Understanding the forces that shape the insurance sector is crucial for strategic planning. Our 2025 Virtual Insurance Symposium brought together industry leaders to discuss the latest developments, including key tax, U.S. GAAP, statutory (STAT), and internal audit updates. We also explored the impacts of AI governance, economic trends, and M&A activity on the industry. This article outlines the insights and the essential takeaways you need to help your organization stay ahead of the curve.
U.S. GAAP Update
FASB issued a series of Accounting Standards Updates (ASUs) to help address gaps in guidance, modernize standards, and improve consistency. Here are a few of the highlights.
ASU 2025-02: Removes the requirement to recognize a liability for safeguarding crypto assets held for platform users, following the SEC’s rescission of prior guidance. This change addresses concerns about the burden and inconsistency of the prior approach. Effective immediately upon issuance in March 2025, with retrospective application to 2024.
ASU 2025-01: Clarifies the effective date for public business entities to implement the new requirements for disaggregated expense disclosures. It reaffirms that the requirements apply to annual periods beginning after December 15, 2026, and interim periods after December 15, 2027, regardless of whether the entity has a calendar or non-calendar year-end. No changes were made to the original effective dates.
ASU 2024-04: Introduces a “pre-existing contract” approach for induced conversions, focusing on whether the form and amount of consideration are preserved. Clarifies that additional consideration, such as cash or warrants, does not disqualify induced conversion accounting. Effective for fiscal years after December 15, 2025, with early adoption permitted.
ASU 2025-05: Simplifies credit loss estimation for short-term receivables by introducing a practical expedient that assumes current conditions remain unchanged. Private companies and nonprofits can also elect to use subsequent cash collections to estimate credit losses. Effective for fiscal years beginning after December 15, 2025, with early adoption permitted.
ASU 2025-04: Clarifies accounting for share-based awards, e.g., stock options or warrants, tied to customer purchases, defining vesting conditions as performance conditions and eliminating the forfeiture policy election for service conditions. Aims to standardize practice, improve revenue recognition timing, and enhance financial statement usefulness. Effective for fiscal years beginning after December 15, 2026.
ASU 2025-07: Refines the definition of a derivative, excluding non-exchange-traded contracts based on a party’s own operations or activities unless tied to market-based variables or financial instruments. Also clarifies when to apply revenue recognition guidance for share-based non-cash consideration received from customers. Effective for fiscal years beginning after December 15, 2026.
ASU 2025-03: Removes the automatic designation of the primary beneficiary as the accounting acquirer in business combinations involving variable interest entities (VIEs). Instead, entities must use the same evaluation criteria as for non-VIE acquisitions, improving consistency and transparency. Effective for fiscal years beginning after December 15, 2026.
ASU 2025-06: Replaces the outdated stage-based model with a principles-based “probable-to-complete” threshold for capitalization, allowing costs to be capitalized when management commits to funding and completion is probable. Integrates website development costs into the internal-use software framework. Effective for fiscal years beginning after December 15, 2027, with multiple transition options and early adoption allowed.
STAT Update
2025 Statutory Statement Reporting Changes
The 2025 statutory statement reporting changes primarily stem from the principles-based bond definition project, which concluded in 2024. Key updates include the removal of mortgage loans and real estate from the general interrogatories and the addition of a new contact person for guarantee association assessments on the juror page. Updates to bond categories and subcategories have resulted in reference corrections in the general interrogatories and financial statement notes. In addition, there is a high-impact change for restricted assets, which now includes extensive new disclosures and will be required in quarterly statements starting in 2026.
RBC Formula Changes
Changes to the Risk-Based Capital (RBC) formulas may affect companies’ capital and surplus requirements. Updates include reference changes in the invested assets section of RBC formulas due to modifications in Schedules D and BA. Property and health RBC formulas now feature an updated worksheet for bond reporting, while health insurance RBC factors have been revised. In addition, a new action level has been introduced to indicate when a company is in the company action level due to the trend test. All RBC formulas now include new reporting requirements for tax credit structures.
NAIC Fall National Meeting Highlights
At the National Association of Insurance Commissioners (NAIC) Fall National Meeting, the Blanks Working Group did not convene but held a meeting on November 5, 2025. The Risk-Based Capital Model Governance Task Force adopted its principles during the meeting, marking a significant development.
Key Questions Addressed
- Where do you classify certificates of deposit (CDs)? CDs maturing in one year or less are classified as cash on Schedule E, Part 1. Long-term CDs are reported on Schedule D, Part 1, Section 1, under a specific category for CDs.
- If you have an asset pledged to the Federal Home Loan Bank (FHLB) as collateral but do not have a loan, would the asset be considered restricted? Assets pledged as collateral to the FHLB are considered restricted and must be disclosed, even if no loan exists, per Statements of Statutory Accounting Principles (SSAP) No. 1, paragraph 23.b.xii.
- Which column from 5L should column 13 pull to compare to the general ledger? Before gross or net admitted? Column 13 should be compared to the admitted amount (statement value) of the listed assets, as no specific instructions or NAIC crosschecks dictate otherwise.
Economic Update
2025 Economic Performance
The U.S. economy in 2025 outperformed expectations, with a Q3 gross domestic product (GDP) growth rate of 3.6% (slightly revised down from 3.9%) and Q4 projections of 3.5%. This strong performance is driven by consumer spending, particularly among the upper-income third of consumers and non-residential fixed investment, with key contributions from transportation infrastructure, manufacturing infrastructure, energy development, and data centers. These sectors have been pivotal in sustaining economic momentum throughout the year.
Inflation: A Significant Challenge for 2026
Inflation is shaping up to be a significant challenge for 2026. Several factors are creating the potential for an inflation surge, including tariffs on food-importing countries, driving up food prices, and reduced interest rates, which could fuel spending and price increases, and wage hikes caused by ongoing labor shortages.
While inflation is currently moderate, these pressures could push it into the “walking inflation” range (3% to 10%), creating economic headwinds.
Key Economic Drivers & Their Sustainability
The 2025 economy was powered by three main drivers:
- Manufacturing
- Growth has returned to levels not seen since 2007.
- Reshoring, technology investments to address labor shortages, and smaller towns hosting manufacturers are fueling this resurgence.
- Non-Residential Construction
- Rapid growth is driven by warehousing, logistics centers, break-bulk facilities, energy data centers, and AI-related infrastructure.
- The One Big Beautiful Bill Act (OBBBA) has also supported this sector.
- Consumer Spending
- Strong spending, particularly among higher-income consumers, has been a key pillar of growth.
- However, rising debt levels in car loans and credit cards pose risks to future spending.
Outlook for 2026
The big question for 2026 is whether these drivers will hold. Manufacturing and construction face challenges like labor shortages and shifting investment priorities. Consumer spending could be dampened by inflation and growing debt burdens. Sustaining economic momentum will require addressing these vulnerabilities while managing the looming threat of inflation.
M&A Update
M&A Trends: Scale & Strategy
M&A activity in the insurance sector is shifting toward scale and strategic intent. Instead of focusing on high-volume roll-ups, transactions now prioritize platform expansion, specialty capabilities, and long-term positioning. Private equity-backed platforms and strategic buyers are targeting acquisitions that elevate the knowledge base, expand geographic reach, and build competitive advantages.
Data-Driven Models
Brokers and carriers are focusing on niche service lines like cyber, employee benefits, and commercial verticals to differentiate themselves. Analytics-driven advisory models and advanced technologies, such as AI and automation, are reshaping the industry. These tools can help improve underwriting precision, risk selection, and operational efficiency.
Capital Markets Support Growth
Despite higher interest rates, capital markets remain open and supportive. Brokers and carriers are efficiently accessing debt capital to fund acquisitions, refinance, and fine-tune balance sheets. Debt markets are particularly attractive due to the sector’s stable cash flows and low default risk, while equity issuance remains limited.
Resilience & Investment in 2026
The insurance sector’s strong fundamentals, including recurring revenue models, underwriting discipline, and robust capital positions, continue to help drive resilience. Brokers benefit from stable renewal revenue, while carriers leverage disciplined underwriting to help manage challenges like climate-driven losses and rising reinsurance costs. Accelerating technology adoption is further enhancing efficiency and competitiveness.
Federal & State Tax Update
The insurance industry faces several important tax updates and considerations in 2026, with opportunities and challenges spanning state, federal, and corporate tax changes.
- Limited SALT Legislation Expected in 2026: No significant state and local tax (SALT) legislation is anticipated to impact the insurance industry in 2026. However, key areas to monitor include the decoupling of OBBBA provisions, which may affect non-insurance affiliates, the introduction of new tax credit opportunities, and the imposition of environmental assessments in states like Colorado and Texas to address wildfire and storm-related costs.
- Refund Opportunity for Wisconsin Insurers: Wisconsin-domiciled property and casualty (P&C) and accident and health (A&H) insurers have a unique refund opportunity for excess retaliatory taxes paid to Kansas between 2022 and 2024. Kansas recently revised its interpretation of the Wisconsin reciprocal tax, opening the door for insurers to file refund claims for prior years. Insurers should act promptly to take advantage of this window.
- MetLife’s Challenge to New York’s Capital Tax: An important legal decision is expected in MetLife, Inc.’s challenge to New York’s inclusion of investments in insurance subsidiaries when calculating the capital tax component of the corporation franchise tax. The outcome could have significant implications for insurers operating in New York, as it addresses whether intercompany transactions should be excluded from the tax base.
- Section 174 Expensing & Unamortized Balances: With the passage of OBBBA, §174 now allows immediate expensing for domestic research and experimentation expenditures. Insurers should evaluate how to handle unamortized balances from 2022 through 2024. Options include fully deducting these balances in 2025, spreading deductions across 2025 and 2026, or continuing to amortize them. A method change will be required with the 2025 tax return.
- Key Implementation Dates From OBBBA: Insurers should be mindful of critical implementation dates under OBBBA. For example, 100% bonus depreciation applies to property placed in service after January 19, 2025, but assets purchased under binding contracts before this date may not qualify. In addition, the new 1% charitable contribution floor takes effect for tax years beginning after December 31, 2025, potentially impacting corporate donation strategies.
AI Governance
AI is transforming how organizations operate, offering opportunities to help automate processes, improve efficiency, and enhance decision making. However, its adoption comes with risks that require strong governance and oversight to maintain ethical and effective use.
Deploying AI starts with a robust governance framework. This includes clear policies, accountability structures, and compliance with existing regulations like HIPAA. Key principles for AI governance focus on fairness, transparency, and making sure systems are safe, unbiased, and secure. Data quality is critical, as AI outcomes depend on the accuracy and reliability of the data provided.
Many organizations rely on third-party AI tools, making it essential to manage risks associated with external resources. This involves reviewing contracts, understanding data handling practices, and having privacy and security measures in place. Shadow AI (the unauthorized use of AI tools) poses additional challenges, highlighting the need for clear acceptable use policies and employee training.
Organizations are encouraged to start small with AI projects, test thoroughly, and scale gradually. Establishing AI steering committees, conducting regular audits, and providing training are critical steps to managing risks and ensuring AI aligns with business goals. While AI offers significant benefits, human oversight remains essential throughout its life cycle to help ensure ethical, compliant, and effective use.
Internal Audit Update
The insurance industry’s risk landscape is changing fast, requiring internal audit teams to stay agile and proactive. To address emerging risks like cyberthreats and regulatory changes, here are a few strategies to consider:
Adopt Leading Practices & Technology: Using governance, risk, and compliance (GRC) platforms can streamline processes, centralize documentation, and automate tasks. Dynamic audit planning, real-time risk sensing, and continuous monitoring are essential for staying ahead of risks.
Leverage Generative AI (GenAI): AI offers opportunities to help improve efficiency in claims processing, underwriting, and customer service. However, internal audit teams must maintain responsible AI use by addressing governance, ethical concerns, and data management.
Focus on Third-Party Risk Management (TPRM): Managing risk from external parties is critical. Internal audit teams should oversee governance, vendor due diligence, risk assessments, and mitigation controls. Continuous monitoring of third-party risks, such as cybersecurity vulnerabilities, helps maintain compliance and operational resilience.
How Forvis Mazars Can Help
Our Insurance Practice can support insurance companies of varying types and sizes in tackling the unique industry challenges they face, including financial reporting accuracy, enhanced governance oversight, industry consolidation, regulatory uncertainty, sustaining operational performance, risk and capital management, technological instability, and more. If you have any questions or need assistance, please contact a professional at Forvis Mazars.
Watch our “2025 Virtual Insurance Symposium” on demand for more information on these topics.