The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

US hybrids: NAIC’s new rules lift market

Likelihood of “ratings shopping” by borrowers/dealers increases.

Hybrid bond borrowers should find the institutional US market a more welcoming place in the coming months now that the US National Association of Insurance Commissioners has put in place new rules that dramatically reduce the amount of risk-based capital that insurers, perhaps the most important investor base, will typically have to allocate to their holdings of the new wave of hybrids that has emerged since August 2005.

“In September the NAIC came up with a resolution that addressed their concerns that some of these hybrids were more risky than typical preferred, but reflecting the fact that these securities were nevertheless not as risky as common stock,” says Dominique Jooris, executive director, co-head debt capital markets hybrid capital, Europe, at Goldman Sachs.

It is a face-saving exercise that provides a better gauge to assess the risk of hybrids without flying in the face of a series of NAIC judgements that have identified these securities as being as risky as common equity.

As shown by the table, hybrids will from now on be placed in three silos, based primarily on credit rating: NAIC–1, NAIC–2 and NAIC-3.


The old regime’s three buckets into which securities were placed were debt, preferred and common equity.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree