{"id":4683,"date":"2026-05-26T06:40:51","date_gmt":"2026-05-26T06:40:51","guid":{"rendered":"https:\/\/www.insuracarelife.com\/blog\/making-collateralised-fund-obligations-cfos-and-rated-note-feeders-rnfs-attractive-to-offshore-reinsurers-walkers\/"},"modified":"2026-05-26T06:40:51","modified_gmt":"2026-05-26T06:40:51","slug":"making-collateralised-fund-obligations-cfos-and-rated-note-feeders-rnfs-attractive-to-offshore-reinsurers-walkers","status":"publish","type":"post","link":"https:\/\/www.insuracarelife.com\/blog\/making-collateralised-fund-obligations-cfos-and-rated-note-feeders-rnfs-attractive-to-offshore-reinsurers-walkers\/","title":{"rendered":"Making Collateralised Fund Obligations (CFOs) and Rated Note Feeders (RNFs) attractive to offshore reinsurers | Walkers"},"content":{"rendered":"<div id=\"html-view-content\">\n<p><strong>Key Takeaways<\/strong><\/p>\n<ul>\n<li>CFOs and RNFs must satisfy both asset-side and liability-side requirements, with Bermuda insurers needing to demonstrate liability usability beyond basic capital classification.<\/li>\n<\/ul>\n<ul>\n<li>Classification is driven by the underlying risk characteristics and look-through analysis, meaning ratings or note labels alone may not prevent higher capital charges.<\/li>\n<\/ul>\n<ul>\n<li>Bermuda and Cayman frameworks differ significantly, so successful transactions require structures that align with both regimes\u2019 expectations on risk transparency, governance, valuation and liability fit.<\/li>\n<\/ul>\n<h2>What asset managers need to understand before marketing CFOs and RNFs to Bermuda and Cayman insurers and reinsurers<\/h2>\n<h4>The importance of CFOs and RNFs across teams<\/h4>\n<p>Legal teams care about structure, disclosure and enforceability; capital teams care about classification, diversification and solvency treatment; actuarial teams care about cash-flow behaviour, valuation stability and liability fit.<\/p>\n<p><strong>Offshore insurance Bermuda v. Cayman: insurance groups are not just another buy-side account<\/strong><\/p>\n<p>A CFO or RNF that appears efficient from the sponsor&#8217;s perspective may be viewed very differently once it is tested against the buyer&#8217;s prudential, governance and liability-management framework. In Bermuda, that often means a distinct asset-side and liability-side analysis. In Cayman, it means a different but equally real focus on risk identification, look-through, valuation, governance and liability fit.<\/p>\n<h4>What sponsors should know regarding Bermuda and Cayman insurance law<\/h4>\n<p>\u00a0<\/p>\n<p><strong>Bermuda: asset-side treatment may not end the analysis<\/strong><br \/>For Bermuda long-term balance sheets, asset-side treatment under the BSCR may not end the analysis; the insurer may also need to show that the asset is usable within its liability methodology, cash-flow matching and any applicable approval framework. Neither stage should be assumed to be straightforward.<\/p>\n<p>\u00a0<\/p>\n<p><strong>Cayman asks a different prudential question<\/strong><\/p>\n<p>CIMA does not apply a BSCR-style capital formula. Instead, Cayman insurers and reinsurers must invest only in assets whose risks they can properly identify, measure, monitor, manage and report\u2014and must maintain an approved investment policy with allocation, concentration and governance parameters appropriate to their liabilities.<\/p>\n<p><strong>Look-through is the default starting point<\/strong><\/p>\n<p>Where Bermuda\u2019s look-through framework applies, full look-through is the default and partial look-through is only a fallback. In Cayman, the investment rules similarly require insurers to invest only in assets whose risk the insurer can properly identify, measure, monitor, manager and report.<\/p>\n<h4>Bermuda and Cayman insurance frameworks<\/h4>\n<p><strong>Bermuda \u2013 BMA\/BSCR framework<\/strong><\/p>\n<ul>\n<li>Classification by the nature, characteristics and risks of the exposure, not the note wrapper or marketing label<\/li>\n<li>Lowest comparable BSCR rating across selected agencies; unrated fixed-income generally falls to BSCR 8<\/li>\n<li>Full look-through is the default; partial look-through is a fallback<\/li>\n<li>Multi-module exposure if embedded leverage, optionality or derivatives engage additional risk categories<\/li>\n<li>Liability-side usability: the insurer may need to show the asset works within its methodology, cash-flow matching and approval framework<\/li>\n<\/ul>\n<p><strong>Cayman \u2013 CIMA prudential framework<\/strong><\/p>\n<ul>\n<li>Invest only in assets whose risks the insurer can identify, measure, monitor, manage and report<\/li>\n<li>Understand and be able to report on the risks of the underlying assets, including structured investments<\/li>\n<li>Investments must be appropriate to the nature and duration of liabilities, with an Authority-approved policy<\/li>\n<li>Valuation, pricing transparency and treatment of illiquid positions must be evidenced and governed<\/li>\n<li>Investment committee governance and conflict controls required, except for certain smaller classes<\/li>\n<\/ul>\n<h4>Where Bermuda and Cayman sponsor assumptions often break down<\/h4>\n<p><\/p>\n<p>[View source.]<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Key Takeaways CFOs and RNFs must satisfy both asset-side and liability-side requirements, with Bermuda insurers needing to demonstrate liability usability beyond basic capital classification. Classification is driven by the underlying risk characteristics and look-through analysis, meaning ratings or note labels alone may not prevent higher capital charges. Bermuda and Cayman frameworks differ significantly, so successful [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4684,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[3582,3577,3574,3580,3575,1138,3579,3576,3583,3578,2604,3581,3584],"class_list":["post-4683","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-attractive","tag-cfos","tag-collateralised","tag-feeders","tag-fund","tag-making","tag-note","tag-obligations","tag-offshore","tag-rated","tag-reinsurers","tag-rnfs","tag-walkers"],"_links":{"self":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4683","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/comments?post=4683"}],"version-history":[{"count":0,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4683\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media\/4684"}],"wp:attachment":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media?parent=4683"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/categories?post=4683"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/tags?post=4683"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}