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Neuberger’s focus on our clients’ needs has driven enduring partnerships with many of the world’s largest and most sophisticated investors.
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Neuberger understands the critical role an experienced investment manager plays in helping institutional investors meet their most important obligations. We offer diverse capabilities across public and private markets, designed to meet the distinct needs of each institution we serve.
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- Neuberger’s institutional capabilities are augmented by a dedicated solutions team focused on providing portfolio allocation, benchmark construction and asset-liability management.
- The Institutional Solutions team is comprised of actuaries and quantitative professionals with expertise in modeling, risk management, asset-liability management and accounting/funding considerations for institutions.
- Large team is a testament to the value Neuberger places on providing excellent service to our Institutional clients.
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Neuberger helps clients invest across public and private markets, delivering standalone strategies, customized solutions and portfolio analytics aligned to client goals.
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Neuberger is focused on serving client investment needs with public and private markets solutions. As a 100% employee-owned investment firm, with no external shareholders, our interests are aligned with our clients.
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Our Consultant Relations team is committed to providing unparalleled service and expertise to investment consultants, advisors and specialists, so that together we may deliver tailored solutions designed to meet the evolving needs of each mutual client.
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What We Do
Neuberger helps clients invest across public and private markets, delivering standalone strategies, customized solutions and portfolio analytics aligned to client goals.
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Neuberger is focused on serving client investment needs with public and private markets solutions. As a 100% employee-owned investment firm, with no external shareholders, our interests are aligned with our clients.
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Neuberger has a long-standing commitment to serving public pension plans, understanding the unique regulatory, governance and fiduciary demands they face.
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What We Do
Neuberger helps clients invest across public and private markets, delivering standalone strategies, customized solutions and portfolio analytics aligned to client goals.
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Neuberger is focused on serving client investment needs with public and private markets solutions. As a 100% employee-owned investment firm, with no external shareholders, our interests are aligned with our clients.
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As an increasing number of individuals rely on defined contribution (“DC”) plans as their primary retirement saving tool, market volatility and evolving regulation have raised new questions as to how sponsors can evolve their DC schemes to provide participants with investment options and solutions to help meet their retirement goals.
Platform at a Glance
$150B in retirement savings entrusted to our managers
Addressing DC Plan Challenges Through Targeted Solutions
Successful retirement outcomes depend on addressing the key challenges participants face, including growing savings, mitigating downside risk, hedging against inflation and replacing income in retirement. At Neuberger, we offer tailored solutions to help plan sponsors meet these demands.
Challenge: Small Caps and Downside Risk Mitigation
- Challenge: Indexing small caps may expose participants to increased risk, especially in volatile markets.
- Our Approach: The Neuberger Genesis Fund leverages a consistent investment process focusing on high-quality small-cap investing to help participants mitigate losses and build diversified portfolios.
Challenge: Private Equity’s Role in Defined Contribution Plans
- Challenge: The inclusion of private equity in defined contribution (DC) plans has traditionally been limited by structural barriers such as regulation, liquidity and other factors despite its potential benefits.
- Our Approach: As product innovations reduce these barriers, DC plan sponsors are encouraged to reevaluate the role of private equity, leveraging new guidance and research to explore its potential benefits for plan participants.
Collective Investment Trusts: A Flexible Solution for DC Plans
Collective Investment Trusts (CITs) are becoming a popular alternative to mutual funds in DC plans due to their competitive fees, improved transparency and flexibility. Modern CITs can provide participants with greater choice while helping plan sponsors diversify their fund lineups.
Retaining participants in DC plans after retirement is increasingly important for plan sponsors. The Retirement Tier provides investment products, tools and services designed specifically for participants nearing or in retirement, helping them transition to the spending phase while aligning with their financial goals. The Retirement Tier provides:
- Tailored solutions for retirees to remain invested in employer-sponsored DC plans
- Enhanced participant education and resources for retirement planning
Taft-Hartley
For more than 40 years, plan sponsors and participants have entrusted Neuberger with their Taft-Hartley assets. The experience of our investment professionals and breadth of our investment platform enable us to provide innovative investment solutions that are a direct reflection of our client’s specific plan goals, obligations, risk tolerance and time horizon.
Our Commitment to Taft-Hartley Plans
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Neuberger helps clients invest across public and private markets, delivering standalone strategies, customized solutions and portfolio analytics aligned to client goals.
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Neuberger is focused on serving client investment needs with public and private markets solutions. As a 100% employee-owned investment firm, with no external shareholders, our interests are aligned with our clients.
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Neuberger has a long-standing commitment to partnering with insurance companies, recognizing the unique constraints and opportunities that define their investment landscape.
Insurance Platform
Our global team of 30 professionals leverages a broad and diversified platform. We utilize the expertise of over 790 investment professionals to address specific insurance requirements.
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insurance companies as clients in 30+ countries
#1
Private Equity manager for non-affiliated insurance general assets1
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managed in alternative and risk strategies2
Holistic Insurance Coverage
- Dedicated team of quantitative and actuarial professionals providing Insurance analytics
- Dedicated Insurance client coverage team with deep understanding of requirements across different insurers and regulation
- Dedicated Head of Insurance Fixed Income: construction and management of bespoke insurance public market FI portfolios
- Dedicated team of specialists, providing day-to-day operational oversight of client portfolios
- Solvency II reporting: Tripartite Template (TPT V5)
- Web-based access to client portfolio investment data (T+1)
- Fixed Income: $232B AUM across 10 global locations, managed by over 200 investment professionals
- Alternatives: $150B AUM across 9 global locations, managed by over 240 investment professionals
Insurance Analytics
Our Insurance Analytics team is a dedicated group of actuaries and quantitative professionals who advise and provide customized analyses and insights for our insurance clients, seeking opportunities to enhance insurance portfolios.
Asset-Liability Management
- Analyzing portfolio exposures against objectives and constraints of insurance liabilities
- Liquidity analysis
Strategic Asset Allocation
- Analysis to support benchmark construction or quantify impact of constraints
- Portfolio optimization designed to enhance risk-return profile and factoring objectives and constraints
Peer Analysis
- Evaluate asset class exposures across insurance industry and relative to peers
- Analysis of risk and return metrics
Risk Modeling
- Stochastic modeling to construct return distributions and run tail-risk analytics
- Portfolio risk metrics
Regulatory Commentary
Residential Mortgages
Reporting changes are coming to RMLs that will impact how RML portfolios need to be structured. The most common structure today is to hold the loans in a trust that is held by an investment subsidiary of a life insurer. The investment subsidiary allows for look-through RBC treatment and the trust solves for operational complexities and for certain state-level lending regulations. However, regulators are uncomfortable with the lack of transparency in this structure (the entire portfolio is recorded as a single line item on Schedule D Part 6).Two parallel changes are coming. The bad news is that investment subsidiaries will no longer provide for look-through RBC treatment, meaning that they won’t lead to the RML capital charge (68bps pre-tax). But the good news is that look-through treatment will be applied directly to trusts. The net effect of these changes is that most insurers will likely cease to use investment subs and will simply pull the trust (or at least the trust’s beneficial interest certificate) up to be held directly by the insurer. Loans will then be recorded individually on Schedule B and will continue to qualify for the RML capital charge.
One potential downstream effect of these changes will be our understanding of the industry’s RML holdings. RMLs on Schedule B alone are doubling every 2 years across the industry. This pace may appear to accelerate once all of the RMLs held through investment subsidiaries migrate to Schedule B, plus current reported holdings will jump.
These changes have not yet been adopted, but I do believe adoption is likely later this year. I will keep you updated as this progresses.
CLO RBC
Updates to CLO RBC have appeared to be coming from two different directions simultaneously: SSG modeling to replace ratings when assigning designations and updated capital charges based on an RBCIRE project being done by the American Academy of Actuaries. These projects have been merging, and this was further confirmed when the Valuation of Securities Task Force this week instructed SSG to prepare to delay implementing their CLO modeling until December 31, 2026. The next major update will be at a September 8 RBCIRE public conference call, where the Academy will present the latest on its CLO work.On May 1, the NAIC heard a proposal to decrease the RBC covariance benefit for equity investments. The correlation assumption between equity and credit risk would increase from 0% to 50%. According to this report from the American Academy of Actuaries, a typical life insurer today faces an after-tax equity (C-1cs) RBC requirement of 13.3%. Under the proposal, this would increase to 19.7%.
The actual impact will vary by company, as it depends on each company’s mix of equity risk vs. credit risk under the RBC formula. The proposal includes other changes, some of which result in an offsetting improvement to companies’ RBC ratio. The net effect for a typical company is an increase to total RBC requirements of 1.6%. For an insurer targeting a 400% RBC ratio, this is approximately equal to a six-percentage-point reduction to the RBC ratio.
The Academy report was not formally exposed, making 2026 the earliest possible time for adoption. If adopted, this will increase capital requirements for investments that have grown in recent years including private equity and rated note feeder funds. We will continue to follow this proposal through the NAIC process and provide updates.
The actual impact will vary by company, as it depends on each company’s mix of equity risk vs. credit risk under the RBC formula. The proposal includes other changes, some of which result in an offsetting improvement to companies’ RBC ratio. The net effect for a typical company is an increase to total RBC requirements of 1.6%. For an insurer targeting a 400% RBC ratio, this is approximately equal to a six-percentage-point reduction to the RBC ratio.
The Academy report was not formally exposed, making 2026 the earliest possible time for adoption. If adopted, this will increase capital requirements for investments that have grown in recent years including private equity and rated note feeder funds. We will continue to follow this proposal through the NAIC process and provide updates.
The NAIC announced a new commissioner-level task force on Risk-Based Capital (RBC) model governance. It will develop RBC principles and will educate international stakeholders on RBC.
The development of RBC principles will be a crucial step toward resolving ongoing and future debates. De facto principles have emerged over the years, but are incomplete and have never been codified. The most directly impactful principle involves potentially updating statistical safety levels, which would require recalibration of capital charges. This task force won’t change any capital charges, but it may direct the Capital Adequacy Task Force to do so. Therefore, I don’t expect any RBC changes to result from this task force’s work for at least three years.
The international trend has been for countries to imitate Solvency II, not RBC, when updating capital standards. These differences in capital standards have implications for cross-border reinsurance transactions. U.S. insurers will benefit from their international regulators better understanding RBC. A brief list of RBC myths that I hope the task force can dispel includes:
Stephen Smith, CFA, FSA
Managing Director, Head of Insurance Analytics & Institutional Solutions
The development of RBC principles will be a crucial step toward resolving ongoing and future debates. De facto principles have emerged over the years, but are incomplete and have never been codified. The most directly impactful principle involves potentially updating statistical safety levels, which would require recalibration of capital charges. This task force won’t change any capital charges, but it may direct the Capital Adequacy Task Force to do so. Therefore, I don’t expect any RBC changes to result from this task force’s work for at least three years.
The international trend has been for countries to imitate Solvency II, not RBC, when updating capital standards. These differences in capital standards have implications for cross-border reinsurance transactions. U.S. insurers will benefit from their international regulators better understanding RBC. A brief list of RBC myths that I hope the task force can dispel includes:
- RBC is factor-based, which is inferior to a scenario-based approach under Solvency II
- RBC factors are not based in sophisticated modeling
- Market-consistent frameworks such as Solvency II are inherently more useful for regulators than RBC, which is based on statutory accounting.
Stephen Smith, CFA, FSA
Managing Director, Head of Insurance Analytics & Institutional Solutions
PRA has released PS15/24, the final policy statement to wrap up the Solvency II Review in the U.K. This policy statement restates relevant EU Solvency II rules (“the assimilated law”) into PRA policy material without making significant changes to the policy substance. Major reforms to Solvency II including use of the Matching Adjustment have already been stated in prior PRA policy statements, which will also take effect on December 31, 2024 (PS2/24, PS3/24, and PS10/24)
Key restatements:
Key changes from consultation paper CP5/24 to policy statement PS15/24:
Key restatements:
- PRA restates the risk margin formula and parameters in line with that outlined in HMG’s legislation. The new formula decreases the cost of capital rate from 6% to 4% and introduces risk-tapering factors. This change will lead to a significant capital release, reducing the risk margin by 65% for long-term life insurance and by 30% for general insurance.
- PRA restates SCR standard formulas with minor clarificatory changes. Several Standard Formula articles in the CDR contain amounts denominated in euros (EUR). The PRA proposes converting all EUR-denominated amounts in the CDR articles to GBP, using the same conversion rate applied in PS2/24 for a similar purpose.
Key changes from consultation paper CP5/24 to policy statement PS15/24:
- A transitional rule has been established, allowing firms to delay obtaining approval from the PRA for including future taxable profits (FTP) in their Loss Absorbing Capacity of Deferred Taxes (LACDT) calculations until December 30, 2025.
- Amendments have been made to the proposed 'ring-fenced fund' (RFF) definition, which preserves the link to 'restricted own funds' and explicitly excludes matching adjustment portfolios (MAPs) from this definition.
A long-debated proposal allowing the SVO to challenge ratings was finally adopted by the NAIC’s E Committee on August 29. Comments from the SVO indicate that bonds with the following attributes are less likely to be challenged:
Despite the above, the SVO retains the authority to challenge any rating. The SVO has indicated that challenges will be rare and will only apply to cases where the SVO disagrees with a rating by at least three notches. This goes live in 2026.
- Multiple ratings
- Ratings from larger rating agencies (SVO has distinguished between large and small rating agencies)
- Public ratings
Despite the above, the SVO retains the authority to challenge any rating. The SVO has indicated that challenges will be rare and will only apply to cases where the SVO disagrees with a rating by at least three notches. This goes live in 2026.
In our November regulatory update email, we detailed how typical rated note feeder funds are likely to qualify as bonds when evaluated as ABS. We further outlined how CFOs may also qualify. We believe this analysis stands—the update below confirms that the ABS framework we applied is the appropriate framework.
In language exposed for public comment, SAPWG clarifies that rated note feeder funds and CFOs must be evaluated as ABS (instead of Issuer Credit Obligations (“ICO”), e.g. corporate bonds) for purposes of determining whether they qualify as bonds. This matters for two reasons:
A key sign that a security is an ABS instead of an ICO is if the cash flows produced by the collateral are contractually required to follow a waterfall to one or multiple debt tranches. Alternatively, a structure where the equity tranche retains discretion over when to pay down the debt may potentially qualify as an ICO.
In language exposed for public comment, SAPWG clarifies that rated note feeder funds and CFOs must be evaluated as ABS (instead of Issuer Credit Obligations (“ICO”), e.g. corporate bonds) for purposes of determining whether they qualify as bonds. This matters for two reasons:
- Qualification as an ABS requires a thorough evaluation of the security, creating more work and a potential for some to fail to qualify as bonds
- Because the debt tranches are considered ABS, the residual tranche will be reported as such and draw a higher capital charge for life insurers
A key sign that a security is an ABS instead of an ICO is if the cash flows produced by the collateral are contractually required to follow a waterfall to one or multiple debt tranches. Alternatively, a structure where the equity tranche retains discretion over when to pay down the debt may potentially qualify as an ICO.
The Blanks Working Group of the NAIC adopted a proposal for more granularity on Schedule D, dividing asset-backed securities (ABS) from issuer credit obligations (ICO). This move is part of the larger bond project and follows the adoption of the principles-based bond definition in August. The updated bond definition and corresponding blanks structures are both effective January 2025. But, importantly, the rules are finalized. It will be important for insurers to analyze any new structure for compliance with the new bond definition. For further detail on what’s required for rated feeder funds and CLOs to qualify as bonds, please reach out to your local NB Insurance Solutions contact.
Brief Summary of the Principles-Based Bond Definition: To be classified as a bond, an investment must be either an ICO or an ABS. ICOs include Treasuries, corporate bonds, municipal bonds, etc., while ABSs include structured credit.
Brief Summary of the Principles-Based Bond Definition: To be classified as a bond, an investment must be either an ICO or an ABS. ICOs include Treasuries, corporate bonds, municipal bonds, etc., while ABSs include structured credit.
After an almost two-year development, S&P is finally implementing its updated capital model to rate insurance companies. This final version maintains most of the changes shared at the end of 2021, while removing the most controversial aspects of the original proposal. Overall, the quantum of change versus the current capital model remains significant, as S&P has entirely overhauled both the method and assumptions underpinning the quantitative aspect of ratings. On the investment front, one significant innovation is the differentiation of credit risk charges based on the seniority/nature of the obligation and a recalibration that results in lower charges for senior secured debts and the sub-investment-grade universe compared to the previous model.
To better reflect the risk embedded in their balance sheet and enhance policyholder protection, regions across Asia are examining and updating the insurance solvency regimes. The underlying philosophy tends to share similarities of regulations in Europe Solvency II. In addition, increasing consideration is being given to consistency with the new International Reporting Standard 17 (IFRS 17) and International Capital Standards (ICS). The framework details and implementation pace of the new capital regimes differ among countries. In China the CBIRC unveiled the new rules of C-ROSS Phase II on 30 December 2021. In January 2023 South Korea has implemented K-ICS, an economic value-based capital framework similar to ICS. The new rules are effective in 2024 for Hong Kong, in 2025 for Japan and in 2026 for Taiwan. Most of the solvency regimes have moved to an economic balance sheet framework, with an objective to assess assets and liabilities on a fair-value basis, which highlights the importance of better asset liability management and duration matching. Matching adjustments are adopted by some regimes such as HK RBC and Singapore RBC2, which aims to reduce the impact from short-term fluctuation in asset values and enhance asset liability cash flows matching. Neuberger Berman has worked with insurers across different Asia regions for more effective asset liability management under the new rules and portfolio optimization under the matching adjustments.
On today’s RBCIRE call (June 14, 2023), the C-1 factor and RBC sensitivity test for residual tranches were updated. 2023 C-1 factor will remain at 30%, and there will be a 15% sensitivity test. 2024 C-1 factor will increase to 45% and the sensitivity test will be removed.
The 2023 sensitivity test will allow regulators to assess the impact of a 45% factor (30% base factor + 15% sensitivity test = 45%) before it is imposed next year. The sensitivity test is a what-if scenario, not an actual RBC requirement.
The change applies to all residual tranches that are recorded in Schedule BA. There is a parallel project ongoing at SAPWG to update the definition of residual tranches—this new 45% factor in 2024 will apply to anything captured by this updated residual tranche definition.
Regulators on RBCIRE expressed that before the 45% factor comes into effect in 2024, they would like to revisit the issue and consider additional information. But in the absence of additional information, the default result would be for a 45% factor beginning in 2024.
The 2023 sensitivity test will allow regulators to assess the impact of a 45% factor (30% base factor + 15% sensitivity test = 45%) before it is imposed next year. The sensitivity test is a what-if scenario, not an actual RBC requirement.
The change applies to all residual tranches that are recorded in Schedule BA. There is a parallel project ongoing at SAPWG to update the definition of residual tranches—this new 45% factor in 2024 will apply to anything captured by this updated residual tranche definition.
Regulators on RBCIRE expressed that before the 45% factor comes into effect in 2024, they would like to revisit the issue and consider additional information. But in the absence of additional information, the default result would be for a 45% factor beginning in 2024.
On the NAIC’s RBC Investment Risk and Evaluation Work Group conference call Thursday, a specific C1 factor for residual tranches was formally exposed for the first time—45% pre-tax. Adoption of a structural change to RBC that allows for a separate residual tranche C1 factor was on the agenda and passed unanimously, but at the end of the call during the “any other matters” section, the specific 45% factor was proposed for an exposure.
Regulators debated about whether to expose a specific number or a range, for which 30 – 45% was mentioned. A regulator expressed concern that 45% may lead to insurers effectively being required to hold more than a dollar of capital per dollar of residual tranche investment if they are targeting a high enough RBC ratio. While regulators focused on ranges capped at 45%, the industry letter where the 45% factor was first seen had recommended a factor of “at least” 45%. The 45% number is still up for debate.
In summary: 45% pre-tax residual tranche factor exposed; This would be an interim factor that applies to all residual tranches identified on Schedule BA regardless of underlying collateral, LTV or other characteristics of the securitization (CLO residual tranches are likely to be the first to get a new factor distinct from this interim factor); Comment period is 21 days (through May 12, 2023).
Regulators debated about whether to expose a specific number or a range, for which 30 – 45% was mentioned. A regulator expressed concern that 45% may lead to insurers effectively being required to hold more than a dollar of capital per dollar of residual tranche investment if they are targeting a high enough RBC ratio. While regulators focused on ranges capped at 45%, the industry letter where the 45% factor was first seen had recommended a factor of “at least” 45%. The 45% number is still up for debate.
In summary: 45% pre-tax residual tranche factor exposed; This would be an interim factor that applies to all residual tranches identified on Schedule BA regardless of underlying collateral, LTV or other characteristics of the securitization (CLO residual tranches are likely to be the first to get a new factor distinct from this interim factor); Comment period is 21 days (through May 12, 2023).
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Our only business is managing our clients’ irreplaceable capital. We build enduring partnerships grounded in our clients’ trust and seek to add real value beyond investment performance by delivering thought leadership and services that make a difference.
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Neuberger helps clients invest across public and private markets, delivering standalone strategies, customized solutions and portfolio analytics aligned to client goals.
Learn More Who We Are
Neuberger is focused on serving client investment needs with public and private markets solutions. As a 100% employee-owned investment firm, with no external shareholders, our interests are aligned with our clients.
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