Regulatory Update: National Association of Insurance Commissioners Fall 2025 National Meeting

The proposal was previously exposed by the Macroprudential Working Group in November 2025 and is intended to provide regulators with information to monitor the activity in the FABN market, as the statutory Annual Statement reporting framework currently does not require reporting with respect to FABNs. The proposal is the result of discussions by the Macroprudential Working Group in July 2025 during which the working group heard a presentation from NAIC staff on FABN and FABS programs. While NAIC staff noted that they do not believe FABN/FABS activity poses any outsized risk for individual insurers or the industry in general, state regulators stated that they would like to receive reporting from insurers to identify aggregate issuance and outstanding FABNs/FABSs and the types of FABNs/FABSs issued rather than relying on information currently received from the Financial Stability Oversight Council and the Federal Reserve Board. The Financial Stability Oversight Council and the Federal Reserve Board have quantified and highlighted this activity in their most recent reports on financial stability.

The additional time to provide comments was requested by the American Council of Life Insurers (ACLI) to allow the ACLI an opportunity to offer further context in its comment letter. In discussing its request for re-exposure, the ACLI noted that it would like additional time to develop a comprehensive response that reflects the full range of funding agreement uses beyond FABNs, including funding agreement-backed repurchase agreements (FABRs), funding agreement-backed commercial paper (FABCP), funding agreement-backed loans (FABLs), and direct funding agreements. The Macroprudential Working Group noted that the intent of the proposal has always been to capture all funding agreements backing FABNs but that the exposure does not request separate reporting for each type of FABN. The Macroprudential Working Group noted that funding agreements backing FABLs are not currently included in the exposure and the Macroprudential Working Group will conduct additional research to determine whether FABLs should be classified as a type of FABN. 

If the Financial Stability Task Force adopts the proposal, a referral will be sent to the Statutory Accounting Principles (E) Working Group (SAP Working Group) to incorporate a new disclosure in SSAP No. 52, Deposit-Type Contracts, and the Financial Stability Task Force chair will sponsor a proposal to incorporate new footnote disclosures to Exhibit 7, Deposit-Type Contracts. The Macroprudential Working Group expects that the proposal will be adopted for disclosure in the year-end 2026 financial statements.

 

The revisions to AG 49-A are intended to address concerns identified by regulators related to companies including multiple historical averages (e.g., 10-year, 15-year, 20-year, etc.), sometimes based on back casting, and often showing the historical averages side-by-side with the maximum illustrated rate (even where the historical averages were two to four times the maximum illustrated rate).

The revisions seek to increase uniformity in disclosure practices by

• prohibiting the inclusion of a table showing annualized actual historical index changes and corresponding hypothetical annualized rates of indexed credits for indices in existence for less than 10 years
• eliminating the perceived optionality in the number of historical years shown by increasing the standard table to require the information for only the most recent 25-year period (or, for indices in existence at least 10 years but less than 25 years, the number of years the index has been in existence)
• prohibiting tables or disclosures that explicitly or implicitly compare historical returns and maximum illustrated rates, such as a side-by-side presentation
• adding to Section 3 new defined terms for “historical period,” “inception date,” and “index,” which terms are used in revised Section 7

The revisions to AG 49-A will apply prospectively to policies sold on or after April 1, 2026.

Model 275 includes a safe harbor provision that allows insurance producers to satisfy the regulation’s best interest standard if they comply with a comparable standard, such as those required by the SEC’s Regulation Best Interest and applicable Financial Industry Regulatory Authority rules. The guidance document clarifies supervisory obligations for insurers that issue annuities sold under the safe harbor. Specifically, for the sale harbor provision to apply, insurers must monitor the relevant conduct of the insurance producer using information gathered in the normal course of an insurer’s business, and insurers must provide supervising entities (such as broker-dealers) with sufficient data for the supervising entity to maintain effective oversight systems. The guidance document provides that components of an effective monitoring program may include a written contract between the insurer and the supervising entity; robust onboarding procedures by which an insurer reviews the policies and procedures of the supervising entity; ongoing monitoring activities, such as audits and due diligence/compliance questionnaires conducted by the insurer; and obtaining certifications of compliance from the supervising entity. The guidance document also includes a list of the types of information the insurer might share with the supervising entity to satisfy the insurer’s reporting obligation.

The key revisions include (a) limiting the LTCI MSA Framework to a single rate review methodology (based on the Minnesota approach and removing references to the Texas approach), (b) updating the cost-sharing factors to reduce rate increases for policyholders who have faced high cumulative rate increases (typically older policyholders with older policies), and (c) moving the governance of the LTCI MSA Framework and related processes to the Health Actuarial (B) Task Force and other related work, such as reduced benefit options, to the Senior Issues (B) Task Force.

a. NAIC Proposes Restructuring of Natural Catastrophe Risk and Resilience Activities

At the Fall Meeting, the NAIC announced a proposal to restructure and consolidate the existing Climate and Resiliency (EX) Task Force, the Catastrophe Insurance (C) Working Group, and the NAIC/Federal Emergency Management Agency (C) Working Group into the new Natural Catastrophe Risk and Resilience (EX) Task Force. The streamlined structure is intended to enhance coordination among regulators and stakeholders, strengthen natural catastrophe risk management, improve communication and mitigation strategies, and align more closely with the NAIC Center of Excellence on Catastrophe Modeling and Risk Management (and related data resources) developed in recent years.

The new task force is expected to be charged with

• implementing the deliverables outlined in the NAIC National Climate Resilience Strategy for Insurance and efficiently coordinating its operationalization, implementation, and communication initiatives
• serving as the coordinating body for discussions and engagement on matters related to natural catastrophe risk and resilience
  assessing existing and proposed financial regulatory strategies aimed at addressing natural catastrophe risk and enhancing resilience
• coordinating communications regarding catastrophe risk and resilience, solvency strategies and tools, and mitigation programs and discounts
• acting as a catalyst and repository for innovative ideas and vision development for the NAIC Center of Excellence on Catastrophe Modeling and Risk Management, focusing on future resources and services for members

The new task force is also expected to oversee the work of two new working groups: the Pre-Disaster Mitigation & Risk Modeling Working Group and the Severe Peril Working Group. The proposed charges of the new task force and its working groups have been exposed for a public comment period ending January 12, 2026.

b. NAIC Adopts the Homeowners Market Data Call Template and Definitions

The NAIC adopted a revised data template and definitions for the homeowners market data call. The revised data call materials are expected to provide regulators with additional data while clarifying definitions. To support the updated scope and capture industry trends, the 2026 data call will require eight years of data (2018–25). Data from ISO policy forms HO4, HO6, and HO7 are now being requested. Other new data elements include count of paid claims and losses paid by type of peril, company-initiated cancellations collected by time periods similar to the market conduct annual statement (MCAS), written and return premium for cancelled policies, count of policies in force, and certain information related to discounts. Mirroring the threshold used in MCAS, companies with at least $50,000 in homeowners premiums in any of the years 2018 to 2025 in a participating state will be required to report requested data for all years included in the 2026 data call. Going forward, the $50,000 threshold will apply only to the applicable data call year. It is expected that states will issue the data call in early 2026 with a submission due date in June 2026.

The PBM Guidelines, which the PBM Working Group adopted during the Fall Meeting, do not constitute a model law, a regulation, or a white paper but rather are intended to serve as a guidance document for regulators implementing state legislation governing PBM licensure. The PBM Working Group adopted the PBM Guidelines despite concerns raised by industry interested parties that the PBM Guidelines are styled more like a model law or regulation than a guidance document and may conflict with PBM laws adopted by state legislatures. The PBM Working Group has exposed for comment until January 16, 2026, a draft of the PBM examination chapter for inclusion in the NAIC Market Regulation Handbook. It is expected that both the PBM Guidelines and the PBM examination chapter will be discussed and considered for adoption by the Market Regulation and Consumer Affairs (D) Committee during the NAIC Spring 2026 National Meeting.

The proposed modifications follow discussions at the Chief Financial Regulator Forum and the Risk-Focused Surveillance (E) Working Group in late 2024 and early 2025 regarding the recent increase in the formation of reciprocal exchanges and regulators’ challenges in assessing the fairness and reasonableness of attorney-in-fact fees charged to newly formed reciprocal exchanges. Twenty-one new reciprocal exchanges were formed from 2019 to 2024, and direct premiums written by reciprocal exchanges increased by 55.35%. While the attorney-in-fact fee structure is often based on a percentage of gross premiums written, the Risk-Focused Surveillance (E) Working Group suggested that attorney-in-fact fees should be limited to the cost of any management services provided plus a reasonable profit.

The White Paper discusses the statutory processes that certain states have recently adopted to govern insurance business transfer (IBT) and corporate division (CD) transactions. The White Paper includes a survey of U.S. restructuring statutes and regulations (including a summary of transactions completed to date) and a summary of the significant legal issues related to IBT and CD laws (including guaranty association issues). Among other things, the White Paper recommends that regulators develop financial best practices to be used in considering the approval of proposed restructuring transactions.

Consistent with this recommendation, the working group also adopted the Best Practices document, which establishes best practice procedures for state insurance regulators to use in reviewing IBT and CD transactions. Among other things, the Best Practices document outlines a framework for the application for approval of an IBT or CD transaction, recommends that an independent expert review the transaction, and establishes procedures to protect the due process rights of policyholders, claimants, and other stakeholders.

a. VOS Task Force Provides Grace Period for Filing of Private Letter Rating Annual Updates

At the Fall Meeting, the VOS Task Force adopted an amendment to the P&P Manual that provides insurers with a 30-day grace period to submit annual rating updates to the NAIC Securities Valuation Office (SVO) following a CRP’s annual renewal of a private letter rating (PLR) (i.e., no later than 395 days following the date of the prior calendar year’s initial PLR or annual rating update).

Insurers are required to file a copy of the PLR rating letter with the SVO each calendar year as part of the conditions for FE with respect to private letter securities. The objective of the grace period is to avoid the need to deactivate PLRs that received annual updates close to year-end. This amendment would update the PLR instructions to permit a 30-day grace period for PLR annual updates, regardless of when they occur during the year.

The VOS Task Force emphasized that the 30-day grace period applies only to the filing of the annual PLR update itself. Insurers must still comply with the requirement to file the accompanying PLR rationale report within 90 days of the annual update or any rating change.

b. VOS Task Force Adopts Amendment to Further Postpone Implementation of CLO Modeling Project

At the Fall Meeting, the VOS Task Force adopted an amendment to the P&P Manual that delays the implementation of its CLO modeling process until December 31, 2026. The delay is intended to permit the SSG to improve the modeling methodology and allow better alignment with other NAIC workstreams.

The VOS Task Force previously adopted an amendment to the P&P Manual, which became effective January 1, 2025, to add reporting instructions for the financial modeling of CLOs. Specifically, the P&P Manual amendment makes CLOs ineligible to use CRP ratings to determine an NAIC Designation if the SSG can model the security. The P&P Manual amendment was introduced after the NAIC Investment Analysis Office identified that NAIC Designations assigned to CLOs were inconsistent when relying on CRP ratings and recommended this change to ensure reporting equivalency for NAIC regulatory purposes. 

The CLO modeling project has been led by an ad hoc group, and while the modeling methodology is operationally and technically ready to produce results for year-end 2025, the VOS Task Force determined to delay the effective date for implementation to align with ongoing work by the Risk-Based Capital Investment Risk and Evaluation (E) Working Group and the American Academy of Actuaries related to asset-backed securities, like CLOs, as well as the holistic review of the overall risk-based capital (RBC) framework by the Risk-Based Capital Model Governance (EX) Task Force. 

c. New Committee Structure for NAIC Investment Monitoring Activities

The Fall Meeting marked the final public meeting of the VOS Task Force. As previously announced, at the direction of the Financial Condition (E) Committee, effective January 1, 2026, the VOS Task Force will be replaced by the Invested Assets (E) Task Force with three working groups reporting to it: Invested Assets (E) Working Group (Invested Assets Working Group), Investment Designation Analysis (E) Working Group (Investment Designation Analysis Working Group), and the Credit Rating Provider (E) Working Group (CRP Working Group). The names of the working groups reporting to the new task force have been updated since the restructuring was announced.

Under the new structure, the task force will become a commissioner-level group, chaired and vice chaired by two commissioners. In addition to overseeing the three new working groups, the task force would (i) provide a forum for regulator education on investment products, their performance, and their financial risks as well as methods for regulators to address such risks and (ii) analyze new or evolving investment products that may possess characteristics that pose unique risks to insurers and the industry and coordinate with different NAIC groups to develop, implement, or advise on investment-related solvency policy changes or procedures.

The new Invested Assets Working Group is intended to be the primary group analyzing new or evolving investment products that may possess characteristics that pose unique risks to insurers. The working group is expected to be limited in size and hold most of its meetings in a regulator-only setting.

The VOS Task Force’s current charges will be divided between the Investment Designation Analysis Working Group and the CRP Working Group. The Investment Designation Analysis Working Group will focus on monitoring the operations of the SVO and the SSG to ensure they continue to reflect regulatory objectives and maintaining and revising the P&P Manual to provide solutions for investment-related regulatory issues for existing or anticipated investments. The CRP Working Group will focus on implementing the CRP due diligence framework, including proposing further refinements to the FE process.

 

 

d. VOS Task Force Updates on CRP Rating Due Diligence Framework and FE Discretion Projects

At the Fall Meeting, the VOS Task Force received reports on the CRP rating due diligence framework and FE discretion projects.

The CRP due diligence framework is intended to be a structured, scalable, and pragmatic process to support the NAIC’s reliance on the translation of CRP ratings to NAIC Designations. It is expected to provide practical oversight focused on areas where CRP ratings have the greatest potential effect on the insurance industry. The CRP due diligence framework design remains in progress. A preliminary data analysis using NAIC historical ratings history and insurer statutory filings is also underway. To supplement gaps in the NAIC’s available data repository, additional data was requested from each CRP on August 8, 2025. Review and normalization of the data provided to date will continue as more data is received. After the data analysis is complete, a completed draft CRP due diligence framework will be presented to the new CRP Working Group, which will then determine whether it is ready to be exposed for public comment or whether further refinements will be required prior to such exposure. The VOS Task Force expects to receive a status update with further details at the upcoming Spring 2026 National Meeting. 

The FE discretion project is intended to allow the NAIC to challenge ratings assigned using the FE process that it does not think are a reasonable assessment of the investment risk, with the final decision as to whether to maintain or remove a rating from FE eligibility remaining with the regulators. Although the authority granted to the NAIC as part of the FE discretion project becomes effective January 1, 2026, the system needed to make the process operational and the agreements necessary to ensure the security of information and data are still in process.

The proposal reflects regulators’ growing focus on the risk profile of collateral loans. On May 29, 2025, the Blanks (E) Working Group adopted revisions to AVR and Schedule BA, Other Long Term Invested Assets (Schedule BA) to incorporate more granular reporting of collateral loans based on the type of underlying collateral that secures the loan. The revisions are intended to address concerns that some insurers were using collateral loans as a way to access certain types of investment structures while obtaining more favorable RBC treatment than if they held the underlying collateral directly.

The proposal introduces a look-through approach that ties RBC treatment of collateral loans to the nature of the underlying collateral rather than applying a single, uniform collateral loan factor. For example, the conceptual proposal suggests applying a 30% RBC charge for collateral loans backed by mortgage loans as well as collateral loans backed by investments in joint ventures, limited partnerships, and limited liability companies and a 45% RBC charge to collateral loans backed by residual tranches. These are the same RBC charges applied to such underlying investment categories rather than the current 6.8% RBC charge that applies to collateral loans.

a. NAIC Adopts Clarifications to Guidance on the Risk Transfer Analysis of Combination Reinsurance Contracts

During the Executive (EX) Committee and Plenary meeting, the NAIC adopted revisions to SSAP No. 61, Life, Deposit-Type, and Accident and Health Reinsurance (SSAP No. 61), and Appendix A-791, Life and Health Reinsurance Agreements (A-791), to incorporate guidance noting that interdependent contract features such as a shared experience refund must be analyzed in the aggregate when determining risk transfer. The revisions are immediately effective for new and newly amended contracts, with provisions to allow a December 31, 2026, effective date for existing contracts to allow time for industry and regulator assessment. The revisions were approved by the SAP Working Group at the NAIC Summer 2025 Meeting and by the Financial Condition (E) Committee earlier at the Fall Meeting.

The proposed revisions to SSAP No. 61 clarify that for purposes of evaluating whether a contract with a reinsurer transfers risk, what constitutes a contract is essentially a question of substance. For instance, the profit-sharing provisions of one contract may refer to experience on other contracts and therefore raise the question of whether, in substance, one contract rather than several contracts exists. Therefore, if agreements with a reinsurer do not, in the aggregate, transfer risk, the individual component contracts that make up those agreements also would not be considered to transfer risk, regardless of how they are structured.

The revisions to A-791 were first exposed in June 2025 and are intended to clarify that risk transfer can occur only if there is no potential for payments out of surplus at the reinsurer’s option or automatically upon the occurrence of some event, meaning that in all cases there would be an established liability to absorb any possible payments.

b. SAP Working Group Eliminates Investment Subsidiary Classification

During the Fall Meeting, the SAP Working Group adopted revisions to remove the “investment subsidiary” concept from Schedule D-6-1, Valuation of Shares of Subsidiary, Controlled, or Affiliated Companies (Schedule D-6-1) and the annual statement instructions, effective December 31, 2026. The revisions bring these materials into alignment with SSAP No. 97, Investments in Subsidiary, Controlled and Affiliated Entities (SSAP No. 97).

The revisions were originally developed to address ongoing confusion surrounding the classification of investment subsidiaries in Schedule D-6-1, and the life RBC formula. The concept of an investment subsidiary, an entity that holds assets solely for the benefit of the reporting entity, was originally introduced in SSAP No. 46, Investments in Subsidiary, Controlled, and Affiliated Entities, which required equity method valuation adjusted for statutory principles. However, the investment subsidiary concept was eliminated in 2005 with the adoption of SSAP No. 88, Investments in Subsidiary, Controlled and Affiliated Entities (SSAP No. 88), and was not reincorporated when SSAP No. 88 was replaced by SSAP No. 97 in 2007.

These revisions now remove the outdated references that no longer align with existing statutory accounting guidance. These revisions do not prohibit insurers from owning investment subsidiaries, as such structures are authorized under the Investments of Insurers Model Act (Model 280); however, Model 280 does not provide accounting or reporting guidance, which falls under the purview of statutory accounting principles and the annual statement instructions.

The SAP Working Group also directed NAIC staff to sponsor a proposal to remove annual statement reporting components as well as a referral to the Capital Adequacy (E) Task Force to eliminate RBC-related instructions. As a result, investments previously reported as investment subsidiaries will no longer receive specialized or imputed RBC treatment based on subsidiary form. Instead, RBC charges will be determined based on the statutory accounting classification and characteristics of the underlying assets as if they were held directly by the reporting entity.

The elimination of the investment subsidiary concept had been tied to proposed guidance in SSAP No. 37 that would allow for qualifying statutory trust structures to hold and report residential mortgage loans on Schedule B, Mortgage Loans as if the loans were held directly by the insurer. Those revisions were also adopted by the SAP Working Group during the Fall Meeting and are effective January 1, 2027, with early adoption permitted.

Assets of the statutory trust may consist only of single residential mortgage loan agreements (meaning each to be legally separate and divisible) of a type that could otherwise be directly held by the reporting entity under SSAP No. 37. The revisions to SSAP No. 37 and SSAP No. 40, Real Estate Investments (SSAP No. 40), also permit real estate acquired through foreclosure to be held within a limited liability company (LLC) that is wholly and directly owned by a qualifying statutory trust. The proposed revisions to SSAP No. 40 further clarify that real estate must be owned by an LLC directly and wholly owned by either the reporting entity or a qualifying statutory trust, meaning the LLC must be held directly by the qualifying statutory trust and cannot be layered (e.g., an LLC wholly owned by an LLC wholly owned by the qualifying statutory trust).

For a statutory trust to be considered qualifying it must meet six criteria:

• The trust must be domiciled in a U.S. state or territory.
• The insurer must hold 100% beneficial ownership interest of the trust.
• The trust may hold only certain assets (cash and cash equivalents, real estate received through foreclosure, and/or residential mortgage loans).
• The trust may not engage in restricted activities.
• All cash flows from mortgage loans must flow directly through the trust to the insurer.
• The trust must maintain certain documentation requirements.

Statutory trusts that meet all six of the criteria are to be considered qualifying and within the scope of SSAP No. 37. The proposed revisions also establish new disclosures on Schedule A, Real Estate and classified as “held for sale” in accordance with SSAP No. 40, which would include a description of the trust, summary of assets and liabilities held within trust, disclosure of material litigation and/or regulator reviews, disclosure of financing transactions, and summary of mortgage loans held in trust disaggregated by loan standing.

c. SAP Working Group Adopts Clarifications to Guidance on Private Placement Securities

The SAP Working Group adopted revisions to statutory accounting guidance to enhance transparency and consistency in the reporting of private placement securities. The revisions introduce a new electronic reporting column in applicable investment schedules to identify whether investments are publicly registered, Rule 144A, or private placement securities, and require an aggregate disclosure summarizing key information by category. The revisions clarify classification boundaries under the Securities Act of 1933 and remove duplicative reporting from Schedule D-1A, Quality and Maturity Distribution of All Bonds Owned December 31 at Book/Adjusted Carrying Values by Major Types of Issues and NAIC Designation. These changes are effective for year-end 2026.

Also related to private placements, the SAP Working Group exposed for public comment revisions intended to consolidate and clarify disclosure requirements for commitments and contingent commitments, including private placement commitments. The proposed changes would relocate and harmonize disclosure requirements across the annual statement instructions, SSAP No. 1, Accounting Policies, Risks & Uncertainties, and Other Disclosures; SSAP No. 5, Liabilities, Contingencies and Impairments of Assets; SSAP No. 21, Other Admitted Assets; SSAP No. 26, Bonds; and SSAP No. 43, Asset-Backed Securities.

The revisions also add a formal definition of “commitments,” require a comprehensive commitments disclosure in Note 14, and introduce new Schedule D columns to capture commitments for additional investment.

NAIC staff received inquiries regarding whether statutory accounting guidance should explicitly address investments that include clawback provisions, which are contractual features that allow the issuer or originator to recover previously distributed or paid amounts under specified conditions. Although such provisions are often associated with equity-related investments, NAIC staff have noted that these features were historically found in certain types of debt securities but have become less common. Accordingly, NAIC staff has requested industry feedback on the types of investments that include clawback features and the prevalence of these provisions within insurers’ investment portfolios. Additional input was also requested on the typical triggers, valuation and accounting treatment, and potential implications for statutory reporting and risk assessment investments with clawback features.

Comments on the proposed revisions are due on February 13, 2026.

d. SAP Working Group Considers Clarifications to Guidance on Sale-Leasebacks

The SAP Working Group exposed revisions to SSAP No. 22, Leases (SSAP No. 22), that would clarify the statutory accounting treatment of sale-leaseback transactions that include restrictions on the seller’s access to the proceeds received from the sale. Under the clarified guidance, transactions in which cash or other assets received by the seller are effectively restricted, such that they are unavailable to satisfy policyholder obligations or would be forfeited upon early termination, do not qualify for sale-leaseback accounting.

The proposed revisions were drafted in response to a question NAIC staff received on a sale-leaseback transaction that included a significant restriction on the cash received as part of the sale of the assets and whether such a transaction would meet the definition of a sale-leaseback in accordance with SSAP No. 22. In the transaction, the company was able to sell the nonadmitted asset to an unaffiliated party, but as a part of the transaction, the cash the seller received was to be held in such a manner that the selling insurance company would not be able access the cash until the leaseback was fully paid off years in the future.

Regulators noted that if the insurer were to be put into receivership during the lease term, the cash would not be able to pay policyholder claims. As a result, the proposed revisions are intended to address concerns that certain sale-leaseback structures could otherwise result in admitted assets that are not truly available in the event of insolvency where the selling insurer is restricted from readily accessing the sales proceeds. In such instances, such arrangements must be accounted for as financing transactions. Under the financing method, the underlying asset is not derecognized, the cash received is recognized as an asset, and a corresponding liability is recorded for the obligation to repay the proceeds.

The guidance would apply prospectively to contracts in effect on or after December 31, 2026, with the intent of avoiding retroactive disruption to existing arrangements while strengthening consistency and regulatory clarity going forward.

Comments on the proposed clarifications are due on February 13, 2026.

e. SAP Working Group Proposes Review of Guidance on Joint Ventures, Partnerships, and LLCs

The SAP Working Group proposed a review and clarification of the accounting and reporting of equity changes for investments in scope of SSAP No. 48, Joint Ventures, Partnerships, and Limited Liability Companies (SSAP No. 48), and how they are applied, to ensure intended guidance is clear and consistently applied.

Under existing guidance in SSAP No. 48, investments must be reported using the equity method. If a reporting entity holds a minor ownership interest (less than 10%) or lacks control, the equity calculation is limited to the guidance in SSAP No. 48. If there is a more-than-minor ownership interest, then the equity method is calculated pursuant to the guidance in SSAP No. 97. The general concept of the equity calculation is the same in both SSAP No. 48 and SSAP No. 97. Under both SSAP No. 48 and SSAP No. 97, audited financial statements are required to support the equity method calculation and for the investment to be admitted.

The SAP Working Group is seeking feedback on the timing of recognizing equity method changes, the use and disclosure of audited financial statements, treatment of goodwill and negative goodwill, reporting of unrealized gains and losses, and related disclosures under Schedule BA. The review is intended to ensure consistent application of the equity method and improve transparency of reported equity values, with potential future revisions following consideration of comments.

This review is in line with the SAP Working Group Investment Classification Project, which was undertaken to review the statutory accounting guidance related to investments, including SSAP No. 48. However, after completion of numerous revisions (including the bond project), the agenda item was closed, with a note that future revisions under the project would be captured in new agenda items to allow for easier tracking. A review of SSAP No. 48, although originally identified, was not completed under that project.

Feedback on the proposed review is due on February 13, 2026.

f. SAP Working Group Considers Clarifications to Guidance on Repurchase Agreements

The SAP Working Group exposed revisions to SSAP No. 103, Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SSAP No. 103), to clarify the guidance requiring nonadmittance of long-term repurchase and reverse repurchase transactions. Under existing guidance in SSAP No. 103, repurchase and reverse repurchase transactions with maturity dates in excess of 365 days are required to be nonadmitted. The revisions provide that if a repurchase agreement satisfies the initial and ongoing SSAP No. 103 collateral requirements (i.e., collateral equal to at least 95% of the fair value of the transferred/sold security), the agreement’s maturity length should not affect its admittance. Reverse repurchase agreements with maturity dates that exceed one year, in contrast, would continue to be required to be nonadmitted.

NAIC staff noted that repurchase and reverse repurchase agreements are different transactions, serving different purposes for insurers, and therefore should be assessed separately in determining whether nonadmittance should be required for maturities in excess of one year. Specifically, in a repurchase agreement, the insurer has transferred an asset to the counterparty for cash and the valuation risk is assumed by the counterparty. On the other hand, in a reverse repurchase agreement, the asset valuation risk has been assumed by the insurer.

The SAP Working Group requested comments from industry on the prevalence of “put” type provisions in repurchase agreements, noting that if there is concern that longer-dated repurchase agreements can be putted and terminated early, leaving an insurer to liquidate invested assets, then it would consider establishing provisions that address the puttable nature of all borrowing agreements rather than limiting a specific form of borrowing transaction.

g. SAP Working Group Updates on Asset-Liability Matching Derivatives

The SAP Working Group directed NAIC staff to move forward with an issue paper and concurrent SSAP to reflect statutory accounting guidance for interest-rate hedging derivatives used for asset-liability matching (ALM) using an amortized cost approach. NAIC staff indicated it expected these items to be presented for exposure by the NAIC Spring 2026 National Meeting with a potential effective date of January 1, 2027.

On September 10, 2025, the SAP Working Group received a presentation from the ACLI regarding proposed new statutory accounting guidance for ALM derivatives along with two drafts of potential statutory accounting guidance: one using an amortized cost approach, and one using a fair value and spread method. The presentations and both potential options for statutory accounting guidance were exposed for public comment. Comments from industry members recommended moving forward with the ACLI’s amortized cost approach.

NAIC staff expects to start with the draft amortized cost approach provided by the ACLI but will revise it to conform to the SAP Working Group’s statutory accounting concepts and format. NAIC staff noted that the amortized cost approach is consistent with the SSAP No. 86, Derivatives, approach for highly effective hedges and is easier to apply in that unlike in the fair value and spread method, an unrealized gain or loss would not occur.

The SAP Working Group expects to work with industry on related reporting concepts, including whether reporting can be included in existing Schedule DB, Derivatives, or whether new schedules would be required to identify these derivatives separately from other derivatives schedules.

h. SAP Working Group Updates on IMR Topics

The SAP Working Group exposed revisions to SSAP No. 61 to clarify how IMR derecognized by the cedent pursuant to a reinsurance transaction should be reflected in determining the amount of reinsurance collateral required from the assuming entity to receive reinsurance credit.

With respect to net positive IMR derecognized from a reinsurance transaction, the revisions reiterate the current requirement under SSAP No. 61 that reinsurance collateral be increased. While industry comments advised that the inclusion of eliminated net positive IMR in the collateral requirement is often driven by the terms of the negotiated reinsurance treaties, NAIC staff has taken the position that this is inconsistent with statutory accounting principles and deviations should be supported by a permitted or prescribed practice.

With respect to net negative IMR derecognized from a reinsurance transaction, the draft revisions prohibit a decrease in reinsurance collateral requirements, although the SAP Working Group is seeking public comment as to whether this asymmetrical approach is appropriate or if both positive and negative IMR derecognized from reinsurance transactions should affect the reinsurance collateral requirement.

Also related to IMR, the SAP Working Group exposed proposed concepts and templates relating to an IMR proof of reinvestment requirement. A fundamental concept of a negative IMR, supporting the deferral of realized loss recognition with amortization over time, is that the proceeds from the sale of fixed-income instruments have been reinvested into new fixed income instruments with a higher yield. To facilitate verification without specific investment tracking, a calculation template has been developed to determine whether (i) insurers are sufficiently acquiring fixed-income instruments in comparison to their investable premium and sold fixed-income investments and (ii) whether the weighted average yield on the investments acquired is greater than the weighted average yield of the investments sold. A company would be required to complete and pass both tests within the proof of reinvestment to move to a net negative IMR balance (from a prior positive IMR position) and/or increase a prior year net negative IMR balance. The proof of reinvestment is intended to be captured as a disclosure within SSAP No. 7, Asset Valuation and Interest Maintenance Reserve, for annual completion as required by affected reporting entities.

These proposals were each driven from discussion at the IMR Ad Hoc Group that has been charged with developing long-term IMR guidance. The IMR Ad Hoc Group continues to meet regularly, with recent discussions focusing on the proof of reinvestment, the concept of “disallowed” IMR, separate account reporting, amortization of IMR, and updating the NAIC Designation change guidance for allocating realized gains and losses to either IMR or AVR. It is anticipated that only a few key topics remain, including excess withdrawals, market value adjustments, modified coinsurance and funds withheld reinsurance transactions, and the admittance limit.

 

In November 2019, the International Association of Insurance Supervisors (IAIS) adopted ComFrame and the ICS, the group capital component of ComFrame, as part of a set of reforms designed to enable effective cross-border supervision of IAIGs and contribute to global financial stability. Implementation of the ICS is being undertaken in two phases, the first of which was a five-year monitoring period (which commenced in January 2020), now being followed by full implementation of the ICS as a groupwide PCR. The U.S. developed the AM as an alternative to the ICS to avoid the application of multiple capital standards to groups domiciled in the U.S.

Since the adoption of the ICS and the IAIS determination that the AM can be used as a PCR in lieu of the ICS for U.S.-based IAIGs on December 5, 2024, the NAIC has been working on the implementation process for the AM through the group capital calculation as other jurisdictions are in the process of implementing the ICS into their supervisory regimes.

At the Fall Meeting, the AM Working Group discussed a timeline for implementation of the AM in 2026, in coordination with the IAIS timeline for implementation of the ICS. The IAIS has set high-level timelines for its plans to assess the comprehensive and consistent implementation of the ICS across jurisdictions and will coordinate a self-assessment by IAIS members of their progress in implementing the ICS, which will serve as a baseline for future implementation progress monitoring. In 2027, the IAIS plans to initiate detailed jurisdictional assessments of ICS implementation.

In light of that timeline, in early 2026, the AM Working Group intends to finalize the work completed to date on key technical topics, including interest rate risk, scalars, and supervisory intervention considerations and to identify any remaining gaps or refinements needed to support a final, operational AM framework. Following the completion of such work, the AM Working Group intends to move toward finalization of the AM in mid-2026, including with the final plans for reporting of AM results within existing U.S. supervisory processes.

a. AI Systems Evaluation Tool

In July 2025, the Big Data and Artificial Intelligence (H) Working Group (BDAI Working Group) exposed for comment an AI Systems Evaluation Tool (Evaluation Tool) to enable regulators to identify and assess both financial and consumer risks arising from insurers’ use of AI systems (AIS). In response to comments received during the exposure period, the BDAI Working Group released Version 2.0 of the Evaluation Tool for comment prior to the Fall Meeting. During the Fall Meeting, the BDAI Working Group held an in-depth, four-hour-long meeting to discuss comments received on the revised version of the Evaluation Tool. 

The current version of the Evaluation Tool includes the following four exhibits to be used at the regulator’s option and that are proposed as a standardized method of data collection for regulators to request and review quantitative and qualitative information about an insurer’s use of AIS. 

• Exhibit A: Quantify Regulated Entity’s Use of AI Systems: quantifies the insurer’s existing and planned use of AIS across operational areas, including data on models with consumer impact and material financial impact
• Exhibit B: AI Systems Governance Risk Assessment Framework: seeks detailed information regarding the insurer’s AI governance and risk management program, processes, and procedures and serves as a potential guide for what regulators will be looking for in an insurer’s AIS program
• Exhibit C: AI Systems High-Risk Model Details: seeks information on insurers’ use of “high-risk AI system models,” which are defined as models making automated decisions that could cause adverse consumer, financial, or financial reporting impact
• Exhibit D: AI Systems Model Data Details: seeks detailed information on the source(s) and type(s) of data used in AIS models, including whether the data is sourced internally or from third parties

The BDAI Working Group expects Exhibit A to be the most frequently used part of the Evaluation Tool, as it will inform regulators’ requests with respect to Exhibits B, C, and D. Discussion during the Fall Meeting focused on revisions to the background, intent, scope, and Exhibit A of the Evaluation Tool. Exhibits B–D were not discussed due to time constraints.

The BDAI Working Group expects to release Version 3.0 of the Evaluation Tool for use in the regulator self-audit pilot beginning in early 2026. The pilot is expected to include 10 to 12 participating states that will use the Evaluation Tool in their financial and market conduct examinations. Regulators from the participating states will meet periodically to discuss the implementation of and feedback on the Evaluation Tool. The pilot is expected to conclude before the end of 2026, with the Evaluation Tool being finalized thereafter.

b. Third-Party Data and Model Regulatory Framework

The Third-Party Data and Models (H) Working Group exposed a draft Third-Party Data and Model Regulatory Framework, which was developed by state insurance regulators from Colorado, Florida, Iowa, Pennsylvania, and Vermont. The purpose of the regulatory framework is to provide regulators with access to third-party data and models used in insurance functions with direct consumer impact and to establish governance standards for model and data integrity, consumer protection, and ongoing monitoring.

The draft framework would apply to certain defined third-party data and model vendors and would apply when data or models would have direct consumer impact, including in pricing, underwriting, claims, utilization reviews, marketing, and fraud detection. The framework would require third-party data and model vendors to register with a state department of insurance and submit documentation of their governance program for approval. Under the draft framework, states would have discretion to request filings of data and models in addition to registration.

Initial oral comments from industry interested parties requested that the working group consider options for registration with one state department of insurance to be recognized by other states, noting efficiency gains that would benefit all parties. Other comments noted that review of data and models themselves would require specialized expertise at state departments of insurance and emphasized the costs of compliance on “startup” data and model vendors.

The draft framework has been exposed for a public comment period ending February 6, 2026.

c. Cybersecurity Incident Response Framework

At the Fall Meeting, the Market Conduct Examination Guidelines (D) Working Group provided an update on its development of a Cybersecurity Incident Response Framework. The purpose of this initiative is to assist state departments of insurance in assessing the significance of cybersecurity events and to develop protocols for multistate coordination following a cybersecurity event. The framework is expected to include (i) criteria to assess the impact of the cybersecurity event, (ii) an appropriate threshold that would trigger the need for multistate coordination, (iii) procedures to identify the lead state for coordinating the response, and (iv) clarification as to the roles of relevant NAIC working groups in coordinating the response.

The working group has formed a small group of subject matter experts to create an initial draft of the framework document. The 2024 Cybersecurity Event Response Plan adopted by the Cybersecurity (H) Working Group, which focuses on individual state responses, will be leveraged as part of the drafting process. The new framework document will overlay or be merged with the Cybersecurity Event Response Plan to address how states can coordinate a multistate response. 

An initial draft of the framework is anticipated to be exposed for public comment in the first quarter of 2026.