New Statutory Accounting Guidance Permits “Look-Through” Treatment for Residential Mortgage Loans Held by Insurers in Qualifying Statutory Trusts

The NAIC Statutory Accounting Principles (E) Working Group has adopted a revised version of Item 2025-13, amending Statement of Statutory Accounting Principles (“SSAP”) No. 37—Mortgage Loans to allow residential mortgage loans held in a qualifying statutory trust to be treated as directly owned Schedule B mortgage loans for statutory accounting, statutory reporting and risk-based capital (“RBC”) purposes. This “look-through” treatment resolves longstanding uncertainty for insurers that originate and hold residential mortgage loans through statutory trust structures.

Background and Prior Treatment

Insurers frequently utilize statutory trusts, often with a federally chartered bank serving as trustee, to acquire and hold residential mortgage loans. Under the pre-amendment framework, SSAP No. 37 recognized mortgage loan treatment only where the insurer was the lender of record or held a qualifying participation with the lender of record. As a result, insurers using statutory trusts to hold residential mortgage loans faced uncertain accounting and reporting outcomes, with divergent practices across the industry with respect to the statutory accounting, reporting, and RBC treatment of those investments.

Qualifying Statutory Trust Criteria

The amendments to SSAP No. 37 introduce a targeted “look-through” construct for qualifying statutory trusts that hold residential mortgage loans for a single insurer. To qualify, the statutory trust must meet specified criteria, including the following:

• The insurer must own a 100% beneficial interest in the trust. If the trust is a multi-series trust, the insurer must own a 100% beneficial interest in the single series that holds the mortgage loans.
• The trust may hold only mortgage loans, cash and real estate acquired as a result of foreclosure. In addition, consistent with SSAP No. 40—Real Estate Investments, a single parcel of foreclosed real estate may be held through a single-member limited liability company.

The guidance expressly excludes commingled vehicles in which multiple investors own interests in the same statutory trust or series thereof that hold the same pool of mortgage loans. Such multi-investor arrangements will not qualify for “look-through” treatment and, accordingly, will not support Schedule B classification for the underlying loans. They will be reportable on Schedule BA instead.

Accounting, Reporting and RBC Implications

For qualifying statutory trusts, insurers may treat the residential mortgage loans as if held directly for purposes of Schedule B reporting and RBC treatment. This alignment is intended to reflect the insurer’s full economic exposure to—and control over—the underlying assets, where the statutory trust functions solely as a title-holding or administrative conduit. The clarification should reduce variability in statutory reporting and capital treatment, provide greater comparability across insurers employing similar structures and mitigate the prior ambiguity associated with lender-of-record requirements.

Effective Date and Early Adoption

The amendments are effective January 1, 2027. Early adoption is permitted, allowing insurers to implement the new guidance in their December 31, 2025 annual statements if they so choose. Insurers utilizing statutory trusts should assess whether their existing structures satisfy the qualifying criteria and consider the timing of early adoption in light of financial reporting, RBC planning and any necessary structural adjustments.