CLO Alert: NAIC finalizes CLO RBCs for 2026YE: Buy AAA-A, Bye Jr BBB

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CLO Alert: NAIC finalizes CLO RBCs for 2026YE: Buy AAA-A, Bye Jr BBB

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CLO Alert

NAIC finalizes CLO RBCs for 2026YE: Buy

AAA-A, Bye Jr BBB

CLO RBCs: lower RBC for AAA-A; higher for mezz 25 June 2026

The NAIC finalized CLO RBC factors for YE2026 based on the American Academy of Securitized Products Strategy

Actuaries (AAA) framework, which emphasizes tail risk in the underlying portfolio. The Global

finalized NAIC framework favors AAA-A CLO exposure. It penalizes thin mezzanine risk Pratik K. Gupta

across the board. We thus expect continued insurance demand for AAA–A tranches CLO/MBS Strategist

across all CLO types, increased dispersion within BBBs based on performance, and BofAS+1 646 855 9146

persistent dislocation in junior BBB spreads. pratik.gupta@bofa.com

Chris Flanagan

RBC charges for 2026 YE: FI/MBS/CLO Strategist

BofAS

BSL: BSL CLOs will use a combination of ratings-based factors (AAA–BBB) and a +1christopher.flanagan@bofa.com646 855 6119

framework incorporating both ratings and tranche thickness (<=4% thick) for BBB- and Victoria Xu

lower-rated bonds. Junior BBB (<=4% thick) and lower rated bonds have a 4-5x increase CLO/MBS Strategist

in RBCs, and are being treated similar to CCC corporate bonds. Thus IG to Non-IG BofAS+1 646 855 6549

downgrades will have a material impact on RBCs. victoria.xu@bofa.com

Akash Bhairav Gupta

All other structures: (Private Credit CLOs, CBOs, CDOs, and TruPS) will use ratings- MBS/CLO Strategist

based RBC factors derived from the framework developed by the American Academy of +1 646 855 7717

Actuaries for BSL CLOs (without incorporating tranche thickness). Thus, to the extent akashbhairav.gupta@bofa.com

insurance firms invest in AAA-A rated bonds, RBC charges will be materially lower vs Andy Fan

CLO/MBS Strategist