1986-2002 Credit Risk Loss Experience Study: Private Placement Bonds

by the Private Placement Committee of the Society of Actuaries

April 2006

Executive Summary: The 1986-2002 Credit Risk Loss Experience Study represents a continuation of the 1986-98 study analyzing credit loss experience by institutional investors on private placement bonds. This continuing study is being conducted under the auspices of the Society of Actuaries and involves twenty institutional investors altogether, but between six and fifteen in any given year, which accounted for between 24% and 44% of outstanding life insurance company private placement bond holdings during the study period. The study measures incidence rates, loss severities and economic loss rates associated with credit risk events for privately placed debt during the years 1986-2002. Private placement loss experience is broken down along a variety of dimensions, such as by year of funding, bond rating, etc., and is compared to loss experience for publicly issued bonds. In addition to the final report, institutions which contributed data to the study receive confidential reports comparing their experience against the aggregate experience. New contributors are welcome to join in the study.

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