US NAIC Fall 2025 National Meeting Highlights: Investment-Related Highlights

This update reports on selected investment-related topics from the NAIC’s Fall National Meeting, December 8-11, 2025, as well as a number of interim developments that took place between the NAIC’s Summer and Fall National Meetings.

Statutory Accounting Principles (E) Working Group

The NAIC Statutory Accounting Principles (E) Working Group (SAPWG) met on December 9, 2025, for which a summary is available. The SAPWG agenda included the following noteworthy items, among others.

New statutory accounting guidance adopted to allow residential mortgage loans held in qualifying statutory trusts to be treated as directly owned mortgage loans

Adopting a newly revised version of Item 2025-13 (the original version of which was first exposed for comment on May 22, 2025), the SAPWG has amended the statutory accounting guidance in SSAP No. 37—Mortgage Loans to allow residential mortgage loans held by an insurer through a qualifying statutory trust to be treated as Schedule B mortgage loans on a “look-through” basis for statutory accounting and reporting and risk-based capital (RBC) purposes.

Insurers frequently use statutory trusts to hold title to residential mortgage loans because having a federally chartered bank act as the trustee obviates the need for the insurer to obtain a lending license in certain states in order to originate and hold the mortgage loans. Prior to the newly adopted amendments, SSAP No. 37 treated investments as mortgage loans only if the insurer was the lender of record or had a qualifying participation agreement with the lender of record. That left insurers who held residential mortgage loans through a statutory trust in a quandary as to how to account for and report that investment, with different insurers taking different approaches.

In order to qualify for “look-through” treatment under the new SSAP No. 37 amendments, a statutory trust needs to meet specified criteria, including that (i) the insurer must own a 100% beneficial interest in the trust (or a 100% beneficial interest in a single series of the trust if the trust has multiple series) and (ii) the trust can hold no other types of assets besides mortgage loans, cash and real estate acquired as a result of foreclosed mortgages. Consistent with the requirements of SSAP No. 40—Real Estate Investments, a single parcel of foreclosed real estate is also permitted to be held through a single-member limited liability company. Importantly, a trust that represents a commingled vehicle with multiple owners of the same pool of mortgage loans will not be a qualifying statutory trust.

Regardless of whether the mortgage loans held in a statutory trust are reported on a “look-through” basis on Schedule B, the SSAP No. 37 amendments provide that all statutory trusts owned by an insurer must be disclosed as subsidiaries of the insurer in Schedule Y to the insurer’s statutory statements.

The effective date of the amendments is January 1, 2027, but early adoption is permitted, meaning that insurers have the option to implement the new guidance in their December 31, 2025 annual statements.

SAPWG approves eliminating the “investment subsidiary” concept from statutory reporting and RBC instructions

Item 2024-21 addressing the “investment subsidiary” concept was first proposed in 2024 but was put on hold temporarily while the NAIC staff focused on the use of statutory trusts to hold residential mortgage loans (discussed above). At the NAIC Summer National Meeting on August 11, 2025, the SAPWG turned back to this topic, noting that the “investment subsidiary” concept had been eliminated from SSAP guidance in 2005 when SSAP No. 46 was superseded by SSAP No. 88, which was subsequently superseded by the current SSAP No. 97—Investments in Subsidiary, Controlled and Affiliated Entities. Although no longer addressed in SSAP guidance, the “investment subsidiary” concept is still found in the annual statement instructions, where it is defined as “any subsidiary, other than a holding company, engaged or organized primarily to engage in the ownership and management of investments for [the insurer].” In addition, the Life RBC instructions provide that the RBC charge for the ownership of an investment subsidiary is calculated based on the RBC of the underlying assets, pro-rated for the degree of ownership—thus replicating the RBC charge that would apply if the life insurer held the assets directly. The concept of an investment subsidiary is also found in the insurance codes of many states.

On December 9, the SAPWG adopted Item 2024-21, which includes a referral to the Blanks (E) Working Group to eliminate the “investment subsidiary” concept from the annual statement instructions (as a category within Schedule D-6-1) and also a referral to the Capital Adequacy (E) Task Force to eliminate the “investment subsidiary” concept from the Life RBC instructions. To be clear, these changes will not prevent insurers from utilizing investment subsidiaries, but the RBC for life insurers would no longer be calculated on a “look-through” basis.

New disclosure and reporting requirements added for private placement securities

On December 9, the SAPWG adopted Item 2025-19 relating to private placement securities, in the form previously proposed on October 6, 2025 (reflecting certain modifications requested by industry to the proposal originally exposed for comment at the SAPWG’s August 11, 2025 meeting). Effective on December 31, 2026, a new electronic column will be added to insurers’ investment schedules to indicate whether a security is publicly registered with the SEC, was issued in an offering exempt from registration pursuant to Rule 144A, Regulation D or Section 4(a)(2) of the Securities Act of 1933, or not of a type required to be registered with the SEC. In addition, aggregate disclosure will be added to the notes to insurers’ statutory statements, capturing (for each of the above categories) the total book-adjusted carrying value (BACV), fair value (with fair values determined by level 2 and level 3 reported), total amount of aggregate deferred interest and paid-in-kind interest, and total BACV supported by a private letter rating.

Clarification of the authority of statutory accounting issue papers

On December 9, the SAPWG adopted Item 2025-12EP, which revised the footnotes to paragraphs 42 and 43 of the Preamble to the Accounting Practices and Procedures Manual to (i) clarify that statutory accounting issue papers—which rank in Level 5 of the statutory accounting hierarchy—are authoritative guidance only if they do not conflict with other sources of statutory accounting guidance, and (ii) reference SEC rules and interpretations as sources of authoritative US GAAP for SEC registrants.

Revisions to financial statement disclosures for debt securities and residual interests

On December 9, the SAPWG adopted a bundle of revisions to financial statement disclosures proposed at the NAIC Summer National Meeting in Item 2025-20, to become effective with the December 31, 2026 annual statements. The revisions are designed to improve utilization of existing disclosures, clarify guidance, and incorporate consistent locations and frequency for debt security disclosures. The revisions also include disclosures for residual interests, which include whether the insurer is using the practical expedient or allowable earned yield method and whether the insurer is transitioning from the practical expedient to the allowable earned yield method. 

SAPWG directs staff to develop new statutory accounting guidance for ALM derivatives

By way of background, on September 10, 2025, the SAPWG held a special meeting to hear a presentation by a life insurance company representative on behalf of the American Council of Life Insurers (ACLI) recommending that the SAPWG develop new guidance for interest-rate-hedging derivatives that do not qualify as effective hedges under SSAP No. 86—Derivatives, but are used for asset-liability management (ALM) (Item No. 2024-15). The September 10 ACLI presentation included two alternative drafts of potential new statutory accounting guidance—one using an amortized cost method and the other using a fair value and spread method. The SAPWG exposed the entire package (the presentation and both potential options for SAP guidance) for a comment period that ended on October 31, 2025.

On December 9, with the support of the ACLI, the SAPWG directed NAIC staff to move forward with developing an issue paper and a new SSAP to establish statutory accounting guidance for ALM derivatives using the amortized cost approach. The amortized cost approach will mirror the approach used by SSAP No. 86—Derivatives for highly effective hedges. The aspiration is to have a draft issue paper and accompanying draft SSAP ready to expose for comment at the NAIC Spring National Meeting (March 22-25, 2026), or potentially even earlier at an interim SAPWG meeting, with a potential effective date for the new guidance of January 1, 2027.

New financial statement disclosures proposed for future commitments and “delayed draw” features associated with investment transactions

At the December 9 SAPWG meeting, NAIC staff expressed a concern that the existing instructions for disclosing commitments in the notes to statutory financial statements are both unclear and incomplete. They also noted that commitments and contingent commitments are currently disclosed across multiple notes and schedules, making it difficult for regulators to obtain a comprehensive view of the reporting entity’s potential obligations. Accordingly, they presented a new agenda Item 2025-24, with a rationale that is worth quoting in full:

As insurers increasingly enter into complex financial arrangements, the commitments embedded in these transactions are often not recognized as liabilities on financial statements. Nonetheless, the terms of such arrangements can materially restrict an insurer’s ability to exit or modify them without incurring significant costs. From a regulatory standpoint, full transparency of these commitments is essential. Although they may not have an immediate balance sheet impact, they can govern the use of future cash flows, constrain liquidity, and shape the insurer’s overall risk profile. This agenda item therefore proposes clarifying existing disclosure requirements and introducing a comprehensive framework to capture all such commitments, enabling regulators to form a more complete assessment of an insurer’s financial position.

The Item 2025-24 proposal—which the SAPWG exposed for comment until February 13, 2026, and which we recommend reading in its entirety—would make revisions to the annual statements and instructions (including to the investment schedules) and to SSAPs No. 1, 5, 21, 26, and 43. Among other things, the proposal would require disclosure of the total amount of any additional investment commitments for each reported investment. This would include both commitments and contingent commitments, including, but not limited to, capital calls, delayed draws, scheduled or on-demand drawdowns, and unfunded commitments.

New agenda item proposed to modify and/or clarify reporting for certain investments

On December 9, the SAPWG exposed for comment Item 2025-29, which proposes to modify and/or clarify reporting for certain investments, particularly aspects related to the principles-based bond definition (PPBD) that became effective on January 1, 2025. The list of six topics identified for discussion is just an initial list and may be expanded as a result of comments received, as well as a review of insurers’ 2025 annual statements. The comment period ends on February 13, 2026. Two of the six topics exposed for comment are of particular interest:

• Rated notes issued by feeder funds: The proposal would clarify that a rated note issued by a feeder fund needs to be assessed under the PPBD as an asset-backed security (ABS) rather than an issuer credit obligation (ICO), given that the primary source of repayment is derived from cash flows associated with the underlying defined collateral, rather than the general creditworthiness of an operating entity. That proposal, which is consistent with the position previously articulated in paragraph 32.c. of the PPBD Issue Paper No. 169, would also add a new “investment characteristic” code (for identification in electronic column 23) to Schedule D-1-2 to indicate that an investment is a rated note issued by a feeder fund.
• Permissible underlying investments for Schedule BA mortgage funds: “Schedule BA mortgage fund” is a shorthand term for an investment in a joint venture, partnership or limited liability company that is governed by SSAP No. 48 and reported on Schedule BA (Other Long-Term Invested Assets) as having the “underlying characteristics of mortgage loans.” For a life insurer, the default RBC factor for an equity investment in a Schedule BA fund is 30%, but there are several exceptions to that general rule, and one of those exceptions applies to Schedule BA mortgage funds. If a Schedule BA mortgage fund is unaffiliated with the insurer, then the RBC factor is generally 1.75% (risk category CM2) if the underlying investments are primarily senior lien mortgages, and otherwise 3.00% (risk category CM3). The significant contrast between those RBC factors for Schedule BA mortgage funds versus the generic 30% RBC factor for funds has made Schedule BA mortgage funds an attractive investment for life insurers. Based on certain references in the annual statement instructions, NAIC statutory accounting staff have historically taken the view that (i) the only underlying investments permitted in a Schedule BA mortgage fund are investments that would be reported as mortgage loans on Schedule B if held by an insurer directly, and (ii) since RMBS and CMBS would be reported either as bonds on Schedule D or non-bond debt securities on Schedule BA if held by an insurer directly, they are not permitted as underlying investments in a Schedule BA mortgage fund. However, it appears that the practice among life insurers has differed, and it has been suggested that the Schedule BA mortgage reporting category should be able to include funds that hold RMBS or CMBS if the insurer can look through the RMBS/CMBS structures to complete a detailed property analysis on the underlying securitized mortgages. Given the apparent divergence of practice, Item 2025-29 proposes to explicitly exclude funds that hold debt securities, including RMBS/CMBS, from being treated as Schedule BA mortgage funds for statutory reporting and RBC purposes.

New agenda item proposed to address equity accounting for SSAP No. 48 investments

On December 9, the SAPWG exposed for comment Item 2025-26, a concept agenda item to review the overall equity method accounting guidance as well as the process for reporting equity changes for investments in scope of SSAP No. 48—Joint Ventures, Partnerships and Limited Liability Companies. This agenda item is very detailed with many concepts from SSAP No. 48 identified for discussion and potential revision to ensure that the statutory accounting guidance is clear and is consistently applied. The comment period ends on February 13, 2026.

New agenda item proposed to potentially allow long-term repos as admitted assets

Existing guidance in SSAP No. 103—Transfers and Servicing of Financial Assets and Extinguishments of Liabilities treats repurchase agreements (repos) and reverse repurchase agreements (reverse repos) as admitted assets only if they have a stated maturity date of 365 days or less. On December 9, the SAPWG exposed for comment Item 2025-28, which sets out a detailed discussion of the current guidance and a rationale for revising the guidance to allow repos—but not reverse repos—to be admitted assets even if they have a maturity date exceeding 365 days. The comment period ends on February 13, 2026.

Proposal to add new codes to investment schedules to identify assets held under reinsurance arrangements

We previously reported that on March 24, 2025, the SAPWG adopted agenda Item 2024-20, effective on December 31, 2025, to clarify that assets held under modco agreements or funds withheld arrangements are in scope of paragraph 23 of SSAP No. 1—Accounting Policies, Risks & Uncertainties, and Other Disclosures and must be disclosed on a summary basis in Note 5L of the statutory financial statements.

On December 9, 2025, the SAPWG exposed for comment Item 2025-27, which would revise SSAP No. 1 to add assets held under a modco or funds withheld arrangement to the categories listed in paragraph 23 of SSAP No. 1 for which such summary disclosure is required. The comment period ends on February 13, 2026.

In addition, the SAPWG has recommended to the Blanks (E) Working Group that new codes be added to the annual statement blanks and instructions, so that the following types of assets will be identified as such on a line item basis in insurer’s statutory investment schedules:

• CX—Collateral assets received and on the balance sheet, excluding collateral held under security lending and repurchase agreements reported on the balance sheet.
• MR—Assets held under modco reinsurance agreements.
• FWR—Assets held under funds withheld reinsurance agreements.

Revisions proposed to statutory accounting guidance on sale-leaseback transactions

On December 9, the SAPWG exposed for comment Item 2025-01, which proposes certain revisions to SSAP No. 22—Leases relating to sale-leaseback transactions. The proposed revisions would clarify that when cash or assets received by the seller are effectively restricted (in whole or in part) from being accessed or used to satisfy policyholder obligations until the repayment of the lease and/or such cash or assets (or other assets pledged to the lender under the terms of the agreement) would be forfeited to the lessor/lender (in whole or in part) if the seller terminates the contract, then such transactions do not meet the definition of a sale qualifying for sale-leaseback accounting and must instead be recorded as financing arrangements. The comment period ends on February 13, 2026.

Valuation of Securities (E) Task Force

The NAIC Valuation of Securities (E) Task Force (VOSTF) held its final meeting on December 10, 2025, for which a summary and minutes are available. The VOSTF agenda and materials included the following noteworthy topics, among others.

Purposes and Procedures Manual amended to provide a grace period for annual rating updates of private letter ratings

The VOSTF adopted an amendment to the Purposes and Procedures Manual of the NAIC Investment Analysis Office (P&P Manual) to permit a 30-day grace period after an NAIC credit rating provider (CRP) renews a private letter rating (PLR) to provide the annual rating update to the NAIC Securities Valuation Office (SVO). The objective of the grace period is to avoid the need to deactivate PLRs that receive an annual update close to year-end.

Effective date for CLO modeling delayed until year-end 2026

As we have discussed in our prior articles, there are two parallel projects addressing RBC for collateralized loan obligations (CLOs) that are being conducted, respectively, under the auspices of the VOSTF and the Risk-Based Capital Investment Risk and Evaluation (E) Working Group (RBC IRE WG). The VOSTF-led project would require CLOs to be financially modeled by the NAIC Structured Securities Group (SSG), whereas the RBC IRE WG-led project has a project underway, led by the American Academy of Actuaries (Academy), to develop a principles-based RBC framework for ABS, beginning with CLOs. 

When the VOSTF met on August 12, 2025, it recognized that the RBC IRE WG-led project would extend into 2026, and accordingly it exposed for comment a P&P Manual amendment to delay the effective date for SSG’s financial modeling of CLOs from December 31, 2025 to December 31, 2026, in order to give the Academy additional time to complete its analysis of RBC for CLOs for the RBC IRE WG. As anticipated, the VOSTF then adopted that P&P Manual amendment at its meeting on December 10.

Update on the CRP due diligence framework project

One of the key VOSTF initiatives that emerged from the 2023 holistic review document was a mandate to develop a due diligence framework to provide greater consistency, uniformity, and appropriateness in the NAIC’s use of CRPs. A major step forward in that effort was the NAIC’s retention in 2025 of PricewaterhouseCoopers (PwC) to assist in developing that due diligence framework.

At the December 10 VOSTF meeting, Jeremy Phillips, a PwC partner, provided a status update on the CRP due diligence project. He expressed the view that the main objective of the project should be to establish a structured, scalable, and pragmatic process to support the NAIC’s reliance on the translation of CRP ratings to NAIC designations, and that the proposed due diligence framework that PwC is developing will be designed to provide practical oversight focused on areas where CRP ratings have the greatest potential impact on the insurance industry. He stated that NAIC stakeholders and regulators would be briefed on key aspects of the proposed framework during the design phase, so that their feedback can be incorporated along the way. He then reported that PwC has begun its preliminary data analysis using NAIC historical ratings history and insurer statutory filings, and has also issued a historical ratings data call to all of the CRPs to obtain additional data for analysis. He said that after the data analysis is complete, a complete draft of a CRP due diligence framework will be presented to the NAIC’s new Credit Rating Provider (E) Working Group, which will then determine whether it is ready to be exposed for public comment or whether further refinements are needed prior to such exposure. Mr. Phillips concluded by stating that PwC expects to provide another status update with further details at the NAIC Spring 2026 National Meeting.

Implementation of SVO/SSG discretionary challenge process is delayed pending system updates

At the December 10 VOSTF meeting, SVO Director Charles Therriault reported that the new process whereby the SVO and SSG will have the discretion, effective on January 1, 2026, to challenge the use of a CRP rating to determine the NAIC designation for a filing-exempt security is not yet operational because the necessary systems changes and the agreements needed to ensure the security of information and data are still in the works. The details of the discretionary challenge process are discussed in our Legal Update on the NAIC Summer 2024 National Meeting. Briefly, the process will allow the SVO and SSG to challenge the use of a CRP rating for determining the NAIC designation category on a filing-exempt security if they believe the CRP rating “may not be a reasonable assessment of investment risk of the security for regulatory purposes.” However, the final decision on whether to maintain or remove a rating from filing-exempt eligibility will be made by state regulators. In this context, it was noted that Eric Kolchinsky left the directorship of the SSG at the end of October, after 16 years of service in that capacity.

VOSTF has been replaced by the Invested Assets (E) Task Force

If you search for the website of the VOSTF on the internet, you will no longer find it. That is because the VOSTF has been replaced, effective January 1, 2026, by the Invested Assets (E) Task Force (IATF) and its three working groups: the Investment Analysis (E) Working Group, the Investment Designation Analysis (E) Working Group, and the Credit Rating Provider (E) Working Group. A detailed discussion of the functions of the three working groups is included in our Legal Update on the NAIC Summer 2025 National Meeting, although we note that the name of one of the working groups has changed: what was originally to be called the Securities Valuation Office and Structured Securities (E) Working Group is now called the Investment Designation Analysis (E) Working Group. So, as the new year opens, we sing “auld lang syne” to the VOSTF, with its history going back to 1907, and say welcome to the IATF and its working groups. And kudos to VOSTF Chair Carrie Mears, whom we hope to see serving in a new capacity in the new structure.

Life Risk-Based Capital (E) Working Group

Major changes proposed to Life RBC factors for collateral loans

The Life Risk-Based Capital (E) Working Group (LRBC WG) of the Capital Adequacy Task Force (CADTF) did not meet at the NAIC Fall National Meeting, but it did meet on November 14, 2025 and exposed for comment an important conceptual Proposal 2025-16-L regarding RBC for collateral loans. This proposal is the next step in a process that has been in the works for several years.

Collateral loans are defined in SSAP No. 21—Other Admitted Assets as “unconditional obligations for the payment of money secured by the pledge of a qualifying investment.” Qualifying investments are investments that would qualify as admitted assets if directly held by an insurer. (State laws governing authorized investments of their domestic insurers may impose additional requirements, such as loan-to-value limitations and restrictions on the categories of permitted collateral.) SSAP No. 21 also provides that a collateral loan does not include investments captured in scope of other statements. So, for example, debt securities need to be analyzed under the SSAP No. 26 PPBD criteria, rather than being treated as collateral loans.

Historically, the RBC factor for collateral loans for life insurers was 6.8%, regardless of the nature of the underlying collateral. In large part, that approach was consistent with the fact that the statutory statement investment schedules did not separate collateral loans into different subcategories based on the underlying collateral type.

In 2024, the LRBC WG adopted an interim provision, giving special treatment to collateral loans backed by mortgages (i.e., “loan on loan” structures), which were allowed to be reported as Schedule BA mortgage investments and to receive Schedule BA mortgage RBC factors based on the characteristics of the underlying mortgage loans. (See the discussion of Schedule BA mortgage investments in the SAPWG section above.)

In our Legal Update on the NAIC 2025 Summer National Meeting, we noted that on May 29, 2025, the Blanks (E) Working Group adopted changes to the Asset Valuation Reserve (AVR) and Schedule BA to require more granular reporting of collateral loans based on the type of underlying collateral that secures the loan. We also reported that the CADTF had exposed for comment an SAPWG memorandum dated June 5, 2025 requesting that the CADTF consider developing separate RBC factors tied to the new reporting lines that would differentiate among collateral loans based on the underlying collateral type. The LRBC WG, as a working group of the CADTF, is now taking this project forward.

LRBC WG Proposal 2025-16-L includes the following recommended RBC factors for collateral loans based on the underlying collateral type:

• Mortgage loans – Proposed RBC factor of 3.00%: This is the same as the Schedule BA CM3 mortgage RBC factor for unaffiliated Schedule BA structures where the underlying mortgage loans are not primarily senior liens. The proposal states: “NAIC staff believe this charge (CM3) is prudent and reasonable as the underlying mortgage loans backing the collateral loans could have a wide range of outcomes.”
• Equity interests in joint ventures, partnerships, and limited liability companies (LLCs) – Proposed RBC factor of 30%: This is the same as the RBC factor for Schedule BA unaffiliated common stock.
• Residual tranches or interests – Proposed RBC factor of 45%: This is the same as the RBC factor for residual tranches or interests.
• All other types of collateral – Proposed RBC factor of 6.8%: This is the existing charge for collateral loans (other than those collateralized by underlying mortgage loans).

Significant comments from industry are anticipated on the current proposal. With respect to collateral loans backed by mortgage loans, I expect to see support for maintaining the current “interim” solution of using CM2 or CM3 Schedule BA mortgage factors of 1.75% or 3.00%, respectively, based on the predominant lien priority of the underlying mortgage loans—a possibility that is already hinted at in the text of the proposal. With respect to equity and residual interests, I predict there will be suggestions to take the level of overcollateralization into account, rather than a straight “look-through” that treats holding the collateral loan the same as holding the underlying collateral.

The comment period for Proposal 2025-16-L ends on January 13, 2026, and based on the discussion at the November 14, 2025 LRBC WG meeting, it is clear that members of the working group are looking to complete this project in the first half of 2026, so that the new RBC factors can become effective for the December 31, 2026 annual statements.

Risk-Based Capital Investment Risk and Evaluation (E) Working Group

The RBC IRE WG did not meet at the NAIC Fall National Meeting (or at the Summer National Meeting, for that matter), but since our last report it has held three public meetings—two meetings focused on the Academy’s CLO RBC project and one meeting focused on the SVO funds alignment project.

Background of the CLO RBC project

The RBC IRE WG was launched in 2022 as a working group of the CADTF and was charged with performing a comprehensive review of the C-1 (investment risk) component of the RBC framework, focusing on the RBC treatment of asset-backed securities (ABS) including collateralized loan obligations (CLOs), collateralized fund obligations (CFOs) and other securities with similar types of “tail risk.”

As noted above, the RBC IRE WG enlisted the Academy to develop a principles-based RBC framework for ABS, beginning with CLOs. At a high level, the Academy has taken the following approach:

• Identify as many candidates as possible for “comparable attributes” (i.e., anything that can be used to differentiate risk, such as CRP rating, thickness of residual tranche and credit support).
• Run CLOs through a range of scenarios and multiple available models.
• Narrow comparable attributes to the most informative ones and evaluate whether a subset of attributes determine most of the tail risk.
  • If a small set of easily identifiable attributes explains most of the tail risk, then these become candidates for determining C-1 RBC.
  • On the other hand, if a large/complex set of attributes is required for determining risk, then modeling individual securities may be necessary.

Six guiding principles for the Academy’s work were hammered out in dialogue with the RBC IRE WG during 2023 and 2024 and are set out in a slide deck at the RBC IRE WG website.

At the September 8, 2025 meeting of the RBC IRE WG, the Academy provided a first look at its model for developing hypothetical C-1 RBC factors for CLOs. The September 8 presentation was based on six sample CLO deals, although ultimately the entire universe of CLO deals will be analyzed. These early results were broadly consistent with the work done by the SSG, showing low risk for senior tranches but potential cliff risk for junior tranches. Based on these early results, it is expected that the Academy’s ultimate recommendations will potentially include lower RBC factors for highly rated CLO tranches and higher RBC factors for non-highly rated tranches. It is important to note, however, that the goal of the Academy’s project is to define several risk buckets for CLOs according to comparable attributes and then assign a C-1 factor to each bucket—in contrast to the SSG’s project of modeling each individual CLO on an ongoing basis. The minutes of the September 8, 2025 discussion are available as Attachment 1 to the November 4, 2025 meeting materials for the RBC IRE WG.

Major update from the Academy at the December 15, 2025 RBC IRE WG meeting

At the December 15, 2025 meeting of the RBC IRE WG, the Academy presented an updated presentation on its CLO C-1 RBC factor project. The presentation included a detailed discussion of two major milestones achieved since the September 8 meeting. The first milestone was finalizing the key assumptions underlying the CLO modeling framework based on the model decisions selected for reconsideration and discussed at the September 8 meeting. The rationale for retaining each of the baseline assumptions was presented, along with a consideration of nine sensitivity tests to which CLOs rated Baa/BBB and below are highly reactive. The second milestone was identifying the full universe of CLO deals to be analyzed—2,674 deals as of December 31, 2024.

Timeline for the Academy’s CLO RBC project

The RBC IRE WG voted at the December 15 meeting to expose the Academy’s updated presentation for a comment period ending on January 29, 2026. The timeline set by the NAIC Financial Condition (E) Committee (E Committee) calls for the Academy to apply its model to the full universe of CLO deals so that the RBC IRE WG will be in a position to expose proposed RBC factors for CLOs for comment no later than April 30, 2026, and to adopt factors no later than June 15, 2026, thus enabling the CADTF to adopt the factors no later than June 30, 2026, in order for them to become effective on December 31, 2026. In the event the June 30, 2026 deadline is not met, the E Committee’s timeline provides for the SSG’s methodology for individually modeling CLOs to be exposed for comment in June or July of 2026, with a view toward making that individual modeling regime effective on December 31, 2026, as specified by the VOSTF at its December 10, 2025 meeting (see report above on that meeting). 

Also at the December 15 meeting, the RBC IRE WG voted to expose Proposal 2025-22-IRE for a comment period ending on January 29, 2026. That proposal is a purely structural proposal that would amend the LR002 Bonds page of the Life RBC Instructions to break out CLOs separately from other bonds. The E Committee’s timeline provides for the structural proposal to be acted upon by the RBC IRE WG by April 30, 2026 and by the CADTF by May 15, 2026.

It is important to note that the Academy’s current workstream pertains only to RBC for life insurers and will not change the RBC for property casualty (P/C) and health insurers. Once the RBC IRE WG has settled on a path for life insurers, it will make referrals to the Property and Casualty Risk-Based Capital (E) Working Group and the Health Risk-Based Capital (E) Working Group to engage with their constituencies and discuss whether changes to their respective RBC frameworks are warranted. Any changes proposed by those working groups would not be capable of becoming effective any earlier than 2027.

SVO Funds Alignment Project is put on hold

For background, on June 23, 2025, the RBC IRE WG exposed for comment (until July 23, 2025) Proposal 2025-12-IRE, relating to the SVO Funds Alignment Project. The background of that project is discussed in detail in our commentary on the RBC IRE WG session in our Legal Update on the NAIC Spring National Meeting. The proposal would make bond mutual funds eligible for an SVO-assigned “look-through” Life RBC factor similar to what is currently available for bond ETFs and private bond funds.

At the November 4, 2025 meeting of the RBC IRE WG, Chair Philip Barlow pointed out that there are inherent differences in the accounting and reporting treatment of the three types of funds. Although there was no suggestion that the investment risk differs between the three types of funds, there was extensive discussion regarding the different reporting schedules and accounting methods, and that was sufficient to cause the RBC IRE WG to put the project on hold and ask the ACLI to consider ways to address the concerns raised. The minutes of the November 4, 2025 discussion are available as Attachment 1 to the December 15, 2025 meeting materials for the RBC IRE WG.

The above only applies to RBC for life insurers. The P&C and Health RBC Working Groups are considering Proposal 2025-12-IRE on their own separate tracks. On September 29, 2025, the Health RBC Working Group exposed the proposal for a comment period that ended on December 3, 2025. And on November 12, 2025, the P&C RBC Working Group, which had previously exposed the proposal, requested additional study to be done by the NAIC staff.

Risk-Based Capital Model Governance (EX) Task Force

Since the NAIC Summer National Meeting, the Risk-Based Capital Model Governance (EX) Task Force (RBC Mo Go TF) met three times: on October 23, December 3, and December 10, 2025. The minutes packet and December 10 meeting materials include the minutes for all three meetings.

Background of the task force

The RBC Mo Go TF was created in early 2025 as a commissioner-led task force that reports directly to the NAIC Executive (EX) Committee. The task force is co-chaired by Judith French (Director of the Ohio Department of Insurance and Chair of the NAIC Life Insurance and Annuities (A) Committee) and Nathan Houdek (Wisconsin Commissioner of Insurance and Chair of the E Committee).

One of the primary goals of the RBC Mo Go TF is to develop a set of guiding principles for the RBC framework to ensure a consistent approach to future RBC adjustments. Bridgeway Analytics was retained as a consultant to the task force and had a leading role, working with a drafting group of regulators, in drafting the guiding principles and in making refinements to successive drafts in response to multiple rounds of comments. At the December 10, 2025 meeting, the RBC Mo Go TF achieved its initial goal and adopted the Guiding Principles as a “guiding North Star” for governing the purpose and use of, as well as maintaining and prioritizing updates to, RBC requirements.

The Guiding Principles

• Purpose. The purpose of RBC requirements is to identify potentially weakly capitalized companies.
• Use. RBC requirements are primarily used to facilitate regulatory action with respect to weakly capitalized companies. RBC requirements may be used for other purposes, but these uses must not distort or redefine the purpose of RBC requirements.
• Materiality. RBC requirements should be updated when a change is material. Materiality for purposes of RBC means a level at which a decision whether to update RBC could meaningfully impact the regulator’s assessment of the solvency risk for all or an identifiable segment of companies.
• Equal capital for equal risk. RBC requirements should be guided by the principle of equal capital for equal risk, consistent in their statistical safety levels and time horizons, appropriate for the underlying risk, unless there are substantial differences in the nature of the risk in the context of the business model (e.g., life versus P/C) to warrant alternative treatments. RBC requirements should reflect measurable risks that can impact solvency, including the mitigating effects of risk management.
• Objectivity. Appropriately consider only the factors that impact solvency risk, including but not limited to concentration, diversification, and tail risks, thereby avoiding the promotion or inhibition of objectives that are unrelated to assessing solvency risk.
• Accuracy. Sufficiently precise to assess solvency risk, while avoiding unnecessary complexity.
• Grounded in statutory accounting and reserving. Derived from values reported in the statutory annual statement and calibrated to align with statutory accounting and reserving practices, to the extent practical.
• Emerging risks. Updated to incorporate emerging risks (including macroprudential risk) by the time they become material to the industry or an identifiable segment of companies.
• Transparency. The process to maintain and update RBC requirements must adhere to the NAIC Policy Statement on Open Meetings and follow standards that provide for clear, complete, and transparent communication and documentation of proposed and adopted updates, methodologies, and supporting rationale.
• Process. Maintaining and updating RBC requirements must adhere to model risk management standards, relying on data-driven methodologies with assessments of model performance and model validation, when possible, the need to rely on expert judgment and proxies, significantly so in some cases, and the use of interim solutions.
• Prioritization. Recognizing the vast number of potential refinements that could be made to RBC requirements at any given time, the groups tasked with updating and maintaining the RBC model should use regulatory judgment to prioritize changes, considering their necessity, materiality, time and resource intensity, and other relevant considerations.

Next steps for the RBC Mo Go TF

Attachment Three to the December 10, 2025 meeting materials outlines the following next steps for the RBC Mo Go TF:

• Edits to the RBC Preamble
  • This is a project that the CADTF has been working on for some time, and on which it has not yet achieved consensus. A revised Preamble to the RBC instructions was originally exposed for comment at the NAIC Spring 2024 National Meeting, has elicited numerous comments, and remains under consideration.
  • There is broad agreement that the purpose of RBC requirements (as the first Guiding Principle makes clear) is to identify potentially weakly capitalized companies.
  • However, there is disagreement regarding other potential uses of RBC. In particular, there is a strongly held view that it is inappropriate to use RBC as a tool for comparing insurers whose RBC ratios are comfortably above the minimum levels, and there are some who would like to restrict or even prohibit public disclosure of insurers’ RBC ratios for that reason.
  • The October 23, 2025 meeting of the RBC Mo Go TF (see the minutes packet) was a joint meeting with the CADTF and provided an opportunity for sharing historical perspectives and insights on this debate.
• A process for analyzing retrospective and future RBC adjustments
• Gap analysis, initially focusing on Life RBC
• 2026 planning and coordinating with the American Academy of Actuaries
• An education and public messaging campaign to highlight the RBC framework’s benefits and strengths

Macroprudential (E) Working Group and Financial Stability (E) Task Force

New statutory statement disclosures proposed for funding agreement backed notes

The Macroprudential (E) Working Group (MWG) launched a new initiative on the topic of funding agreement backed notes (FABNs) at its July 21, 2025 meeting. At that meeting, there were two educational slide presentations:

• The first presentation was given by Tim Nauheimer, the NAIC’s Manager, Macroprudential Supervision, who is the primary staff liaison to the MWG. His slides outlined the potential risks and risk mitigants that he sees with regard to life insurers that issue funding agreements that back FABNs, including considering potential additional disclosure requirements for such insurers and asking whether FABNs are a form of “hidden leverage” for life insurers, and whether there are put options that create withdrawal risk and associated ALM risk for the insurer.
• The second presentation was given by Marc Altschull, who is a Senior Actuary at the American Council of Life Insurers. His slides provided detailed information about why FABNs exist, why they should not be considered as debt of the insurer, what are the withdrawal characteristics, and how risk is managed, including expressing the view that the funding agreement liabilities can be effectively defeased through proper asset-liability cash flow matching.

At the next meeting of the MWG on November 7, 2025, Chair Robert Kasinow set out an objective of improving transparency by requiring insurer-level statutory reporting for funding agreements and FABNs, rather than relying on aggregate data from external sources such as the Federal Reserve, Bloomberg and rating agencies.

Tim Nauheimer then explained that the MWG had met in “regulator only” session on October 9 to follow up on the topics raised at the July 21 meeting. He next discussed a slide presentation (Attachment 1 to the meeting materials), which included a flowchart of an FABN transaction, and he noted that there are currently no insurer statutory reporting requirements pertaining to the elements of the transaction subsequent to the issuance of the funding agreement itself. He also reviewed slides on foreign currency (FX) FABNs, funding agreement backed repurchase agreements (FABRs), and funding agreements backing Federal Home Loan Bank advances. He then discussed a number of questions posed to the ACLI and the ACLI’s responses (Attachment 2 to the meeting materials), addressing the following topics: whether FABNs function as operating leverage or financial leverage, the use of derivatives in connection with FX FABNs, and the appropriate level of disclosure of funding agreement backed transactions to enhance transparency.

At the conclusion of the November 7 discussion, the MWG voted to expose a blanks proposal (i.e., a proposal for changes to the contents of the statutory statement for life insurers) for a comment period ending on December 8, 2025. The proposal, which was substantially based on the ACLI’s suggestions, would add new footnote disclosure to Exhibit 7—Deposit-Type Contracts of the statutory statements, including aggregate disclosures regarding funding agreements backing FX FABNs, FABRs, puttable FABNs, and all other types of FABNs, plus additional disclosure regarding whether all funding agreements mirror the terms of the FABNs, a breakdown of funding agreements by currency denomination with related information on hedging of FX exposures, and a breakdown of funding agreements by maturity buckets.

On December 10, 2025, the MWG convened in a joint meeting with its parent task force, the Financial Stability Task Force (FSTF) (see the FSTF meeting materials, FSTF meeting minutes, and a summary of the FSTF meeting). With regard to the new blanks proposal, the MWG and FSTF discussed an ACLI comment letter in which the ACLI noted the regulators’ intention for the proposed new blanks disclosure to reflect issuances backed by funding agreements beyond just FABNs—to also include FABRs, funding agreement backed commercial paper (FABCP), funding agreement backed loans (FABLs), and direct funding agreements. To ensure sufficient time to ensure that the disclosure better reflects the universe of issuances backed by funding agreements, the ACLI requested a 45-day extension of the comment period until January 24, 2026, which was granted.

Valuation Analysis (E) Working Group to coordinate with new Investment Analysis (E) Working Group

The Valuation Analysis (E) Working Group (VAWG) typically meets in “regulator only” sessions because the discussion often includes references to specific insurance companies. One of the primary functions of the VAWG is analyzing the adequacy of insurers’ assets to meet policyholder claims.

As discussed above and in our Legal Update on the NAIC Summer 2025 National Meeting, the restructuring of the VOSTF into the new IATF will include the creation of a new Investment Analysis (E) Working Group (INVAWG), which is likewise expected to meet primarily in “regulator only” sessions and one of whose functions will be to monitor and analyze the risks associated with complex assets.

At the December 10, 2025 joint meeting of the MWG and FTSF, VAWG Chair Fred Andersen presented a report on behalf of the VAWG. Among other topics, he addressed the anticipated “division of labor” between the VAWG and the new INVAWG. He explained that the VAWG will take the lead on issues that are lightly asset-focused and heavily actuarially focused, and that the INVAWG will take the lead on issues that are lightly actuarially focused and heavily asset focused. He also pointed out that several regulators will be members of both groups, which will facilitate coordination between the two groups.