Regulatory Update: American Council of Life Insurers Presents Proposal on Interest Maintenance Reserve Compliance

On October 7, 2026, the Statutory Accounting Principles (E) Working Group (SAP Working Group) of the National Association of Insurance Commissioners (NAIC) held a virtual meeting at which the American Council of Life Insurers (ACLI) presented a proposed framework for the long-term statutory treatment of net negative interest maintenance reserve (IMR).

Since 2023, INT 23-01: Net Negative (Disallowed) Interest Maintenance Reserve has provided optional, temporary guidance permitting limited admittance of net negative IMR, subject to a 10% cap and certain safeguards and disclosures. INT 23-01 has been extended several times and now remains effective through December 31, 2027. Regulators’ core concern throughout has been that economic losses (as opposed to timing losses attributable to interest rate movements) could be inappropriately deferred through IMR.

On April 22, 2026, the SAP Working Group exposed a revised SSAP No. 7 — Asset Valuation Reserve and Interest Maintenance Reserve, related issue papers, and other revisions. The exposure included proposed provisions addressing the long-term treatment and admittance of net negative IMR balances and would generally permit continued limited admittance of net negative IMR, subject to conditions and limitations, including risk-based capital thresholds, capital and surplus limitations, disclosure requirements, and related conditions generally consistent with INT 23-01. In response to this exposure, interested parties submitted comment letters that were broadly aligned in supporting full admittance of net negative IMR but suggested removal of the 10% admittance cap. Several regulators expressed views on the idea of raising or removing the 10% admittance cap, and the ACLI agreed to work with industry to come up with an alternative proposal that would take into account industry compliance with the guardrails set forth in INT 23-01 and, upon effectiveness of the proposed changes, SSAP No. 7.

The ACLI proposed a phased schedule under which the cap is reviewed annually and stepped up as industry compliance with appropriate safeguards is demonstrated. ACLI’s proposal would tie future increases in the cap to demonstrated industry compliance with three safeguards:

1. Asset adequacy testing (AAT) — whether net negative IMR admitted as an asset is excluded from the assets supporting reserves in AAT, so the same deferred loss isn’t counted as an available asset in cash flow testing
2. Proof of reinvestment — whether the proceeds from the sales that generated the deferred losses have been reinvested in a way that supports deferral rather than the losses’ being economic in nature
3. Liquidity sale losses — whether insurers have effective controls to identify losses from liquidity-driven sales that are economic in nature and should therefore not be deferred through IMR

Some regulators raised questions about how compliance would be monitored (e.g., how cap increases would be rolled out if there were broad industry compliance but a handful of noncompliant outliers). Overall, however, there appeared to be general support for adopting a framework along these lines. The specific thresholds, cap steps, and timing remain open, and we expect them to be the focus of the comment process.

The ACLI proposal has been exposed for comment through November 6, 2026, and the SAP Working Group goal is to adopt a revised SSAP No. 7 at the NAIC Fall 2026 National Meeting on November 15.