adplus-dvertising
Connect with us

Investment

Insurers Fume at Proposal That May Crimp Private Investments

Published

 on

(Bloomberg) — Representatives of the multitrillion-dollar insurance industry are hurling criticism at a proposal that could make it harder to invest in deals sold in fast-growing private markets that offer higher yields but often bring added risks.

The proposal by a unit of the National Association of Insurance Commissioners, a consortium of state regulators that sets standards for the industry, would allow the group to override credit ratings assigned to some deals, in turn affecting how much money insurance companies could allocate to those deals. The NAIC group says it’s necessary in part because more deals are being done in little-regulated private markets.

Money managers and other industry groups are staunchly opposed. The impacts are already being felt, they say, as some insurance firms place moratoriums on certain deals until there’s more clarity.

“The current NAIC proposals have already had a major market disruption as word of the impending proposal permeates all levels of the insurance industry,” according to a letter by Jacques de Saint Phalle, head of debt capital markets at Piper Sandler. His opinion was read aloud at a Monday meeting in Seattle to discuss the plan.

The proposal under discussion would allow the NAIC’s Securities Valuation Office to override the credit ratings assigned to deals in which its own risk assessment is three or more notches different than the one assigned by an official credit rating organization, such as Kroll Bond Rating Agency and Egan-Jones Ratings Co. As a result, an increasing number of insurance companies have instituted a moratorium on purchasing Kroll and Egan-Jones rated transactions in these markets, according to Piper Sandler.

“Egan-Jones has a leading market position in private debt in part as a result of our excellent performance,” said Eric Mandelbaum, deputy general counsel at Egan-Jones, in emailed comments. “In 2022 we only had one default (compared to 50+ implied by our rating levels) and it was a ‘soft’ default for a covenant violation (and not payment) and in 2020 no defaults.”

Representatives for the NAIC declined to comment. Kroll didn’t immediately respond to requests for comment.

Industry criticisms of the proposal center on the fact that the SVO, which has a far smaller staff than any of the national ratings companies, would effectively be assigning its own ratings in cases where it chose to do so. It isn’t itself a ratings firm and isn’t regulated like one, critics said.

“The NRSROs are subject to a robust regulatory regime and have transparent methodologies which are available on their website for investors,” Mandelbaum said, using an acronym to refer to the nationally recognized statistical rating organizations, which includes Egan-Jones.

The proposed change could have big implications for US insurance companies, which reported $8.2 trillion in total cash and invested assets at the end of 2022. They’re closely bound by rules that limit the size of their investments in riskier assets. If the credit ratings of some deals are rejected in place of lower ratings by the NAIC group, then it could limit participation from the industry.

The SVO says the policy is necessary in order to protect against too much reliance on traditionally assigned ratings, in part by bringing transparency to less-regulated private markets. Evidence of some the risks emerged in 2022, when a new regulatory requirement brought to light a number of examples in which deals executed in private markets received substantially different ratings from different credit graders, said Charles Therriault, the director of the SVO, at the meeting.

“We have observed growing and often material discrepancies between the ratings provided by competing NRSROs for the same security,” said Therriault. “The rating exceptions identified by the SVO to the task force only came about because of the requirement for increased regulatory transparency into these non-public transactions. Otherwise, the task force would continue to be completely blind to these issues.”

A decade of low interest rates has drawn many insurers away from traditional public markets toward non-traditional and private markets, increasing the need for careful assessments of risk, NAIC’s president and president-elect wrote recently in a letter to members of Congress who had objected to the proposed rule.

 

728x90x4

Source link

Continue Reading

Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

 on

 

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

 on

 

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

S&P/TSX composite little changed in late-morning trading, U.S. stock markets down

Published

 on

 

TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.

The S&P/TSX composite index was up 0.05 of a point at 24,224.95.

In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.

The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.

The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.

The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.

This report by The Canadian Press was first published Oct. 10, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending