 BCX0\">,<\/span><\/span><\/span><span class=\"TextRun SCXW91491805 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW91491805 BCX0\"> but<\/span><span class=\"NormalTextRun SCXW91491805 BCX0\"> can also extend to other payment rights and receivables as well as royalties. These<\/span> <span class=\"NormalTextRun SCXW91491805 BCX0\">have <\/span><span class=\"NormalTextRun SCXW91491805 BCX0\">prove<\/span><span class=\"NormalTextRun SCXW91491805 BCX0\">n to be the<\/span><span class=\"NormalTextRun SCXW91491805 BCX0\"> most difficult and require the most effort. <\/span><span class=\"NormalTextRun SCXW91491805 BCX0\">The guidance stipulates that in the case of these exposures, one must analyze the cashflows to the bondholder and confirm that the bond is not overly reliant on a refinancing event to repay principal to the holder.<\/span><span class=\"NormalTextRun SCXW91491805 BCX0\">\u00a0<\/span><\/span><span class=\"EOP TrackedChange SCXW91491805 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span class=\"TextRun SCXW142255301 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW142255301 BCX0\">Bloomberg\u2019s extensive database of securitized positions, along with cashflow projections, both modeled and contributed, provides a basis for analysis that can help to minimize the manual effort in these cases. Where cashflows are projected to pay <\/span><span class=\"NormalTextRun AdvancedProofingIssueV2Themed SCXW142255301 BCX0\">in excess of<\/span><span class=\"NormalTextRun SCXW142255301 BCX0\"> 50% of principal prior to the final payment date, one may choose to apply the \u201cpractical expedient\u201d, saving time and manual effort that would otherwise be <\/span><span class=\"NormalTextRun SCXW142255301 BCX0\">required<\/span><span class=\"NormalTextRun SCXW142255301 BCX0\"> for non-financial securities.<\/span><span class=\"NormalTextRun SCXW142255301 BCX0\"> Ideally, this leaves firms with <\/span><span class=\"NormalTextRun SCXW142255301 BCX0\">relatively few<\/span><span class=\"NormalTextRun SCXW142255301 BCX0\"> positions that require prospectus examination and manual classification.<\/span><\/span><span class=\"EOP SCXW142255301 BCX0\" data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span class=\"TextRun SCXW193068235 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\">In conclusion, <\/span><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\">insurance companies<\/span><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\"> cannot completely remove the subjectivity that <\/span><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\">is inherent in regulatory guidance such as this.<\/span> <span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\">However, <\/span><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\">using a trusted data source and applying data in a consistent and <\/span><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\">automated way allows firms to <\/span><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\">demonstrate<\/span><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\"> a robust compliance program to regulators<\/span><\/span><span class=\"TrackChangeTextDeletionMarker TrackedChange SCXW193068235 BCX0\"><span class=\"TextRun SCXW193068235 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun TrackChangeTextDeletion SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\">,<\/span><\/span><\/span><span class=\"TextRun SCXW193068235 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW193068235 BCX0\" data-ccp-parastyle=\"heading 2\"> while minimizing time spent performing manual and labor-intensive research.<\/span><\/span><span class=\"EOP TrackedChange SCXW193068235 BCX0\" data-ccp-props=\"{&quot;134233117&quot;:false,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335559738&quot;:0,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>How can we help?<\/h2>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-contrast=\"auto\">The Bloomberg NAIC Principles-Based Bond solution provides firms with an automated classification indicator that communicates with four data fields:<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"6\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559683&quot;:0,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:&#091;8226&#093;,&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\uf0b7&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}\" data-aria-posinset=\"1\" data-aria-level=\"1\"><span data-contrast=\"auto\">NAIC Principles-Based Bond Class whether securities are issuer credit obligation (ICO), qualified asset-backed securities (ABS), or not a principles-based bond<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"6\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559683&quot;:0,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:&#091;8226&#093;,&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\uf0b7&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}\" data-aria-posinset=\"2\" data-aria-level=\"1\"><span data-contrast=\"auto\">NAIC Principles-Based Bond Attribute whether securities have been tested to meet the conclusion with a specific rationale such as the availability of credit support<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"6\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559683&quot;:0,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:&#091;8226&#093;,&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\uf0b7&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}\" data-aria-posinset=\"3\" data-aria-level=\"1\"><span data-contrast=\"auto\">NAIC ABS Asset Type whether securities are financial assets or cash-generating non-financial assets in the case of ABS<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"6\" data-list-defn-props=\"{&quot;335552541&quot;:1,&quot;335559683&quot;:0,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:&#091;8226&#093;,&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;\uf0b7&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}\" data-aria-posinset=\"4\" data-aria-level=\"1\"><span data-contrast=\"auto\">NAIC Principles-Based Bond Characteristic whether securities have any specific characteristics such as callable or sinkable feature<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span class=\"TextRun SCXW49518552 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW49518552 BCX0\" data-ccp-parastyle=\"Normal (Web)\">To learn more about<\/span> <span class=\"NormalTextRun SCXW49518552 BCX0\" data-ccp-parastyle=\"Normal (Web)\">Bloomberg\u2019s<\/span><\/span><span class=\"TextRun Highlight SCXW49518552 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW49518552 BCX0\" data-ccp-parastyle=\"Normal (Web)\"> NAIC Principles-Based Bond solution\u202f<\/span><\/span><span class=\"TextRun SCXW49518552 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW49518552 BCX0\" data-ccp-parastyle=\"Normal (Web)\">click<\/span> <\/span><a class=\"Hyperlink SCXW49518552 BCX0\" href=\"https:\/\/www.bloomberg.com\/professional\/products\/data\/enterprise-catalog\/regulatory\/#regulation-ready-data\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"TextRun Underlined SCXW49518552 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW49518552 BCX0\" data-ccp-charstyle=\"Hyperlink\">here<\/span><\/span><\/a><span class=\"TextRun SCXW49518552 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW49518552 BCX0\" 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compliance.<\/p>\n","protected":false},"author":1935,"featured_media":60565,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"template-article.php","format":"standard","meta":{"_yoast_wpseo_primary_category":"457","footnotes":""},"categories":[435,457,486,3661],"tags":[3698,526,3652],"series":[],"class_list":["post-105614","post","type-post","status-publish","format-standard","hentry","category-data","category-financial-services","category-regulation","category-technology","tag-enterprise-tech-and-data","tag-fixed-income","tag-insurance","type-article"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.11 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>NAIC principles-based bond classification: A data driven approach | Insights | Bloomberg Professional Services<\/title>\n<meta name=\"description\" content=\"In this analysis we look at NAIC regulation, its effects on capital requirements for insurance companies, and strategies 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