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In other words, if an insurer is exposed to a 1 The American Academy of Actuaries is a 20,000-member professional association whose mission is to serve the public and the U. [...] However, the subcommittee disagrees with the implicit suggestion from the OW study that C-1 for residual tranches can be informed by comparing risk of residual tranches to the risk of common stock (other sections of this letter also reference the comparison to common stock, which we believe is implied although not explicitly stated in the OW study). [...] The subcommittee’s view is based on the following: • While leveraging existing C-1 factors from other asset classes may be a reasonable approach under some circumstances, the use of this approach should be predicated on similar risk characteristics or having insufficient data to support risk modeling (see Appendix 1 for the C-1 modeling flowchart that was introduced by the subcommittee at the 2023. [...] By providing new data and analysis to explore the risk of residual tranches, the OW study is consistent with Principle #2. [...] On this point, the OW study is consistent with Principle #4 where the exposure analysis of residual tranches is based on projected performance of the underlying collateral.