NAIC Report - 2026 Summer National Meeting

I. Investment-Related Initiatives and Developments

a. NAIC Adopts New C-1 Life RBC Framework for CLOs

On the last day of the Summer National Meeting, the Executive (EX) Committee and Plenary capped off a four-year project by adopting a new C-1 capital charge framework for collateralized loan obligation (CLO) investments of US life insurers. Since 2022, the Risk-Based Capital Investment Risk and Evaluation (E) Working Group has been considering changes to the framework for setting C-1 RBC charges for CLO investments, with the aim of preventing CLO structuring that results in so-called “RBC arbitrage”. After initially proposing that all CLO investments would be subject to individual financial modelling, the NAIC ultimately adopted a framework developed by the American Academy of Actuaries (Academy) with extensive input from regulators and interested parties. 

Under the new framework, CLOs, collateralized bond obligations (CBO) and collateralized debt obligations (CDO) will have a C-1 RBC charge that is based on the investment’s credit rating provider (CRP) rating, with broadly syndicated loan (BSL) CLOs having an NAIC Designation 2.C. or below and a tranche thickness equal to or below 4% assessed a surcharge of 11.77%. CLO/CBO/CDO residual tranche investments will continue to have a 45% pre-tax C-1 RBC charge. The new RBC framework is effective for December 31, 2026, RBC calculations. However, as noted below, the Risk-Based Capital Investment Risk and Evaluation (E) Working Group is still considering some of the assumptions underpinning the new framework.

During the Investment Designations (E) Working Group meeting, it was reported that the NAIC Structured Securities Group will begin publishing a list of BSL CLOs that are subject to the RBC surcharge noted above. The Working Group also exposed a proposed amendment to the Purposes and Procedures Manual of the NAIC Investment Analysis Office that would officially remove CLOs as a financially modelled security.

b. RBCIRE Provides an Update on its 2026/2027 Work Plan

The Risk-Based Capital Investment Risk and Evaluation (E) Working Group did not meet during the Summer National Meeting, but Philip Barlow (DC), Working Group Chair, provided the Financial Condition (E) Committee with an update on the Working Group’s plans for the remainder of 2026 and 2027. Over the next four months, the Working Group is expected to: (1) identify the types of asset backed securities (ABS) that will next be reviewed to identify potential RBC framework enhancements (similar to the review that was conducted by the Academy for CLOs (discussed above)), and (2) consider refining certain of the assumptions underpinning the new CLO RBC framework that many interested parties have advocated for. Specifically, the Working Group is expected to revisit the CLO RBC framework assumptions related to the percentage of variance explained by systemic risk (the current model assumes 10%) and whether the framework should account for prepayments and collateral repurchase discounts (the current model assumes no prepayments or discounts). If changes to the CLO RBC framework assumptions are ultimately adopted, they could be implemented as soon as the 2027 reporting year.

Chair Barlow also reported that Matt Cheung (IL) is expected to succeed him as Chair of the Working Group in 2027, with Thomas Reedy (CA) continuing as vice-chair.

c. RBC Model Governance (EX) Task Force Seeks Feedback on its Work Plan

The RBC Model Governance (EX) Task Force continues work on its charge to complete a “comprehensive gap analysis and consistency assessment” of the US risk based capital (RBC) framework and establish a plan to address any identified gaps and potential inconsistencies that improve the framework. During the Summer National Meeting, the Task Force heard a presentation from Bridgeway Analytics on the “most material RBC gaps” that warrant consideration and requested feedback from interested parties. The list includes the following RBC components: life reinsurance transactions; property/casualty reinsurance transactions; life residential mortgage loans; residential mortgage back securities (RMBS) and commercial mortgage backed securities (CMBS); life RBC covariance, including the treatment across asset classes, and the portfolio adjustment factor; property/casualty Rcat correlation; underwriting risk in the health RBC formula; life principle-based capital (RBC C-3); life RBC factor-designation grid mismatch; life investment valuation-basis mismatch. NAIC projects related to a number of these issues are already underway. Bridgeway Analytics also identified the operational risk charge and an analysis of companies with high RBC ratios (RBC outliers) as areas warranting further study.

The Task Force’s goal is to identify five to seven material RBC gaps or modernization projects by the 2026 Fall National Meeting. Once the gaps/projects are identified, the Financial Condition (E) Committee is expected to develop and implement a project plan for addressing those issues over the next two years (though the projects themselves may not be completed within the two-year period).

The Task Force also exposed for public comment a proposal for a commissioner-level Financial Policy Steering Committee that would oversee major RBC initiatives and related solvency matters. The Committee would be designed to provide broader commissioner engagement, visible membership support, and a policy perspective outside the ordinary Financial Condition (E) Committee and technical processes. Comments on both exposures are due by September 12, 2026.

d. Credit Rating Provider (E) Working Group Hears Comments on CRP Due Diligence Framework

The Credit Rating Provider (E) Working Group heard comments from interested parties on the NAIC Credit Rating Provider (CRP) Due Diligence Framework – Whitepaper that was released for public comment in April 2026. The Whitepaper sets out a four part due diligence framework for the NAIC’s reliance on credit rating provider ratings (most notably, through the Filing Exempt (FE) Process), including scoping, risk assessment, detailed testing procedures, and governance. The stated purpose of the framework is to corroborate the reasonableness of the FE translation matrix for CRP ratings and NAIC Designations and align with broader NAIC objectives to harmonize regulatory oversight related to investments in the insurance industry.

Interested party comments included a number of common themes: the importance of transparency, the need to coordinate the Framework with existing SEC oversight of CRPs, a desire for more specificity regarding the circumstances under which a CRP may be determined to be ineligible or not reliable with respect to a particular asset class, and the importance of a formalized notice and remediation process when a CRP’s ratings or methodology are determined to be inappropriate for regulatory use. The Working Group has directed NAIC staff to revise the proposed Due Diligence Framework, as appropriate, to address the comments received. A timeline has not been set for exposure of a revised Framework proposal. In the meantime, the Working Group is deferring action on any new applications from CRPs seeking recognition from the NAIC (an application from Pacific Credit Rating is currently pending).

e. SAPWG Proposes Amendment to Principles-Based Bond Definition

The Statutory Accounting Principles (E) Working Group has proposed an amendment to SSAP No. 26R – Bonds that would introduce new requirements for asset backed securities (ABS) backed by financial assets. Specifically, the amendment would require that financial assets of an ABS issuer that are not self-liquidating must overcome the rebuttable presumption provided under SSAP. No 26, paragraphs 6a-6d (relating to whether a security represents a creditor relationship), and that self-liquidating ABS must produce cash flows that are sufficient to pay all contractual amounts due. The proposed amendment is intended to address perceived risks related to asset liability management for multi-collateral structured credit investments. The proposed amendment was released for a public comment period ending October 2, 2026.

f. Fair Value Disclosure for Level 3 Investments Garners Increased Attention

Several NAIC working groups and task forces are discussing the disclosure requirements and related guidance for investments categorized as level 3 under SSAP No. 100 – Fair Value, with a particular focus on Note 20C fair value hierarchy disclosures. Level 3 assets are of particular interest to state insurance regulators due to their reliance on significant unobservable inputs, limited market activity, and increased use of model-based valuation techniques. The Investment Analysis (E) Working Group has sent a referral to the Statutory Accounting Principles (E) Working Group for an evaluation of whether existing disclosure requirements continue to provide the consistency, transparency, and comparability needed for regulators to effectively assess fair value measurements, particularly for level 3 investments. During the Summer National Meeting, the Invested Assets (E) Task Force also heard a presentation from representatives of Ernst & Young, KPMG, Deloitte, and Forvis Mazars on private credit and auditing fair value estimations for assets with a fair value hierarchy of level 3.

g. SVO Temporarily Extends Private Rating Filing Deadline by 60 Days

Private letter rating rationale reports are generally required to be filed with the NAIC Securities Valuation Office (SVO) within 90 days following the date of an annual rating update or any rating change, or the SVO will mark the security as ineligible for the FE process. However, following a June 11th cybersecurity incident impacting NAIC systems, the NAIC suspended assigning NAIC Designations to insurer investments that are based on a public or private CRP rating within AVS+ until August 18th. Accordingly, the SVO has temporarily extended the private rating filing deadlines for an additional 60 days.

h. Process for Exercise of Regulator Discretion over the FE Process is Operational

Effective January 1, 2026, the Purposes and Procedures Manual of the NAIC Investment Analysis Office was amended to give regulators the discretion to remove a security from the FE process if they believe the NAIC Designation resulting from the Filing Exempt (FE) process is not a “reasonable assessment” of investment risk of the security for regulatory purposes. However, the NAIC delayed implementation of this discretionary process while it pursued system and technology enhancements needed to comply with prescribed procedures. The NAIC has announced that the functionality required to implement the discretionary FE process is now operational. 

i. Financial Stability (E) Task Force Exposes Macroprudential Risk Dashboard, Discusses Private Credit, Offshore Reinsurance and Potential Emerging Risks

The Financial Stability (E) Task Force met jointly with the Macroprudential (E) Working Group on August 12, 2026, and exposed the Macroprudential Risk Dashboard Summary Report for a 30-day public comment period ending September 14. Derived from a more detailed regulator-only dashboard, the report uses key risk indicators across eight risk categories to assess industry-wide trends and assist state regulators in determining whether similar risks affect individual insurers. The report concludes that the US insurance industry remains well capitalized overall and that industry liquidity risk is low, but identifies increased risks in the health sector and continued concerns regarding private credit, Level 3 assets, natural catastrophes, cross-border life reinsurance, and funding agreement-backed notes. It recommends continued work to improve regulators’ ability to identify interconnectedness, counterparty and recapture risks associated with cross-border life reinsurance, and insurers’ private credit exposures.

Task Force Chair Susan Ochs (NJ) also reported that regulators met privately with individual insurers during the preceding months to receive presentations and operational perspectives on private credit. The dashboard identifies private credit as a significant credit risk but notes that limited information concerning borrower fundamentals, valuation, and the nature of certain investments makes insurers’ aggregate exposure difficult to quantify. Among other things, the Summary Report recommends continued enhancement of annual-statement disclosures and identifiers to improve regulators’ ability to identify and evaluate private credit exposures.

The Working Group also announced plans to enhance its assessment of insurance industry interconnectedness and contagion by developing additional key risk indicators to identify significant risk-transmission channels and the potential accumulation of risk. In connection with that work, the Working Group updated its tracking of 13 regulatory considerations initially developed in connection with private equity-owned insurers, many of which have been completed or referred to other NAIC groups. The Working Group will continue heightened monitoring of the remaining issues, particularly cross-border reinsurance, including offshore ceded reserves and asset-intensive reinsurance transactions, and plans to discuss its interconnectedness initiative further at a subsequent meeting.

II. Innovation and Technology Initiatives and Developments

a. Privacy Protections (H) Working Group (PPWG) Releases Full Draft of Revisions to Model 672

The Privacy Protections (H) Working Group (PPWG) met to discuss the comprehensive revised draft of the Privacy of Consumer Financial and Health Information Model Regulation (Model 672), which it released for public comment on July 24, 2026. The revised draft is the culmination of the PPWG’s years-long work to modernize the model, building on the Chair’s Draft revisions that were published in 2024. Consistent with the individual articles of the revised model that were previously exposed, the revised draft addresses, among other matters, third party service provider arrangements, consumer notice obligations, opt-in and opt out requirements, limits on the disclosure and sale of nonpublic personal information, and the treatment of sensitive personal information. Importantly, the revised draft includes the first exposure of the proposed definitions for key terms that are central to evaluating the scope and effect of the model. Comments on the revised draft are due by September 22, 2026.

During the Summer National Meeting, consumer advocates urged the PPWG to adopt a strict opt-in approach for all sharing of nonpublic personal information except to the extent necessary to process transaction requests by the consumer; and to include more prescriptive requirements for the content and formatting of privacy notices. Industry representatives encouraged the PPWG to ensure the revised model is harmonized with the Gramm-Leach-Bliley Act and existing state privacy laws, emphasizing the need for the final model to be workable. Commenters also raised concerns about the disproportionate burden the revised model might impose on smaller entities with fewer resources to comply with the amendments, and the possibility that bad actors might exploit the model’s new consumer rights to engage in fraud.

Stakeholders sought the PPWG’s assurance that additional opportunities for comment on the revised model would be provided, particularly since any changes to the definitions of key terms will necessarily impact the entire framework. PPWG Chair Elizabeth Dwyer (RI) noted the PPWG’s goal to finalize the revisions to the model by December, but left open the possibility of additional meetings or discussions on the proposed revisions after the comment period closes on September 22.

b. Third-Party Data and Models (H) Working Group Narrows and Advances Draft Third-Party Regulatory Framework 

Both the Third-Party Data and Models (H) Working Group and the Big Data and Artificial Intelligence (H) Working Group held meetings that provided further insight into the trajectory for their respective workstreams. 

The Third-Party Data and Models (H) Working Group has significantly narrowed the scope of its regulatory framework for third-party model and data vendors, limiting their proposal at this time to just models and data used in pricing, underwriting and rating for property and casualty insurance. Regulators during the meeting heard from representatives of both insurance carriers and technology companies that serve the insurance industry about their continued concerns with the revised framework that the Working Group exposed in July. Working Group Chair Jason Lapham of Colorado, along with Doug Ommen of Iowa and Mary Block of Vermont, emphasized the importance of continuing to advance the proposed framework. While certain issues surrounding the scope and content of annual attestations required by vendor registrants with the NAIC-hosted vendor registry and the confidentiality protections for information provided to the NAIC were acknowledged, regulators coalesced around revising the framework for potential adoption by the Working Group at the Fall National Meeting. 

c. Big Data and Artificial Intelligence (H) Working Group Advances Revised Artificial Intelligence Risk Evaluation Supplement

The Big Data and Artificial Intelligence (H) Working Group provided a short update about the progress of the multi-state pilot of the newly renamed Artificial Intelligence Risk Evaluation Supplement (formerly the AI Systems Evaluation Tool). The Working Group described that they are still gathering feedback from regulators administering the Supplement, as well as from companies that have received and responded to the Supplement in the 12 states involved in the pilot. The Working Group is scheduled to meet on August 31, where it is expected to release a further revised draft of the Supplement for further comment. There continue to be questions about how exactly the Supplement will complement other regulatory workstreams, including the market conduct modernization initiative led by a working group of the Market Regulation and Consumer Affairs (D) Committee, as well as how States will integrate the Supplement into their own individual exam processes. Regulators appear committed to advancing both initiatives despite unresolved implementation questions. 

III. Life Insurance-Related Initiatives and Developments

a. Regulatory Focus on Ceded Reinsurance Transactions Continues

The Financial Condition (E) Committee advanced two proposals that continue the trend of increased regulatory focus on offshore reinsurance (particularly in the life and annuity space). First, the Committee adopted a referral to the Life Risk-Based Capital (E) Working Group to develop the following two changes to the life RBC formula: (1) develop a reinsurance recapture RBC factor to be applied to ceded reserves and modified coinsurance balances for all reinsurers located outside of reciprocal jurisdictions (currently, the United Kingdom, the European Union, Bermuda, Japan, Switzerland, and US accredited states and territories) while also considering any overcollateralization of reserves, and (2) modify the reinsurance methodology used in the life RBC formula for recoverability risk by aligning with the approach used in the property/casualty RBC formula. The charges are intended to address potential capital strain that a US cedent may face if it had to recapture business ceded to an offshore reinsurer domiciled in a non-reciprocal jurisdiction, and the increased credit risk to US cedents from reinsurers with lower financial strength rating.

The Committee also exposed a memorandum regarding increased disclosure of reinsurance under the NAIC Disclosure of Material Transactions Model Act (Model #285) for a public comment period ending September 28, 2026. The memorandum cites as the reason for the exposure “an emerging trend in recent years where an increasing number of US life and annuity insurers have been ceding large portions of their business to other insurers, both affiliated and unaffiliated.” Material reinsurance transactions between affiliates (typically defined as agreements in which the reinsurance premium or a change in the insurer's liabilities, or the projected reinsurance premium or a change in the insurer's liabilities in any of the next three years, equals or exceeds 5% of the insurer's surplus) are subject to prior reporting and non-disapproval under state insurance holding company laws. However, reinsurance transactions between non-affiliates are typically only subject to the higher reporting thresholds of Model # 285 (for new life and annuity reinsurance agreements, agreements affecting more than 50% of total reserve credit taken for ceded business). If Model # 285 is opened for amendment as proposed, those thresholds are likely to be reduced.

At the same time, the Mutual Recognition of Jurisdictions (E) Working Group has reported that it is considering applications from the Cayman Islands, Guernsey and the Republic of Korea for Qualified Jurisdiction status. Under the NAIC Credit for Reinsurance Model Law and Regulation, qualified reinsurers domiciled in a Qualified Jurisdiction are eligible for certified reinsurer status and the resulting reduced reinsurance collateral requirements.

b. SAPWG Delays Implementation of New Guidance for IMR

The Statutory Accounting Principles (E) Working Group (SAPWG) extended INT 23-01 (Net Negative (Disallowed) Interest Maintenance Reserve) until December 31, 2027 as it continues to consider a package of updates to statutory accounting guidance for asset valuation reserves (AVR) and interest maintenance reserves (IMR), including updates to SSAP No. 7 – Asset Valuation Reserve and Interest Maintenance Reserve, a new issue paper and annual statement reporting instructions. The guidance package, which is now proposed to be effective January 1, 2028, includes new requirements for the admissibility of net negative IMR, disclosure requirements, and guidance on the interplay of IMR and ceded and assumed reinsurance. The key issue that regulators continue to consider is whether to eliminate (or increase) the current 10% admittance limit for net negative IMR under INT 23-01. The guidance package was released for a public comment period ending October 2, 2026. 

c. Life Actuarial (A) Task Force Discusses Retrospective Application of VM-22

The Life Actuarial (A) Task Force (LATF) discussed comments on technical questions concerning the potential retrospective application of Valuation Manual VM‑22 (VM‑22) requirements to in‑force non‑variable annuity business. The questions, together with an ACLI proposal under which insurers could elect application subject to notice and domestic-regulator review, were exposed for a 90‑day public comment period ending June 22. VM‑22 establishes a principles‑based reserving framework for non‑variable annuities; it was adopted at the 2025 Summer National Meeting, with prospective application beginning January 1, 2026 and an optional three‑year implementation period. During the August 10 meeting, VM‑22 Subgroup Chair Ben Slutsker (MN) said the Subgroup was making progress and expected adoption to occur “sooner rather than later.”

The Task Force received comment letters from the American Academy of Actuaries (Academy) and the ACLI. The Academy proposed four evaluation criteria for an election: a pre‑ and post‑adoption reserve comparison, including aggregation effects; a clear attribution analysis of reserve changes; risk and economic metrics; and sensitivity testing where changes are material. It also contemplates a one‑time election analysis followed by standard VM‑22 reporting and governance, including VM‑31 documentation. The ACLI prefers a flexible approach that would permit future elections, allowing companies to stage implementation and accommodate portfolio transitions and operational constraints, while avoiding new prescriptive asset‑to‑liability tracing requirements. Task Force members, by contrast, appeared to favor a structured and uniform attribution analysis in the first year to facilitate regulatory review.

On timing, the ACLI opposed a hard deadline for transitioning from pre‑PBR CARVM requirements to VM‑22, while regulators suggested requiring elections by 2031 or 2032; the ACLI indicated that timetable could be too aggressive, and some Task Force members sought further discussion. LATF exposed two additional in‑force application questions for an 81‑day public comment period ending October 30, 2026. The VM‑22 Subgroup is expected to refine the optional election framework in light of the comments referenced above.

d. Life Actuarial (A) Task Force Exposes Revisions to Financial Analysis and Examiners Handbooks

The Life Actuarial (A) Task Force (LATF) exposed proposed revisions to the Financial Analysis Handbook and the Financial Condition Examiners Handbook for a 30-day public comment period ending August 28, 2026. The revisions were drafted by NAIC committee support in response to referrals from the Financial Analysis Solvency Tools (E) Working Group and the Financial Examiners Handbook (E) Technical Group. The most extensive edits build out new sections addressing VM‑21 and VM‑22, with additional sections capturing the AG 53 and AG 55 processes and highlighting enhancements to VM‑31 reporting requirements. The handbooks had previously focused on VM‑20. LATF Chair Hemphill encouraged state insurance regulators to review the guidance with their state financial analysts and examiners.

Separately, Fred Andersen (MN), chair of the Valuation Analysis (E) Working Group, presented an update on the Working Group’s review of AG 53 reports. The Working Group identified three additional areas of focus beyond outlying high net yield assumptions: unmodeled cliff risk in complex assets, unmodeled illiquidity risk, and valuation of Level 3 assets. The Working Group recommended that cash flow testing and AG 53 reports disclose downside scenarios showing how high‑yield or illiquid assets could perform poorly—even when those scenarios are not the reserve‑adequacy basis—to demonstrate that insurers understand the risks. The Working Group also plans to propose additions to the AG 53 Template addressing “emerging asset types.”

e. Life Actuarial (A) Task Force Receives Update on AG 55 Reports

Mr. Andersen also updated LATF on Actuarial Guideline 55—Application of the Valuation Manual for Testing the Adequacy of Reserves Related to Certain Life Reinsurance Treaties (AG 55), adopted in 2025 to assess reserve adequacy after reinsurance by requiring asset adequacy testing that treats ceded reinsurance as an integral component of asset‑intensive business. The first AG 55 filings were received in the second quarter of 2026 from approximately 80 US ceding companies covering more than 100 treaties. The Working Group began with companies having the highest percentages of liabilities ceded to offshore or captive reinsurers and emphasized that its review remains preliminary, with observations but no firm conclusions.

Initial observations were that many annuity blocks had lower reserves after offshore or captive reinsurance, driven primarily by asset returns exceeding the US statutory discount rate and policyholder behavior that was less efficient than assumed under US statutory requirements. Regulators also identified a Top 10 list of topics—including downside modeling for high net yield assumptions, Level 2 and Level 3 asset valuations, offshore asset transparency, asset cliff risk, reinsurer financial strength and failure risk, the rationale for offshore or captive reinsurance, company understanding of risks, and AG 55 compliance—for further review. The Working Group noted that nearly all filers performed robust cash flow testing, although filing quality varied and follow‑up would focus on less‑conservative assumption sets.

The Working Group will continue outreach to priority companies on those topics and plans to develop a “Guidance Document” modeled on the existing AG 53 guidance, with finalization targeted by the end of September 2026. 

f. Life Insurance and Annuities (A) Committee Hears Presentations on State and Federal Regulation of Registered Index-Linked Annuities

At its August 12 meeting, the Life Insurance and Annuities (A) Committee received presentations on the state and federal regulatory framework for registered index‑linked annuities (RILAs). Committee Chair Commissioner Ommen (IA) noted that RILAs are insurance products subject to federal securities regulation and highlighted 2025 RILA sales of $79.5 billion. RILAs and fixed indexed annuities together represented 45% of annuity sales in 2025, while ILVA sales rose from $3.7 billion in 2015 to $79.6 billion in 2025 and reached a record $23.3 billion in the second quarter of 2026. Karen Shutter, Executive Director of the Interstate Insurance Product Regulation Commission (Compact) described the Compact’s ILVA product‑approval role and its 2024 Standards for Individual Deferred Index Linked Variable Annuity Contracts; 21 companies have submitted one or more filings and approximately 40 ILVA products have been approved, with the Compact’s Actuarial Working Group expected to consider amendments and new provisions in September 2026. 

g. Life Insurance and Annuities (A) Committee Approves Model Law Development Request to Revise Annuity Disclosure Model Regulation

At its July 13 meeting, the Life Insurance and Annuities (A) Committee approved a Request for NAIC Model Law Development to revise the NAIC Annuity Disclosure Model Regulation (#245). The request was driven by the Life Insurance and Annuities Illustrations (A) Working Group, which had identified concerns that some index annuity illustrations were showing returns of 10% to 25% per year — rates that regulators viewed as potentially unrealistic. The Working Group analyzed illustrations from the top 25 annuity carriers and found that, in states that have adopted the most recent version of Model #245, illustrated rates were significantly lower than in states that have not, with an average difference of approximately 5%. The Working Group reached consensus that reopening Model #245 to address illustration length, illustrated rates of return, disclosures, and accountability would be the most effective path forward. Only 10 states have adopted the most recent version of the Model, in part because it is not an accreditation standard.

The Working Group is also considering whether RILAs, which are currently outside the scope of Model #245 as registered products, should be included in the revised model. Commissioner Ommen noted that many of the same illustration concerns have been observed with RILAs. The Working Group is separately exploring a potential stopgap measure — such as an actuarial guideline drawing authority from Model #245 and the NAIC Suitability in Annuity Transactions Model Regulation (#275) — that could apply requirements across states while legislatures work to adopt the revised model. 

h. Life Actuarial (A) Task Force Exposes Concept Document on Asset Portfolio Segmentation

The Life Actuarial (A) Task Force (LATF) exposed a concept document addressing asset portfolio segmentation between principle-based reserving (PBR) and pre-PBR lines of business for a 30-day public comment period ending September 10, 2026. The concept document responds to concerns — discussed extensively during the VM-22 retrospective application deliberations — that companies could allocate the highest-yielding assets to PBR calculations while assigning lower-yielding assets to non-PBR blocks, a practice regulators have described as ‘cherry-picking.’ The proposed framework would apply to VM-20, VM-21, VM-22, VM-30, and VM-31, covering all starting assets in general account portfolios.

Under the concept, companies would be required to provide documentation demonstrating that the model portfolio is consistent with actual company management practices, including an Excel template mapping assets to liabilities, ALM documentation, a company officer attestation, investment governance materials, and evidence that non-guaranteed element determinations use asset segmentation consistent with PBR and cash flow testing models. If the required documentation is not provided, the company would be required to use a pro-rata slice of its entire general account portfolio — though this would not serve as a safe harbor if the company believes its modeled reserve would be higher under actual management practices. Public comments on the concept document are due by September 10.

i. Life Actuarial (A) Task Force Tables VM-22 Reinvestment Guardrail Proposal for PRT Business

As previously reported, LATF exposed proposed revisions to VM-22 relating to the reinvestment guardrail applicable to pension risk transfer (PRT) business, together with a supporting principles document from the American Academy of Actuaries addressing the application of an illiquidity premium. The ACLI expressed support for the concepts in the proposal but raised questions about whether the illiquidity premium cap should be fixed or dynamic and whether a broader application to products with similar characteristics should be considered.

During the Summer National Meeting, LATF conducted a straw poll on two dimensions — whether the changes should be limited to PRT or extended to payout annuities, and whether the illiquidity premium should apply to guardrail runs only or to all assets including company runs. LATF Chair Hemphill noted that the Task Force had received clear instruction from the Life Insurance and Annuities (A) Committee that it should not be making reinsurance policy changes and should stay within its charge of maintaining Valuation Manual requirements at a moderately adverse level. LATF subsequently tabled APF 2026-01 pending additional Academy analysis on spreads and defaults.

IV. Property & Casualty Insurance-Related Initiatives and Developments

a. Property and Casualty Insurance (C) Committee Adopts Affordability and Availability Playbook

The Property and Casualty Insurance (C) Committee met on August 14, and received and adopted the Affordability and Availability of Homeowners Insurance Playbook (A/A Playbook), a multi part resource intended to assist state insurance regulators in responding to growing availability and affordability challenges in homeowners insurance markets. The A/A Playbook is intended to serve as a practical reference, rather than prescriptive guidance, and is organized into four parts addressing: (1) consumer impacts, macro level trends, and affordability drivers; (2) cross peril and peril specific state actions; (3) emerging and evolving risks (including atmospheric river events); and (4) implementation strategies and practical regulatory considerations. It is intended to be updated over time as markets evolve, states add information, and new tools or approaches develop.

b. Reciprocal Exchanges (E) Working Group Advances Proposed Revisions to Holding Company Models Addressing Attorney-in-Fact and Power of Attorney Fees

The Reciprocal Exchanges (E) Working Group met virtually on July 2 where it discussed its 2026 charge to “Modify the NAIC Insurance Holding Company System Regulatory Act (Model #440) and/or the Insurance Holding Company System Model Regulation with Reporting Forms and Instructions (#450) to clarify that regardless of definitions of control and affiliation, fees charged by insurers from the attorney-in-fact are subject to fair and reasonable standards and subject to approval by the Commissioner and under no circumstances should they exceed the cost of such services plus a reasonable profit.” Working Group Chair, Bradley Trim (FL) stated that Financial Condition (E) Committee Chair, Commissioner Nathan Houdek (WI) previously stressed that the Working Group was not being used to create a new mandate to ensure attorney-in-fact fees must be fair and reasonable, as Model #440 already has that requirement in place. Rather, the formation of the Working Group was intended to clarify this intent in Model #440 and Model #450. 

To that end, the Working Group then discussed proposed revisions to Model 440 (Insurance Holding Company System Regulatory Act) and Model 450 (Insurance Holding Company System Model Regulation), which include adjustments to the definition of “control” (adding a parenthetical to clarify that control may be established through an attorney-in-fact contract) and adding related drafting notes, including one stating that attorney-in-fact agreements include powers of attorney and related agreements established to provide services to a reciprocal exchange at a specified cost. Comments on the exposure drafts were due on August 28.

c. Homeowners Market Data Call (C) Task Force Receives Update on Data Call and Associated Report

The Homeowners Market Data Call (C) Task Force met jointly with the Homeowners Market Report (C) Working Group on August 12 to receive an update on the 2026 Homeowners Market Data Call, hear a presentation on the NAIC’s related Examining Homeowner Property Insurance Market Dynamics report, and discuss the anticipated scope of a public report based on the data call. Approximately 880 companies met the reporting threshold and were not otherwise excluded, and more than 700 submitted data that passed initial validation checks. The NAIC and participating states continue to validate submissions and follow up with companies regarding missing or potentially inaccurate data. The related report, based on MCAS data from approximately 715 companies, concludes that the homeowners’ insurance market remains operationally strong but is experiencing adjustments affecting affordability and availability, including increases in inflation-adjusted premiums and company-initiated nonrenewals. 

The forthcoming public report is expected to provide a more granular view of market conditions by presenting most data elements at the national and state levels, over time, and by policy type. The Working Group plans to develop a straw proposal concerning the scope and presentation of the report for feedback from regulators and interested parties, while the regulator drafting group expects to provide recommendations regarding potential improvements to future data calls by mid-September.

d. Pre-Disaster Mitigation and Risk Modeling (EX) Working Group Receives Update on Development of Pre-Disaster Mitigation Program Model Law

The Pre-Disaster Mitigation and Risk Modeling (EX) Working Group received an update on the development of the proposed Residential Mitigation Grant Program Model Act. The model law is intended to provide states with an enabling statutory framework for establishing, administering, and overseeing residential mitigation grant programs through state insurance departments. Among other matters, it addresses the adoption of recognized mitigation standards, grant amounts and cost sharing, applicant and contractor eligibility, insurance premium discounts, insurer data collection, and funding.

The proposed framework is voluntary, peril-agnostic, and standard-agnostic, allowing states to adapt it to their particular hazards, market conditions, legal frameworks, and recognized mitigation standards rather than requiring identical programs in every state. The draft proposal was exposed for a 30-day public comment period ending September 8. Feedback was specifically requested on definitions, funding flexibility, standards, eligibility, administrative burdens, verification, and state discretion. The Working Group expects to meet again on September 15.

e. Casualty Actuarial and Statistical (C) Task Force Receives Comments on Homeowners Rate Regulation White Paper 

The Casualty Actuarial and Statistical (C) Task Force met on August 12 where it received comments on a draft white paper explaining how homeowners insurance rates are regulated across states, with particular attention to public questions and academic claims regarding potential cross-state subsidization of catastrophic losses. The white paper explains how insurers develop homeowners rates and how those rates are reviewed under state laws requiring them to be neither excessive, inadequate, nor unfairly discriminatory. It concludes that rates are designed and reviewed to reflect the expected future cost of risk in the state where a policy is written, and that cross-state subsidization is constrained by state-specific rate review, actuarial standards, market conduct oversight, and competitive forces. The paper distinguishes cross-state subsidization from risk pooling and broader market effects, such as changes in rebuilding costs, reinsurance pricing, and capital costs following catastrophic events.

The Task Force received comments from several stakeholders: the Nevada Division of Insurance, which questioned whether the white paper adequately demonstrates that cross-state subsidization generally does not occur; the American Academy of Actuaries, which generally supported the paper but recommended greater emphasis on professional obligations and reinsurance cost allocation; and the National Association of Mutual Insurance Companies, which supported the paper’s central premise but recommended distinguishing cross-state subsidization from broader catastrophe, reinsurance, and capital-cost effects. The Task Force is scheduled to meet again on September 8. 

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