Bloomberg data proves essential to NAIC insurance bond classification

Bloomberg has leveraged its regulatory and compliance data to launch a new bond classification solution for the National Association of Insurance Commissioners’ (NAIC) Principles-Based Bond Project (NPBB).

The project, announced in March, is expected to launch at the start of 2025. Its rules will allow insurers to classify their bonds as issuer credit obligations, asset-backed securities, or neither, in reference to these bonds reporting eligibility.

Leila Sadiq, global head of enterprise data content at Bloomberg.

“We have a large existing base of clients who rely on Bloomberg for their regulatory and compliance data. We have established a strong track record of building and maintaining solutions to help our clients meet specific regulatory requirements,” stated Leila Sadiq, global head of enterprise data content at Bloomberg, in a written response to questions. “We were aware of this impending rule, and through discussions with various clients understood the role that we could play in the process given our wide breadth of available data.”

NAIC’s bond classification guidance is intended to shift away from prescriptive regulation of bond accounting and reporting, to account for credit worthiness, interest rate risk, liquidity and more. 

“We had accounting regulations as part of our product suite already, so there was some intellectual property that we were able to use in our effort for this project,” Sadiq stated. “The product that we released is based on a custom rule set, specifically designed to cater to the points in the NAIC rulemaking.”

Bloomberg’s experience building custom regulatory solutions prepared it to create the solution for classifying bonds in just about three months after NAIC’s announcement.

“There are many pieces involved in generating a solution such as this. One must read and interpret the rule, then identify the data points required for automation, then analyze sources of this underlying data and understand how to ingest the data and manage the ruleset,” Sadiq stated. “Bloomberg has developed 60+ custom data solutions so it has extensive expertise, allowing us to produce a preliminary ruleset in a fraction of this time. Bloomberg’s extensive dataset, flexible rules engine, and established methods of providing data to the industry allow for a speedier time to market.”

The bond classification solution tests bonds with a variety of data attributes, providing determinations and attributes that qualify a security for classification. The solution will catch whether a bond is a financial or non-financial asset for reporting, and automate classification to save market participants time.