The SEC and the CFTC have jointly proposed rules defining the terms "security-based swap" and "swap", subject to regulation by the SEC and the CFTC, respectively, pursuant to the Dodd-Frank Act.  The proposal narrowly defines the term "insurance", which would be excluded from regulation, as an instrument provided by an insurance company, limited to the value of the insured interest, and not traded separately from the insured interest.  The proposal also excludes "customary business or commercial arrangements" that were not intended regulatory targets of Dodd-Frank.

OUR TAKE: The narrow definition of "insurance" product shows the regulators' intention to supervise the credit default swap market.