Naic: Investment In Medium Grade And Lower Grade Obligations National Association Of Insurance Commissioners Model Law
Model state law of the NAIC that stipulates that the total sum of medium grade bonds (bonds carrying a rating of 3, assigned by the Securities Valuation Office of the NAIC) and lower grade bonds (bonds carrying a rating of 4, 5, or 6, assigned by the Securities Valuation Office of the NAIC) cannot be greater than 20% of the insurance company's admitted assets. The total sum of bonds rated 4, 5, or 6 cannot exceed 10% of the company's admitted assets. In addition, no more than 3% of the admitted assets can be in bonds carrying a rating of 5 or 6; and no more than 1% of the admitted assets can be in bonds carrying a rating of 6. Bonds are rated by the Securities Valuation office from 1 (highest rating representing debt obligations of companies in excellent financial condition) to 6 (lowest rating representing debt obligations of companies in very poor financial condition).
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