Equitable backs concentration charge on riskier ABS
“Ultra-high correlation of losses” between lower-rated tranches requires new regulation, insurer says
One of the largest US insurance companies is lobbying regulators to introduce a concentration charge for holding subordinated tranches of asset-backed securities.
Equitable is planning to propose a new concentration charge on all but the highest rated tranches in vehicles such as collateralised loan obligations (CLOs) in a public letter to the National Association of Insurance Commissioners expected in October, and is currently meeting state regulators to discuss the idea.
The charge would provide
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