Residential Mortgage Loan Investing: Beyond Fund Look-Through Treatment

Recent NAIC guidance allows certain investments in unaffiliated commingled mortgage funds to receive the same ~68 bps RBC treatment, provided the underlying mortgages are in good standing, as directly held residential whole loans or loans held in trust. While the guidance is a welcome change that aligns capital charges across structures and improves the efficiency of commingled funds, insurers may consider additional factors when selecting the optimal investment structure for residential mortgage investments.

Structure selection has broad implications for statutory reporting, accounting volatility, FHLB eligibility, liquidity, operational burden, and portfolio customization. Bayview’s reference guide breaks down the key trade-offs across SMAs, affiliated funds, commingled funds, and private RMBS structures, helping insurers determine which approach may best align with their capital, accounting, reporting and balance sheet objectives.

Designed specifically for insurance investment professionals, the piece combines practical commentary with intuitive comparison charts that consider structural implications for Life, P&C, and Health insurers.

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Information is general in nature and subject to change. Insurers should consult their regulatory, accounting and legal advisors.