ACC sends joint trade letter backing the Academy CLO model as a more robust, stochastic approach to RBC factors.

The ACC, along with the Loan Syndications and Trading Association, and the American Investment Council, submitted a joint letter supporting the American Academy of Actuaries’ stochastic model for developing risk-based capital factors for collateralized loan obligations (CLOs). The letter commends the Academy's collaboration with the Structured Securities Group but cautions against reverting to deterministic or uniform approaches that mask tranche-specific tail risk. The letter highlights sensitivities in assumptions, including loss-given-default, prepayments, reinvestment price, and probability of default, urging calibration to real-world loan experience. We called for further refinements to the Academy's CLO model and offered technical data to assist regulators in establishing capital charges that recognize CLO diversification and market realities.