Comment Letter: American Academy of Actuaries’ August 2026 CLO C‑1 Modeling Update
LSTA and the ACC filed a joint comment letter with the NAIC's RBC Investment Risk and Evaluation (E) Working Group addressing three CLO modeling assumptions under review: systemic risk correlation, recovery average, and collateral repurchase price and prepayment.
The letter declines to take a position on the correlation parameter given the short comment window, and supports continued refinement of the recovery and prepayment assumptions before any factor changes, while calling for separate LGD analysis for middle-market collateral, recalibrated default rates based on loan-issuer experience, and a fitted (rather than constant) prepayment specification backed by new empirical data.
Comment Letter: American Academy of Actuaries’ August 2026 CLO C‑1 Modeling Update
LSTA and the ACC filed a joint comment letter with the NAIC's RBC Investment Risk and Evaluation (E) Working Group addressing three CLO modeling assumptions under review: systemic risk correlation, recovery average, and collateral repurchase price and prepayment.
The letter declines to take a position on the correlation parameter given the short comment window, and supports continued refinement of the recovery and prepayment assumptions before any factor changes, while calling for separate LGD analysis for middle-market collateral, recalibrated default rates based on loan-issuer experience, and a fitted (rather than constant) prepayment specification backed by new empirical data.
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Comment Letter: American Academy of Actuaries' August 2026 CLO C‑1 Modeling Update
Andrew Berlin
Tess Virmani