Private Placements Interest Grows; Conning Managing New NAIC Requirement for Clients

Conning Private Placements Interest Grows Vignette
Conning clients saw strong relative value in private placements in 2021 and committed nearly 50% more dollars to the asset class than in 2020. This was the second consecutive year of substantial increases from Conning clients, and as we begin 2022 we continue to see opportunities in the sector along with expectations for a more diverse issuance pipeline in February after the annual industry conference.*

One of the regulatory changes in the private placement market for 2022 that we are following closely is a new rating filing requirement by the NAIC’s Securities Valuation Office (SVO). Effective 01/01/22, for any newly issued private placement that is purchased after this date, the insurance company completing the regulatory filing for this asset as lead purchaser must file with the SVO a copy of the rating agency rationale that was issued accompanying the purchase, assuming there was a private letter rating. Conning, as an experienced private placement asset manager, has always performed this service for its private placement clients when we have been lead investor on a deal and will continue to do so.

“One of the regulatory changes in the private placement market for 2022 that we are following closely is a new rating filing requirement by the NAIC’s Securities Valuation Office (SVO).”

As background, the SVO has been concerned about private letter ratings since the insolvency of Eli Global LLC (Eli Global), a highly leveraged private-equity-controlled insurance holding company that entered regulatory supervision in 2019. Eli Global had complicated inter-company financial arrangements with private letter ratings which the regulator believes obfuscated Eli Global’s financial condition. The insurer’s failure triggered the SVO’s study of private letter ratings and the NAIC has since imposed additional disclosure requirements for inter-company transactions at an insurance company.

The SVO is reviewing requirements that it automatically accept rating agency designations for determining risk-based capital (RBC) requirements for private placements. The SVO believes rating agencies did not accurately reflect the financial risk in a substantial number of structured/MBS securities during the 2008 financial crisis. The SVO now relies on its own capital-adequacy measurement process for certain structured/MBS securities rather than the rating agency designations. The SVO is extending its review to corporate ratings, starting with private letter ratings, and comparing its ratings to those provided by select agencies as well as to how ratings vary by agency. Implied in the review is that the SVO may be re-authorized to overrule rating agency designations; until about half a dozen years ago, the SVO was allowed to overrule any agency rating on a CUSIP (public bond or private bond).

Conning will provide updates on developments on this matter as they occur. If you have any questions, please reach out to your Conning relationship contact.

Conning  (  is  a  leading  investment  management firm  with  a  long  history  of  serving  the insurance  industry.  Conning supports institutional  investors,  including  insurers and  pension  plans,  with  investment  solutions,  risk  modeling  software,  and  industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America.

©2022 Conning, Inc. All rights reserved. The  information herein is proprietary to  Conning, and represents the  opinion of Conning. No part of the  information above  may be  distributed, reproduced, transcribed, transmitted, stored in an electronic retrieval system or translated into any language  in any form by any means without the  prior written permission of Conning. This publication is intended only to  inform readers about general developments of interest and does not constitute  investment advice. The  information contained herein is not guaranteed to  be  complete  or accurate  and Conning cannot be  held liable  for any errors in or any reliance  upon this information. Any opinions contained herein are  subject to  change  without notice. Conning, Inc., Goodwin Capital Advisers, Inc., Conning Investment Products, Inc., a FINRA-registered  broker-dealer, Conning Asset Management Limited, Conning Asia Pacific Limited, Octagon Credit Investors, LLC and Global Evolution Holding ApS and its group of companies are  all direct or indirect subsidiaries of Conning Holdings Limited (collectively “Conning”) which is one  of the  family of companies owned by Cathay Financial Holding Co., Ltd. a Taiwan-based  company.

*Past performance is not a guarantee of future results.

Market Risk – Market, or systematic, risk is the risk that individual securities may be correlated with general market downturns regardless of the particular business conditions and outlook for the individual companies
Credit Risk – Eroding fiscal health in issuing companies resulting in inability to meet debt obligations
Inflation Risk – Inflation erodes the purchasing power of future cash flows from investments. In times of high inflation the value of securities may be reduced
Liquidity Risk – Liquidity risk can occur when market conditions do not allow transactions to be made in a quick and orderly fashion in relation to indicative market prices


Conning is a leading investment management firm with a long history of serving the insurance industry. Conning supports institutional investors, including insurers and pension plans, with investment solutions, risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America.

David Motill
Head of Consultant Relations

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