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Last Updated: 8/7/2025

±õ²õ²õ³Ü±ð: Asset-backed securities (ABS) are fixed-income securities that are collateralized by an underlying pool of assets. Typically, these assets consist of consumer receivables, such as credit card receivables, auto loans, and student loans, or commercial receivables, such as equipment leases.

Overview: ABS evolved out of the mortgage-backed securities (MBS) market. Compared with MBS, ABS tend to be less affected by swings in interest rates since car loans and other loans that typically back consumer ABS have shorter maturities/duration than mortgages. Therefore, ABS are less likely to be refinanced when interest rates fall. However, higher interest rates could impact consumers’ ability to pay credit card debt and consumer loan payments, thereby introducing credit risk and resulting in possible delinquencies or defaults in the portfolio collateralizing the ABS. In turn, sufficient funds may not be available to make full and timely payment to all ABS debt holders on payment dates. 

In part to mitigate this possibility, ABS benefit from credit enhancement, whereby the securities are issued in layers of debt, or , with the lowest layer serving as the first loss position. As such, the lowest tranche usually represents the poorest credit quality and riskiest investment, while the top tranche has the highest credit quality.

Key to the health of the overall ABS market is the performance of the consumer and commercial receivables sectors. Because of the more complex structure than traditional bonds, ABS offer higher yields for comparative credit ratings due in part to the structural protections, such as credit enhancement. As relatively conservative investors, most insurers tend to invest in the senior-most or senior/higher tranches within the ABS capital structure, which often are assigned investment grade credit ratings by one or more of the . 

Status: ABS securities have historically been captured in scope of SSAP No. 43—Asset Backed Securities. The Valuation of Securities (E) Task Force will coordinate with other ²»Á¼Ñо¿Ëù¹Ù·½ working groups and task forces to formulate recommendations and make referrals to other ²»Á¼Ñо¿Ëù¹Ù·½ regulator groups, ensuring expertise relative to investments, producing insightful and actionable research and analysis regarding insurer investments, and effectively maintaining and revising the Purposes and Procedures Manual of the ²»Á¼Ñо¿Ëù¹Ù·½ Investment Analysis Office.