As the deadline for the finalization of the various risk-based capital (RBC) formulas drew near (May 15), the associated working groups and task force ramped up their activities. In addition, the 2025 annual statements needed to be finalized by the end of May, resulting in both the Statutory Accounting Principles Working Group (SAPWG) and the Blanks Working Group (BWG) holding meetings to meet that goal.
Life Risk-Based Capital (RBC) Working Group – May 1, 2025
This unusually long meeting was packed with action items and the result is the final formatting of the 2025 Life/Fraternal RBC formula. As a reminder, instructional changes and factor changes have until the end of June to be finalized.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-21-L | Revises reporting for tax credit investments to align with new accounting/reporting changes. Life/Fraternal RBC only. | Structure and instructions adopted. No factors at this time. Effective 2025. |
The Capital Adequacy Task Force has exposed a related item, 2024-26-CA, that would make the corresponding changes to the Property/Casualty and Health RBC formulas. The exposure period ended April 23, 2025 and it was expected that the Task Force will address this proposal at its upcoming May 15, 2025 meeting (see below Capital Adequacy Task Force summary).
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-24-L | Incorporates reporting/instructional changes as the result of the Principles-Based Bond Project (PBBP). Life/Fraternal RBC only. | Structure and instructions changes. No factors at this time. Effective 2025. |
These changes can be found throughout the formula, not just on the main bond reporting page. For the most part, the revisions update annual statement references. Therefore, if the new reporting has been incorporated into the annual statement correctly, the numbers should flow automatically into the RBC. However, all pages/instructions should be reviewed carefully, especially for any manually entered items. The Capital Adequacy Task Force has exposed a related item, 2024-25-CA, that would make the corresponding changes to the Property/Casualty and Health RBC formulas. The exposure period ended April 23, 2025 and it is expected the Task Force will address this proposal at its upcoming May 15, 2025 meeting (see the Capital Adequacy Task Force summary below).
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-01-L | Allows for direct pulls for the Annual Statement General Interrogatories into the C-2 Mortality Risk. | Adopted effective 2025. |
| 2025-05-L | Corrects instructions for inclusive investments in the Asset Concentration. | Adopted effective 2025. |
| 2025-04-L | Supersedes previous 2024-07-L. Reformats page LR008 to ensure assets of the same risk components (C-1o vs. C1-cs) are grouped. | Adopted effective 2025. |
| 2025-10-L | Clarification to the instructions indicating the correct RBC incorporation of modified coinsurance (Modco)/funds withheld (FWH) assets. | Exposed for 30-day comment period ending May 31, 2025. |
This proposal was the result of a referral for SAPWG regarding new reporting changes to take place in the Life/Fraternal annual statement for Modco/FWH assets. Those assets must now be indicated as restricted assets for statement reporting purposes. Accordingly, SAPWG had recommended that if any portion of a Modco/FWH asset has been used as a pledged asset for a purpose specific to the ceding insurance reporting entity at anytime during the year, the ceding company RBC credit (which is a reduction to the RBC requirement) would not be allowed. Since this is only an instructional change, it can still be adopted for 2025 implementation.
Attention then turned to a presentation by the American Academy of Actuaries (Academy) on its C-3 alignment project. The project looks at all current products subject to the C-3 Phase 1 and Phase 2 RBC, with the goal of aligning those phases with the principle-based reserving that was put into place. In the future, reporting scenarios will use the new Generator of Economic Scenarios (GOES). Discounting in C-3 Phase 2 will be utilized. Originally, the goal was to have changes in place for year-end 2026 reporting, with a three-year phase-in period. However, that goal has now been moved to 2027. Factors will be revisited at a future date and will remain unchanged for now.
An additional presentation was given by the Academy on the correlation of the different C risks in the Life/Fraternal RBC formula. In other words, the Academy is taking a new look at the correlation between the different formula risks to determine if the covariance calculation should be updated. The short answer? Yes.
At this point, the Academy feels it has the information available to revise the covariance calculation, although the exact formula was not included in the presentation. The Academy will be working with the Working Group to draft a formal proposal. The Academy emphasized it is not recommending changing the structures of any of the different C risks but changing the overall covariance calculation.
It appears the revisions will increase the overall Life/Fraternal RBC requirement in the aggregate but will vary from company to company. The Academy has not looked at the effect on any individual companies. The prediction is companies with higher equity exposures will most likely have the greatest RBC increase.
Joint Meeting of the Property/Casualty Risk-Based Capital (RBC) Working Group & Catastrophe Risk (CAT) Subgroup – May 2, 2025
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-06-CR | Adds instructional clarification to the climate condition catastrophe exposure disclosure. | Adopted for 2025. |
A sentence was added to the instructions for this disclosure indicating the information provided should reflect annual loss dollars for the given reporting year.
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-09-P | Annual updating of the Underwriting Risk, Line 1 factors. | Exposed for comment through June 1, 2025. |
| 2025-11-CR | Updates the catastrophe modeling attestation to add wildfire and server convective storm perils. | Exposed for comment through June 1, 2025. |
An update was provided by the CAT Subgroup on the status of the wildfire analysis. Ultimately, this analysis will be used to determine if wildfire will be included in the Property/Casualty RBC formula and, if included, what that treatment will be. The goal is to have a decision in time for the 2026 formula. The possibility of holding a panel discussion during the NAIC Summer National Meeting was discussed, but a decision was not made at this time.
Next up was the process for updating the annual catastrophe event lists. The overall process for finalizing and publishing the list will not change. However, the timing to begin the compilation process will be changed. NAIC staff will be working on the listing quarterly instead of waiting until the end of the year. Although work will be ongoing throughout the year, the list will only be published annually.
The Working Group received a referral from SAPWG regarding the treatment of capital notes, surplus notes, and non-bond debt securities. No action on the referral was taken at this time, but the issue will be revisited later.
The meeting ended with a short discussion on two items that were not on the formal agenda. The Task Force chair indicated comment letters had been sent to the group regarding the statement changes to the handling of Securities Valuation Office (SVO)-identified bond-like funds. Statement changes ultimately affect RBC reporting. The chair referred this issue to the RBC Investment Risk and Evaluation Working Group. The chair also mentioned the recently formed RBC Model Governance Task Force, indicating the work of that Task Force should not interfere with the work of this Working Group or the CAT Subgroup. It should be business as usual.
Joint Meeting of Life Risk-Based Capital (RBC) Working Group & Variable Annuities Capital & Reserve Subgroup – May 7, 2025
This meeting was part of a series the Life RBC Working Group has participated in to better understand the development of the new GOES. As a reminder, the new GOES is being developed by the Academy on behalf of the NAIC to replace the Academy Interest Rate Generator currently used for reserve and capital calculations. The design of GOES is a more sophisticated approach to modeling economic conditions, including factors like interest rates, credit spreads, inflation, equity returns, and foreign exchange. GOES will allow for a better understanding of the risks associated with economically sensitive products. The current goal is to have GOES ready for implementation by December 31, 2026.
The Academy provided a presentation to bring attendees up to date on the status of the GOES development and its use in C3 Phase I and Phase II of the Life/Fraternal RBC. In particular, field testing results using different analytics (average C3 factors, range of impacts, etc.) were presented. However, the Academy stressed that the quality of the participant submission is a driving force for all results. Both regulators and interested parties took advantage of several opportunities to pose questions to the Academy. The presentation was exposed for a 45-day comment period after which another joint call will be scheduled.
Capital Adequacy Task Force – May 15, 2025
One of the goals of this meeting was to finalize items that the various RBC Working Groups had adopted earlier. Although the working groups adopt revisions to the formulas, those revisions are not considered final until this Task Force ratifies those adoptions by re-adopting them. Most of the items below fall into that category. However, two of the proposals below originated with the Life/Fraternal RBC Working Group but were deemed applicable to the other formulas as well. Where that occurs, the Task Force takes action to expose and adopt those proposals for the other appropriate formulas. The deadline to adopt format changes to the formulas was May 15.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-21-L | Adopts new reporting in the Life/Fraternal RBC for tax credits. | Adopted effective 2025. |
| 2024-24-L | Provides updated bond reporting in the Life/Fraternal RBC. | Adopted effective 2025. |
| 2025-01-L | Changes references in the C2 Mortality Risk for direct pulls from the annual statement into the Life/Fraternal RBC. | Adopted effective 2025. |
| 2025-04-L | Reorganizes page LR008 in the Life/Fraternal RBC to group assets of the same risk components to better accommodate Modco/FWH adjustments. | Adopted effective 2025. |
| 2025-05-L | Corrects the Life/Fraternal RBC Asset Concentration instructions for aggregating bonds. | Adopted effective 2025. |
| 2025-06-CR | Clarifies that information provided in the Property RBC climate conditioned CAT exposure disclosure should be annual loss dollars for each year. | Adopted effective 2025. |
| 2024-25-CA | Revises Property RBC and Health RBC bond reporting (related to 2024-24-L above). | Adopted effective 2025. |
| 2024-26-CA | Adopts new reporting for tax credits in the Property RBC and Health RBC (related to 2024-21-L above). | Adopted effective 2025. |
| 2025-07-CA | Adds an action level for companies triggering a company action level because of trend test results to all RBC formulas. | Adopted effective 2025. |
Some companies trigger an RBC formula trend test, which is a different test in all of the formulas. In turn, that could result in the company receiving a company action level outcome, even though that level was not generated by the original formula calculation. Within the formula, it is not readily apparent when this occurs. This revision assigns an action level for those companies that generate a company action level because of the trend test. The following are the new action level indicators:
- Company Action Level
- Regulatory Action Level
- Authorized Control Level
- Mandatory Control Level
- Company Action Level – Trend Test
- None of the above
The Task Force then took the following actions on other items:
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-03-CA | Adjusts underwriting risk factors for health lines for investment income for all formulas. | Exposed for comment ending June 14, 2025. |
| Revised procedure document. | Exposed for comment ending June 14, 2025. |
The suggested procedure revisions don’t change anything for the adoption process of revisions to the formulas but change procedural deadlines. New wording now indicates the number of calendar days instead of business days for different deadlines. The most substantial change is the time frame for the Task Force to finalize its working agenda for the next year. Previously this could occur during any National Meeting and could even change during the year. The new procedures state that goals for the next calendar year must be adopted by the prior Fall National Meeting, which is usually in November or early December.
| Reference # | Subject | Disposition |
|---|---|---|
| 2026 proposed charges for Task Force and its various Working Groups. | Exposed for comment ending June 14, 2025. | |
| 2024-16-CA | Revised RBC Preamble. | No action at this time. |
By far the longest individual discussion was on the preparation of a revised Preamble for the formulas. This project has been in the works for some time and the suggested revisions are not without controversy. However, one of the areas of debate is something that is actually not in the current revisions, but a question that was raised by regulators during previous discussions. That topic of debate is whether the two RBC amounts included in the Five-Year Historical pages of the annual statement should be removed. Comment letters from Peter Gould, an individual annuity contract holder; the Academy; the American Council of Life Insurers; and the Center for Insurance Research were included in the meeting materials. The Task Force chair indicated there will be a call scheduled later that will explicitly be for a discussion of Preamble revisions.
The Task Force will next meet on June 30 to finalize any factor or instructional changes for the 2025 RBC formulas, plus other items that were exposed for comment during this meeting (except for the Preamble).
Statutory Accounting Principles Working Group (SAPWG) – May 22, 2025
Much of what was on the agenda to be considered for adoption needed to be adopted prior to the next BWG meeting to finalize the 2025 annual statements. Although theoretically BWG might not adopt one of those proposals, in reality that rarely happens. Once SAPWG has approved a proposal, it is pretty much a done deal. Everything that was adopted and involves a change to the statement reporting will be effective beginning with year-end 2025.
| Reference # | Subject | Disposition |
|---|---|---|
| 2023-24 | Issue Paper No. 171 - Current Expected Credit Losses (CECL) documents the maintaining of pre-CECL U.S. GAAP impairment and other than temporary impairment (OTTI) guidance. | Adopted effective immediately. |
| 2025-04 | Recommends removal of the Capital Structure Code column from Schedule D – Part 1 in the annual statements. | Adopted, moving final action forward to the Blanks Working Group (BWG). |
| 2025-06 | Removes reporting on Line 8 –Unrated Multi-Class Securities of the Asset Valuation Reserve (AVR) in the Life/Fraternal statement by renaming the line to “Intentionally left blank.” | Adopted, moving final action forward to the BWG. |
| 2025-07 | Deletes General Interrogatory – Part 2, #14 regarding dividends from the Life/Fraternal statement. | Adopted, moving final action forward to the BWG. |
| 2024-07 | Expands the reporting of Modco/FWH reinsurance assets in the Life/Fraternal statement through a new Schedule S – Part 8. | Adopted, moving final action forward to the BWG. |
Once adopted by BWG, a new Schedule S – Part 8 will be added to the Life/Fraternal annual statement. Due to comments received from the industry, the original proposal was amended prior to adoption. Reporting in Part 8 applies to assets for ceded and assumed reinsurance. It is important to note that the new Part 8 only includes assets where the investment risk has been transferred under the reinsurance agreement, which makes it aligned with the Life/Fraternal RBC requirements for credit for these assets. Consequently, Part 8 may not tie to the new 2025 reporting of restricted assets in Note to Financials (Note) #5 that covers all Modco/FWH assets. Only the portion of the assets used to support the ceded or assumed liabilities should be included; amounts in excess of the reserve should be excluded.
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-05 | Expands the restricted asset note disclosure (Note #5) to capture information by investment schedule of FWH assets that are related to the reinsurer. Additionally, the restricted asset note will now be required in the quarterly and annual statements. | Adopted, moving final action forward to the BWG. |
| 2025-08 | Creates a new disclosure for Medicare Part D Prescription Drug Payment plans. | Adopted, moving final action forward to the BWG. |
| 2025-13 | Develops accounting and reporting guidance for qualifying trust structures holding residential (only) mortgage loans. | Exposed for comment through June 23, 2025. |
| 2025-14 | Rejects Accounting Standards Update (ASU) 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets as not applicable to statutory accounting. | Exposed for comment through June 23, 2025. |
| 2025-15 | Rejects ASU 2025-02, Liabilities (Topic 405), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122 as not applicable to statutory accounting. | Exposed for comment through June 23, 2025. |
| 2025-16 | Revises the “Status Section” on the cover page of each SSAP, which includes removing issue paper references. | Exposed for comment through June 23, 2025. |
| 2025-17EP | Editorial revisions to SSAP Nos. 26, 41, 56, and INT 22-01. | Exposed for comment through June 23, 2025. |
Blanks Working Group (BWG) – May 29, 2025
The BWG May meeting is always an important one, as the annual statement reporting for year-end is supposed to be finalized then. This year, many of the items that were considered for adoption during this meeting were the result of new investment reporting. Some items were a direct result of the work of PBBD; many other items were an indirect result of the PBBD. (The major changes for the PBBD had already been adopted.) Items shown below apply to all statement types, unless otherwise noted.
| Reference # | Subject | Disposition |
|---|---|---|
| 2024-19 | Add detailed collateral loan reporting to Schedule BA. | Adopted, effective January 1, 2026. |
| 2025-02 | Deletes reporting of the cumulative amount of each type of temporary difference in Note #9 – Income Taxes. | Adopted, effective year-end 2025. |
| 2025-03 | Revises Life Insurance State Page to include Accident & Health data; opens up previously XXX’d out lines. | Adopted, effective year-end 2025. |
| 2025-04 | Increases Note #28 disclosure for the aging of Medicare Part D Prescription Payment Plans. | Adopted, effective year-end 2025. |
| 2025-05 | Adds a new Schedule S – Part 8 in the Life/Fraternal to report Modco/FWH agreements. | Adopted, effective year-end 2025. |
The above Schedule S reporting only includes those assets that transfer investments risk. (See more discussion in the SAPWG summary.) Consequently, Part 8 will not tie to the corresponding General Interrogatory. The reporting on Part 8 should feed directly into Life/Fraternal RBC. During the discussion, there was a question about instructional wording being different than that found in the RBC. NAIC staff is to research that issue and post a memo stating there was no intent to be different than the RBC reporting.
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-06 | Revisions to Note 5L – Restricted Assets instructions and illustrations clarify what to include within the restricted assets note. | Adopted, effective year-end 2025. |
| 2025-10 | Identifies Modco/FWH assets affiliated to the insurer in Note 5L– Restricted Assets and requires completion of the entire Note 5L on a quarterly and annual basis. | Adopted, effective year-end 2025. |
Regulators are showing a lot of interest in insurers’ restricted assets and have decided to ensure restricted assets are well documented in statutory reporting. Most of the emphasis currently is on Modco and FWH reinsurance contracts, on both an assumed and ceded basis. The above two items will greatly expand regulators’ knowledge of a company’s restricted assets for these reinsurance agreements. Reference 2025-06 was put into place to provide guidance on how assets held under Modco or FWH agreements are reflected in Note 5L. The reporting grid for Note 5L(1) now includes reporting categories for collateral assets received and on the balance sheet, assets held under Modco reinsurance agreements, and assets held under FWH reinsurance agreements. Reporting has been expanded for most of the other parts of the note, including a new disclosure for assets held as collateral or under Modco or FWH agreements that have also been pledged for another purpose specific to the reporting company (not for the benefit of the reinsurer). Reference 2025-10 expands the reporting in 5L(4) to identify assets held under Modco/FWH where the investment is related to the Modco/FWH reinsurer. For example, the asset held is a direct loan or direct investment in the reinsurer, or the asset is a securitization or similar investment vehicle where 50% or more of the underlying collateral represents investments in or direct credit exposure to the reinsurer.
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-07 | Editorial revisions to Schedule P in the Property/Casualty statement. | Adopted, effective year-end 2025. |
These revisions came from the Casualty Actuarial and Statistical Task Force and are all instructional changes, mostly for clarification. For example, using “rows” to refer to the schedule; only using “lines” when referring to a line of business. There were no format changes to Schedule P. Those preparing Schedule P should review all the changes before beginning work. In some cases, it appears an instruction was deleted but actually was moved to a different location. For example, the pooling instructions were moved to the “general” Schedule P instructions, not instructions for Part 1.
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-01 | Updates Note #8 – Derivatives for revisions to SSAP No. 86 – Derivatives and Note #11 – Debt for associated revisions to SSAP No. 15 – Debt and Holding Company Obligations. | Adopted, effective year-end 2025. |
| 2025-15 | Clarifies terminology in Note #8 –Derivatives and Schedule DB. | Adopted, effective year-end 2025. |
Reference 2025-01 adds a disclosure to Note #8 requiring companies to explain where cash flows associated with derivative instruments and their related gains/losses are presented in the cash flow statement. Note #11 revisions require information on the amount and terms of unused commitments for financing arrangements and the amount and terms of unused lines of credit for financing arrangements. Due to observed reporting inconsistencies, reference 2025-15 provides clarification of the term “derivative financing premiums.”
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-13 | Simplifies Note #13K for Surplus Notes disclosures under SSAP No. 41 – Surplus Notes. | Adopted, effective year-end 2025. |
| 2025-09 | Updates Life/Fraternal Note #35 for separate account products where general account provides inherent or ultimate guarantee; adds related general interrogatory. | Adopted, effective year-end 2025. |
| 2025-08 | Removes Life/Fraternal General Interrogatory #14 reporting total dividends paid to stockholders. | Adopted, effective year-end 2025. |
| 2025-11 | Deletes Capital Structure Code column from Schedule D – Part 1. | Adopted, effective year-end 2025. |
| 2025-12 | Renames AVR Line 8 to “Intentionally left blank,” indicating nothing should be reported on that line and to keep from renumbering the lines in the remainder of the schedule. (Life/Fraternal) | Adopted, effective year-end 2025. |
| 2025-14 | Adds Instructions for reporting of Medicare Part D Prescription Payment Plan information within reporting schedules. | Adopted, effective year-end 2025. |
| Editorial corrections. | Adopted, effective immediately. |
Editorial corrections or revisions can be deceptive, particularly this year. Due to the substantial number of revisions being incorporated into reporting this year, it was expected that minor oversights would be found and corrected. But this year, it seems like many of the items adopted as editorial corrections are more than just minor issues. Therefore, companies only using the original adopted proposals may not have the most up-to-date information. Companies should review all editorial changes adopted throughout the year carefully.
Only one item was exposed for comment.
| 2025-16 | Updates statement instructions for prescribed language in the Health Statement of Actuarial Opinion. | Exposed for comment through July 14. |
The discussion then turned to jurat page signatures for future system changes. After reviewing various state statutes/regulations, the NAIC legal department found nothing that would preclude the inclusion of digital signatures in the new financial data repository (FDR) system. Therefore, the NAIC would like to incorporate digital signatures into FDR. Members of the Working Group felt they needed to take this issue back to their departments before making a final decision. At this time, Interested Parties is supporting the concept of digital signatures, stating it is often difficult to chase down officers’ signatures for print Jurat Pages when not all are in the same location.
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