The debt in question is collateralized debt obligations: securities tied together from bundles of corporate loans, much of it lent to companies with junk credit ratings. Regulators had become uneasy about how much of it was held by insurers and how low the reserves behind it were. So the National Association of Insurance Commissioners spent years designing new capital rules to make it more expensive to place CLOs in bulk. When rules were finally approved this month that cover an estimated $314 billion of structured loans held by insurers, by most accounts, they were lower than the industry originally feared. And meanwhile, insurers had already redirected the new money toward other types of structured loans that resembled CLOs in almost every sense except one: None of it was subject to the new rules.
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