The NAIC's Spring 2026 National Meeting addressed accelerating regulatory changes for insurance investments, with concrete proposals emerging for CLO risk-based capital (RBC) factors and collateral loan RBC. Key discussions included the potential expansion of CLO factors to middle-market loans and a move towards a look-through approach for collateral loan RBC. The meeting also highlighted ongoing efforts in RBC model governance and statutory accounting updates, signaling increased regulatory scrutiny and a push for greater transparency in insurer portfolios.
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The Academy of Actuaries has published a full set of proposed C-1 factors for CLO tranches.
The proposed approach for collateral loan RBC moves to a look-through framework.
The Model Governance Task Force continues to develop the governance infrastructure for evaluating and prioritizing future RBC changes.
SAPWG exposed a new draft SSAP and issue paper that would allow amortized cost accounting for qualifying interest rate derivatives used in ALM macro-hedging programs.
The proposed C-1 factors are based on modeling of broadly-syndicated loan (BSL) CLO deals.
The factors use a CTE(90) framework, consistent with existing C-1 bond factors.
Security rating serves as the primary risk differentiator for the proposed CLO C-1 factors.
Tranche thickness provides an additional layer of differentiation for BBB- and lower-rated tranches.
The Academy of Actuaries shared additional details of the regression model used to calibrate the factors at the National Meeting.
Interested parties requested model details to provide thoughtful comments ahead of the April 16th, 2026 comment deadline.
Senior investment-grade CLO tranches (Aaa-A2) would carry C-1 factors of roughly 0.03-0.14%.
A3 to Baa3 CLO tranches would carry C-1 factors of 1.8-2.7%, representing a 0.5-1.5% increase over current factors.
A Baa3 tranche with more than 4% thickness would carry a 2.7% factor.
A Baa3 tranche with less than 4% thickness would face a 12.5% charge.
Charges increase steeply for below investment grade-tranches, with many carrying C1 charges higher than equity investments or residual tranches.
The most consequential open question is whether these factors will apply only to BSL CLOs or extend to middle-market loan (MML) CLOs.
The Academy of Actuaries' analysis for CLO C-1 factors was performed exclusively on BSL data.
The Academy of Actuaries noted that while ratings should be predictive for MMLs, the tranche thickness component warrants separate study for MML CLOs.
The American Council of Life Insurers has proposed distinct reporting categories for BSL, MML, and non-CLO structures.
Regulators did not reach consensus on applying BSL factors to MMLs, with some viewing them as a reasonable proxy and others acknowledging meaningful differences.
The debate on MML CLOs will continue through the comment period ending April 16th and into the Summer National Meeting.
The National Association of Insurance Commissioners continues to target year-end 2026 for implementation of the CLO Risk-Based Capital framework.
Year-end 2026 implementation requires an adopted structural framework by mid-year.
Updates on portfolio adjustment factors and residual tranche treatment for CLOs are expected in early April.
The Life Risk-Based Capital (E) Working Group is developing a revised framework for collateral loan RBC.
Currently, collateral loans are subject to a uniform base factor of 6.8% for life insurers.
The National Association of Insurance Commissioners is working to refine the collateral loan RBC approach, particularly for loans backed by JV/LLC interests or residual tranches.
Underlying RBC charges for JV/LLC interests or residual tranches are significantly higher (30-45%).
The look-through framework means the RBC charge reflects the nature of the underlying collateral, with adjustments for overcollateralization.
The American Council of Life Insurers has supported this direction and proposed a framework that haircuts the base RBC charge based on loan-to-value ratio.
The American Council of Life Insurers' proposed framework reflects credit enhancement provided when the loan balance is less than the collateral value.
The National Association of Insurance Commissioners modified their exposure to match American Council of Life Insurers' proposal for collateral loan RBC.
The National Association of Insurance Commissioners has expressed concerns about valuation methodologies used in overcollateralization calculations for collateral loans.
Regulators are looking for industry to propose prudent solutions for valuation methodologies as part of their comments.
Comments on the collateral loan RBC proposal are due by April 13th.
Adoption of the collateral loan RBC framework is likely for year-end 2027.
The Invested Assets (E) Task Force (IATF) held its inaugural session.
Neuberger Berman presented on residential mortgage loans (RMLs) at the IATF session.
Residential mortgage loans have seen rapid growth in insurer portfolios.
The presentation provided an overview of RMLs, major subsectors, reasons for insurer allocation growth, and key risk factors.
Regulators responded to the RML presentation with balanced and curious questions.
The constructive tone is consistent with the IATF's stated goal of engaging with industry to understand investment trends.
Regulators welcomed similar presentations on other asset classes in the future.
For insurers with meaningful RML exposure, this dynamic is encouraging but signals continued regulatory attention.
Regulatory attention to RMLs may include potential disclosure and RBC enhancements.
January 1st, 2026, marked the end of the Valuation of Securities Task Force (VOSTF).
The Invested Assets (E) Task Force (IATF) is the successor to the Valuation of Securities Task Force (VOSTF).
The new IATF structure includes three dedicated working groups: Investment Designation Analysis (IDAWG), Investment Analysis (InvAWG), and Credit Rating Provider (CRPWG).
The restructuring reflects the expanding scope and complexity of insurance investment oversight.
The Model Governance Task Force received comments on the Bridgeway Analytics-led gap analysis.
The gap analysis surfaced a wide range of potential issues, from asset-specific calibration inconsistencies to broader structural gaps across Life, Health, and P&C formulas.
The Model Governance Task Force will review and discuss these comments in the coming months.
The Model Governance Task Force discussed a draft decision-tree process for RBC adjustments.
The decision-tree process is designed to ensure policy alignment before technical groups undertake extensive work.
Some regulators signaled a need for technical group input before making informed policy decisions on RBC adjustments.
The Model Governance Task Force will continue to develop a process framework that balances top-down policy and bottom-up technical considerations.
The Model Governance Task Force's initiatives remain early-stage but are important to follow.
The governance frameworks established by this group will have a meaningful impact on how RBC formula changes are made.
At the Fall 2025 meeting, the Model Governance Task Force adopted 11 principles for evaluating existing and future RBC components.
The adopted principles focus on "equal capital for equal risk," materiality, and transparency.