NAIC Stress Test of CLOs: Losses Below AA Ratings

by Jennifer Johnson, Jean-Baptiste Carelus, Eric Kolchinsky, Hankook Lee, Michele Wong, Elizabeth Muroski of the NAIC Captial Markets Special Report

NAIC stress tests of CLOs show losses below AA rated CLOs in ‘worst case. Time to stress test your company’s CLO portfolio.

Stress test results for year-end 2019 showed that: Losses on “normal” CLO tranches — those with regular promises of principal and interest— reached A-rated tranches, even under the worst-case scenario. For “atypical” CLO tranches — those that have unusual payment promises,such as equity tranches and Combo Notes — losses reached AA-rated securities.

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NAIC Stress Test of CLOs: Losses Below AA Ratings

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