National Association of Insurance Commissioners (NAIC) Fall National Meeting Highlights

Lara Devieux, CFA – Managing Director, Capital Solutions

“The Twelve Days of Christmas”: U.S. Insurance Regulatory Edition

General Atlantic’s Take: The overriding theme of the NAIC Fall National Meeting is regulators’ desire for increased transparency into insurers’ investment portfolios, risks, and activities. We believe 2026 will be a pivotal year with new disclosures, structures, and NAIC leadership in place that could lead to future regulatory actions.

As we enter the new year, the following are 12 U.S. regulatory initiatives that could bring gifts or coal to insurers in 2026 and beyond.

1. Updated CLO RBC factors progressing
2. High level RBC principles adopted as north star
3. Restructuring of VOSTF effective in 2026
4. Credit rating provider due diligence underway
5. Increased granularity of collateral loans and bond reporting to inform regulators
6. Look through treatment for residential loans adopted; investment subsidiaries eliminated
7. Long-term IMR solution progressing
8. ew disclosures for private placements, unfunded commitments
9. Funding agreement backed notes in focus
10. Life covariance proposal still outstanding
11. Bond fund RBC alignment proposal paused
12. Cross-border reinsurance in focus

1  | Updated CLO RBC factors progressing for year-end 2026

During the Risk-Based Capital Investment Risk & Evaluation (E) Working Group (RBC IRE) meeting, the American Academy of Actuaries (AAA) provided an update on the progress and timing of its project to develop updated RBC factors for CLOs. AAA identified three sensitivities related to recovery rates, prepayments, and collateral repurchase assumptions that, with better data and more time, could improve the accuracy of its model. However, given that the impacts of these sensitivities move in opposite directions and the urgency to implement new factors at year-end 2026, regulators were comfortable with AAA moving forward with current model assumptions. At the same time, regulators exposed for comment the AAA presentation for 45 days ending 1/29/26.

In its presentation, AAA provided preliminary hypothetical RBC factors for six sample CLO deals as a baseline, showing lower RBC charges relative to current bond factors for the highest rated tranches (including 0% for Aaa and Aa2 rated tranches), reaching a tipping point at the approximate Baa3 level with sharply higher RBC charges at the Ba3 level (>5x higher than current bond charges). Final CLO RBC factors are subject to change as the AAA model (once finalized) will be run on the full universe of CLOs.

AAA plans to provide a more meaningful update in January 2026 with the identification of comparable attributes and resulting RBC factors for all CLO tranches, including residuals under both the allowable earned yield (AEY) and the more conservative practical expedient accounting methods, with the goal to finalize the factors in 2Q26 to allow time for changes to the statutory statements via the Blanks (E) Working Group.

2 | High level RBC principles adopted as north star; potential for future RBC changes as gaps are identified

During the Risk-Based Capital (RBC) Model Governance (EX) Task Force, regulators adopted 11 high level RBC principles that will govern the purpose, use, maintenance, and future changes to RBC requirements. In an expedited process, these principles were revised, and concepts were narrowed, based on industry feedback following their release in July 2025.

RBC principles acknowledge differing business models between life, P&C and health insurers, potentially reducing impetus for future RBC alignment

The purpose and use of RBC requirements (principles #1 and 2) remain to identify, and facilitate regulatory action on, potentially weakly capitalized companies, with other secondary considerations such as global competitiveness and product availability removed from the main principles. Equal capital for equal risk (#4), with consistency in time horizons and statistical safety levels, is a guiding principle for RBC requirements, yet regulators recognized that alternative RBC treatments are warranted based on differing risk profiles and business models (i.e. life versus P&C). Additional RBC principles relate to objectivity (#5) to only consider factors that impact solvency risk, accuracy (#6) to be sufficiently precise while avoiding unnecessary complexity and grounding in statutory accounting and reserving practices (#7), where practical. Updates to RBC requirements should be made by regulators when a change could meaningfully impact their assessment of solvency risk (materiality, #3) and in response to emerging risks (#8) by the time they become material to the industry or a segment of companies. Maintaining and updating RBC requirements must be done in an open and transparent (#9) manner, supported by a process (#10) that uses data-driven methodologies and expert judgment and adheres to model risk management standards. Lastly, prioritization (#11) among a potential vast number of RBC refinements should be considered by regulators, taking into account necessity, materiality and time and resource intensity of the changes.

The development of RBC principles is the first step in the RBC model governance framework. Key next steps include 1) revisions to the RBC Preamble to clarify uses, disclosures, and limitations of RBC, 2) development of Model Risk

Management guidelines to articulate specific and detailed governance concepts for retrospective and future RBC changes, and 3) gap analysis for the life industry highlighting inconsistencies in the RBC model and instructions. In 2026, AAA will make recommendations to regulators based on the output of the gap analysis, indicating that future RBC changes to address these inconsistencies, may be on the horizon.

3 | Restructuring of VOSTF effective in 2026, positioning regulators to scrutinize insurers’ investment portfolios

The Fall National Meeting was the last Valuation of Securities (E) Task Force (VOSTF) meeting in its current form, with no material updates ahead of its restructuring into a new commissioner-level Invested Assets (E) Task Force (IATF) with three new sub-working groups in 2026: 1) Invested Assets (E) Working Group (InvAWG), which will focus on portfolio level analysis in mainly regulator-only sessions; 2) Investment Designation Analysis (E) Working Group (IDAWG), which will focus on individual investments for NAIC designation assignments; and 3) Credit Rating Provider (E) Working Group (CRPWG), which will focus on the administration of the CRP due diligence framework once it has been developed and implemented (see separate section below). The regulator chairs and members for these groups were not disclosed during the VOSTF meeting.

The new structure reflects the evolution of the U.S. regulatory regime in response to insurers’ investment portfolio shifts to more illiquid and complex assets in recent years. Further, it positions regulators to scrutinize insurers’ investments from both a top down and bottoms up lens, identifying industry trends, new investment structures, and outlier company-specific risks, which can be flagged and addressed via future regulatory initiatives.

4 | Credit rating provider (CRP) due diligence framework slowly progressing

During the VOSTF meeting, consultant PwC provided an update on the development of a quantitative and qualitative assessment of credit rating providers, which we believe is a high priority for regulators given the widespread use of ratings in the filing exempt process for assigning NAIC designations and the historical concerns by regulators of differing ratings methodologies across CRPs and “ratings shopping” by insurers. Extensive historical ratings data from 8 CRPs was requested by PwC in August 2025 via a standardized template, which will be analyzed in conjunction with statutory filing data as the quantitative part of the due diligence framework. There was no specific date disclosed for the framework to be released and exposed for comment; PwC will provide another update during the Spring National Meeting in March 2026.

Once complete, extensive CRP due diligence should dispel concerns about adequacy of ratings within insurers’ portfolios

A robust due diligence process of CRPs will likely mitigate the need for NAIC designation overrides via the discretion policy, making them used only in rare cases. As noted during the VOSTF meeting, the discretion policy is effective as of 1/1/26, yet regulators are not adequately set up to operationalize the structured review process.

At this point, it remains uncertain whether any existing CRPs will be “disqualified” for NAIC designation purposes in the future. Positively, at the conclusion of the evaluation process, the extensive due diligence being undertaken by the NAIC should dispel concerns raised by the global regulatory/financial services community of the adequacy of insurers’ ratings within investment portfolios and could potentially level the playing field among rating agencies.

5 | Increased granularity of collateral loan and bond reporting positions regulators for future actions

Sch. BA reporting in 2025 includes a detailed classification of collateral loans, including those backed by mortgage loans, investments in joint ventures/partnerships/limited liability companies, residual tranches, debt securities, real estate, and other collateral types. With this information, a potential next step for regulators is to update and differentiate RBC factors by collateral type from the current 6.8% charge for all collateral loans for life insurers. In fact, there is a conceptual proposal outstanding and open for comment until 1/13/26 by the Life RBC (E) Working Group that would make changes to the life RBC blanks and update RBC factors based on the risk characteristics of the underlying collateral; for example, collateral loans backed by residuals would have a 45% RBC factor.

Further, year-end 2025 statutory reporting under the new principles-based bond definition will bring significant changes to Sch. D-1 bonds, with the breakout of sections one and two for issuer credit obligations and asset-backed securities (ABS), respectively, and with many new reporting fields required for regulators to understand the true nature and risk profile of insurers’ assets. For example, in addition to a detailed categorization by asset type, notable new fields on Sch. D-1-2 for ABS include related party investments, collateral types, overcollateralization, and deferred/PIK interest, among others. Importantly, with year-end statutory filings, regulators can compare reporting classifications of Sch. D bonds and Sch. BA non-bond debt securities; specifically, whether there is variation in interpretation and reporting at the insurance company level, potentially flagging specific securities, asset classes and/or entities for further review and scrutiny.

6  | Favorable look through treatment for residential mortgage loans on Sch. B adopted; investment subsidiary concept eliminated

As discussed in recent meetings, regulators in the Statutory Accounting Principles (E) Working Group (SAPWG) adopted a proposal that would allow residential mortgage loans held by insurers in an operationally efficient statutory trust to be reported on Sch. B-Mortgage Loans as if the loans were directly held. As such, within the statutory guidance (SSAP-37-Mortgage Loans), regulators clarified the definition of a mortgage loan to include those acquired through a qualifying investment in a statutory trust, with six specific (but loosened vs. prior proposal) requirements, while also revising the Annual Statement instructions to capture these residential loans within Sch. B reporting requirements. New disclosure requirements on Sch. B facilitated by the Blanks (E) Working Group will include a description of the trust, summary of the assets and liabilities held within the trust, disclosure of material litigation and/or regulator reviews and financing transactions, and a summary of mortgage loans by loan standing. The guidance will be applied prospectively as of 1/1/27 but with early adoption permitted, including via permitted practices for certain insurers and states. With this reporting change, regulators will have greater transparency into insurers’ residential whole loan exposure, which has been a rapidly growing asset class for the industry, potentially prompting regulatory review into market concentration and other risks. Regulators in the Life & Annuity (A) Task Force have begun to examine the potential for residential mortgage market stresses as part of Actuarial Guideline (AG) 53, which requires complex asset-level disclosures for 250+ life insurers.

With look through treatment of residential mortgage loans on Sch. B, regulators will have visibility into insurers’ growing exposure to this asset class

Concurrently, with residual mortgage loans addressed, regulators are moving forward with eliminating the “investment subsidiary” concept via revisions to the statutory blanks and RBC instructions, effective 12/31/26, due to concerns over lack of transparency and potential favorable look-through treatment of assets held in the subsidiary.

7 | Progress on elements of long-term interest maintenance reserve (IMR) solution

Since the Summer National Meeting in August, regulators and interested parties in the IMR Ad Hoc group have prioritized discussions on the key topics of proof of reinvestment, IMR impact to reinsurance collateral, disallowed IMR, separate account reporting, amortization of IMR and NAIC designation change guidance for the allocation of realized gains/losses between IMR and AVR (asset valuation reserve). Outstanding items for future discussions relate to excess withdrawals, market value adjustments, reinsurance transactions/collateral requirements, and the admittance limit.
Recall that at the Summer National Meeting regulators adopted a one-year extension of the effective date of the net negative IMR, allowing negative IMR to be admitted for up to 10% of adjusted capital and surplus (C&S), capped at 10% of current unadjusted C&S.

During the Fall National Meeting, SAPWG regulators discussed and exposed for comments (until 2/13/26) the proposed concept and templates for IMR proof of reinvestment. As a key concept in negative IMR, to support the deferral of realized loss recognition via amortization over time, insurers must reinvest proceeds from the sale of fixed income securities (including mortgage loans) into new comparable assets with a higher yield. To verify proof of reinvestment, regulators created a calculation template to determine if insurers are 1) sufficiently acquiring fixed income securities relative to investable premium and sold fixed income investments, and 2) if the weighted average yield of the acquired investments is higher than the weighted average yield of the sold investments. Proof of both criteria would be required for insurers to move to a net negative IMR balance from a prior positive IMR balance and/or increase a prior year net negative IMR balance (not if an insurer is in a net positive IMR position); if proof is not provided, insurers could only recognize in IMR current year realized losses that offset current year realized gains, with additional realized losses directly reducing surplus. Regulators also exposed for comment (until 2/13/26) a proposal on the IMR impact to reinsurance collateral that discusses whether the treatment of derecognized net negative IMR should reduce required collateral for reinsurance, which would be symmetrical treatment to net positive IMR that is captured as an increase in collateral requirements under the current statutory guidance.

8 | New disclosures for private placement securities and unfunded commitments

As introduced during the Summer National Meeting, regulators in SAPWG adopted new private placement reporting requirements effective 12/31/26, including a new field in quarterly and annual reporting schedules for short-term investments, cash equivalents, bonds (issuer credit obligations and asset-backed securities), common and preferred stocks and other long-term invested assets (non-bond debt securities and residuals only) to classify each investment into the following three categories: 1) publicly registered, 2) Rule 144A securities or 3) private placement securities, including Reg. D and 4(a)2 securities. Additionally, on an annual basis, the insurer must aggregate each type of category, capturing book adjusted carrying values (BACV), fair values (including level 2 and level 3 assets), total deferred and paid-in-kind interest, and BACV with private letter ratings as the NAIC designation.

In a new development, SAPWG introduced and exposed for comments (due 2/13/26) a proposal to expand disclosures for commitments and contingencies given current unclear and incomplete instructions in statutory guidance and reporting requirements. Specifically, regulators noted that Sch. BA has a column for “Commitment for Additional Investment”, while Sch. D does not, yet there could be Sch. D bonds with delayed draw provisions. Furthermore, current disclosures are spread across multiples notes and schedules, limiting regulators’ ability to obtain a comprehensive view of an insurer’s potential obligations. Notably, the regulatory proposal will 1) define commitments and contingent commitments and clarify the scope of reporting (note it does not include debt and holding company obligations, including lines of credit), 2) add a new field for “Commitment for Additional Investment” on Sch. D-1-1 and D-1-2 to be consistent with Sch. BA, and 3) create a new summary disclosure that consolidates commitments and contingent commitments reported in the annual statement. With this information, regulators seek full transparency into potential obligations that could impact insurers’ risk and liquidity profiles.

9 | New disclosures proposed on funding agreement backed notes

In November 2025, regulators in the Macroprudential (E) Working Group hosted a discussion on funding agreements (FAs) and funding agreement backed notes (FABNs), which generally are forms of operating leverage and sources of spread income for insurers. The NAIC’s presentation included structures/types of FA and FABNs, market issuance trends (which stood at a record $261 billion at mid-year 2025 according to Federal Reserve Bank data), key risks and mitigants, and current gaps in statutory reporting requirements, with the goal to enhance insurer-level disclosures via a Blanks proposal that was released for industry comment in December 2025.

At the Fall National Meeting, regulators presented slightly revised disclosures for FAs issued as Deposit-Types Contracts based on industry feedback; specific information to be reported includes a general description, use of funding, whether FA terms match terms of related FABNs and/or if they support puttable FABNs, foreign currency denominations and maturity date buckets. The Macroprudential (E) Working Group sent the proposal to the parent Financial Stability (E) Task Force, which if adopted, will be referred to SAPWG and the Blanks (E) Working Group to incorporate the new disclosures in statutory guidance/statements.

10 | Life covariance proposal remains outstanding following significant industry pushback

The Life Risk-Based Capital (E) Working Group (Life RBC WG) met on 11/14/25 to discuss industry feedback on the proposed revisions to covariance calculations within the RBC formula, which were highlighted in a AAA presentation and exposed for comment in September 2025. In that presentation, AAA outlined the: 1) methodology based on historical public data from 1982-2019 to proxy C-risk categories, 2) recommended correlations for market risks, notably 50% between credit and equity, 25% between interest rate and credit, and 50% between interest rate and equity, with additional nested correlations within credit and equity risk, and 3) the expected impact to the life industry’s RBC via higher required capital, including a sharp increase in RBC capital to support equity risk.

Significant flaws in life covariance proposal exposed by industry; expect significant revisions in 2026

Industry feedback via four comment letters from 8 life insurers and ACLI was highly critical of AAA’s data/methodology and noted the potential for unintended consequences at the individual company level, including significant impacts to capital adequacy levels, risk management practices, and investment strategies. Specific concerns included, but are not limited to: 1) the relatively short time horizon (38 years ending 2019, pre-COVID), 2) use of the total returns of bond funds as a proxy for interest rate risk, which incorporates spread/credit risk and may overstate correlations, 3) multiple RBC proposals that will impact various components of the covariance formula, which should analyzed holistically prior to make changes to correlations, and 4) lack of a proposed field testing, which would highlight RBC impacts across insurers with different risk profiles. Industry participants recommended regulators pause this initiative; while acknowledging these concerns, the proposal is still active, with AAA expected to refine the methodology/analysis and discuss with regulators and interested parties during future meetings in 2026.

11 | Bond fund RBC alignment proposal on hold for life insurers

Regulators in the RBC IRE (E) Working Group put on hold what was a 2025 priority proposal to align the RBC treatment for three types of bond funds: ETFs, SEC-registered bond mutual funds, and private bond funds, which have substantially the same underlying assets and economic risk but different legal forms and RBC treatment. Introduced in February 2025, the proposal for life insurers sought to utilize the Security Valuation Office’s (SVO) weighted average rating factor (WARF) methodology to assign bond NAIC designations and RBC factors for bond mutual funds to be consistent with the RBC treatment of ETFs and private bond funds.

While intuitive and simple in nature, the proposal ran into complications around reporting categories and other classification and measurement inconsistencies between the structures. Further, there was disagreement if the concept should be extended beyond life insurers to the P&C and health sectors. Certain P&C and health insurers (and their asset managers) supported the proposal via standardized comment letters, highlighting the punitive RBC charges for all bond funds. In contrast, other large P&C players believe a look-through treatment for investment RBC charges is unnecessary as the P&C RBC formula emphasizes underwriting risk given short duration liability profiles, unlike the life RBC formula that is heavily influenced by investment risk. While the P&C and Health RBC (E) Working Groups further examine the merits and considerations of this bond alignment proposal, the RBC IRE (E) Working Group paused the life proposal.

12 | Cross-border reinsurance in focus by multiple NAIC groups

Regulators across multiple task forces and working groups, overseen by the Reinsurance (E) Task Force, are focused on elements of cross border (CB) reinsurance transactions in light of significant industry activity and regulator concerns of reduced transparency and policyholder protections. We believe one of the most meaningful regulatory initiatives impacting CB reinsurance is Actuarial Guidelines (AG) 55, which requires disclosures on certain asset-intensive reinsurance contracts to ensure adequate reserves after the transfer of risk offshore. Adopted in August 2025 by the Life Actuarial (A) Task Force and effective for year-end 2025 reporting, AG 55 requires information on the assets supporting the reserves, including assumed net yields and cash flow testing assumptions and results under stress scenarios, among other disclosures related to risks and reserve change attribution. These disclosures (available to regulators in April 2025) combined with further educational sessions on reinsurance transactions, will position regulators to take future actions, including related to reserve levels, if warranted.

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