NAIC Spring National Meeting Highlights Key Developments in Insurance Investments
Insurance companies, sponsors, and other interested parties should take note of significant developments concerning insurer investments from the National Association of Insurance Commissioners’ (NAIC) Spring National Meeting, held in Indianapolis from March 23-26, 2025. These developments span various working groups and task forces and signal potential changes to regulatory oversight in the coming years.
Risk-Based Capital Investment Risk and Evaluation (E) Working Group
The Risk-Based Capital Investment Risk and Evaluation (E) Working Group (RBC IRE) received an update from the American Academy of Actuaries (AAA) on its structured securities project. This project is working to identify and assess the risks associated with Collateralized Loan Obligations (CLOs). The AAA is focusing on CLO attributes, such as tranche ratings, collateral ratings, subordination levels, and leverage, to better predict risk.
RBC IRE also reviewed and took comments on the American Council of Life Insurers’ (ACLI) proposal for uniform risk-based capital (RBC) treatment. This proposal concerns Bond mutual funds, Bond exchange-traded funds (ETFs), and Private bond funds. The aim is to ensure these instruments receive the same RBC treatment.
Life Risk-Based Capital (E) Working Group
The Life Risk-Based Capital (E) Working Group (Life RBC) exposed a proposal for public comment. This proposal suggests regrouping certain Schedule BA line items (including affiliated common stock and residual tranches) in the life insurer RBC instructions. This item is open for a 30-day comment period.
Statutory Accounting Principles (E) Working Group
The Statutory Accounting Principles (E) Working Group (SAPWG) addressed an agenda item to expand Schedule BA/AVR reporting lines for collateral loans. This, in support of a related proposal from the Blanks (E) Working Group, could become effective on January 1, 2026.
SAPWG also exposed a comment period (expiring May 2) for a new component of Schedule S in the NAIC’s annual statement blank for life companies. This component would require disclosure of investment assets deployed in funds withheld (FWH) and modified coinsurance (Modco) structures. Furthermore, SAPWG referred an item to Life RBC to clarify when an RBC reduction can occur for FWH and Modco reinsurance agreements. The proposal includes new language in the life insurer RBC instructions, clarifying that RBC may generally not be reduced if a portion of an FWH or Modco asset is used as collateral in a securities lending, repurchase (repo), or Federal Home Loan Bank (FHLB) transaction.
SAPWG deferred discussion on investment subsidiaries to further study structures using Delaware statutory trusts for investments in residential mortgages. It moved to actively list an item related to the ACLI’s proposed new definition of interest maintenance reserve (IMR), which acts as a valuation adjustment. The definition clarifies that IMR is not intended to defer economic gains and losses related to asset sales compelled by liquidity pressures.
Additionally, SAPWG received a referral from the Financial Analysis (E) Working Group (FAWG) to consider enhanced reporting or disclosures. The goal is to identify if investments held under FWH or Modco arrangements are related or affiliated to the reinsurer.
Valuation of Securities (E) Task Force
The Valuation of Securities (E) Task Force (VOSTF) exposed two proposals about securities subject to a private letter rating (PL securities).
- One proposal requires filing private letter rating Rationale Reports within 90 days of an affirmation, update, or change of rating.
- The second proposal requires rationale reports to include sufficient analytical content to enable an independent party to form a reasonable opinion of the basis for the rating agency’s assessment of investment risk.
About Kramer Levin
This article was authored by Daniel A. Rabinowitz, a lawyer at Kramer Levin Naftalis & Frankel LLP. The firm has a long history of advising clients on complex financial and regulatory matters.
Kramer Levin Naftalis & Frankel LLP – Daniel A. Rabinowitz
