Traditionally, June is a month of significant Risk-Based Capital activity in preparation for finalizing instructions and applicable factors for the year. This June was no exception. By the end of the month, 2026 formulas had been finalized and 2027 changes had begun.
Life Risk-Based Capital (RBC) Working Group – June 11, 2026
The main purpose of this meeting was to adopt needed instructional changes and statement references for the 2026 Life/Fraternal RBC prior to the end of June deadline. However, even though that goal was met, it was not the main topic of discussion during the meeting.
| Reference # | Subject | Disposition |
|---|---|---|
| 2026-06-L | Updating of annual statement references for page R027 – Interest Rate Risk and Market Risk. | Adopted effective 2026. |
| 2026-01-L | Revisions to several investment pages to reference new Asset Valuation Reserve (AVR) reporting. | Adopted effective 2026. |
| 2026-09-L | Aligns Schedule BA collateral loan RBC reporting with new granular reporting in annual statement. | Adopted as revised effective 2026. |
During the meeting, a paragraph was removed from the 2026-09-L instructions based on comments that had been received. Since the removal of the paragraph was considered an editorial change, the proposal did not need to be re-exposed for comment. The revisions, however, will result in a memorandum being sent to the Blanks Working Group regarding corresponding statement instructions.
| Reference # | Subject | Disposition |
|---|---|---|
| 2025-16-L | Revises factors to be applied to collateral loans reported in Schedule BA. | Option 2 was adopted effective 2027. |
This was the third version of the above proposal. The proposal revamps the Life/Fraternal RBC charges for collateral loans. The previous exposure provided two options. Commenters were asked to indicate which option they supported. Comments received included suggested additional revisions to the overcollateralization discount, which resulted in an extensive discussion on the subject. The final resolution was the adoption of option two without any additional revisions. Under this method, factors will reflect the underlying collateral type and then be adjusted according to the amount of overcollateralization, if any. However, the fair value of the underlying collateral must be independently verified (an independent third-party to be used) to receive any overcollateralization discount.
All of the above activity applies only to the Life/Fraternal RBC. Adoptions now go to the Capital Adequacy Task Force for final approval. (See its meeting summary below.)
A referral was received from the Investment Analysis Working Group regarding the growing investment exposure to residential mortgage loans within the insurance industry and what it perceived as a lack of reporting that would allow for adequate risk assessment by regulators. The referral does not propose any specific changes but recommends further consideration not only by the Life/Fraternal RBC Working Group, but also by the Statutory Accounting Principles Working Group (SAPWG).
The final actions of the meeting were to remind attendees of a SAPWG exposure regarding the AVR for affiliated stock and to announce that the Life/Fraternal RBC Working Group would hold another meeting in July but was not meeting during the upcoming NAIC Summer National Meeting.
Joint Meeting of Property/Casualty RBC Working Group & Catastrophe Risk Subgroup – June 17, 2026
All adopted items are effective for the 2026 RBC formula.
| Reference # | Subject | Disposition |
|---|---|---|
| 2026-11-P | Annual update of underwriting risk factors. | Adopted. |
| 2025-21-P | Revisions to the premium and loss concentration factors. | Adopted. |
The revisions to the premium and loss concentration factors will increase the maximum diversification credits from the existing 30% for both to 45% for premium and 65% for reserves. An update on the convective storm project was provided, including information on the testing of different modelling vendors. The Catastrophe Subgroup indicated it was in the process of reviewing 2025 response to the climate impact disclosures. The disclosures are currently scheduled to run through 2026 and then a decision will need to be made on whether any additional inclusion is cost-effective. The groups will meet again in July.
All of the above activity applies only to the Property/Casualty RBC. Adoptions now go to the Capital Adequacy Task Force for final approval. (See its meeting summary below.)
Joint Meeting of the RBC Governance Task Force & Capital Adequacy Task Force – June 18, 2026
The sole focus of this meeting was a revised Preamble to be included in the RBC instructions for all of the RBC formulas. The project has been ongoing for over a year and culminated during this meeting with the Preamble adoption. The revisions had gone through a rigorous review process, with several comment periods. During this meeting, the groups discussed reasons for including or excluding suggestions from the last set of comments. The Preamble was then adopted and will be included in the RBC instructions for all formulas beginning in 2026.
Reinsurance Task Force – June 22, 2026
The goal of this meeting was to approve a response to a referral received from SAPWG regarding derecognized Interest Maintenance Reserve (IMR) impact to reinsurance collateral. The original referral was sent to the Task Force in December 2025. Currently, Statement of Statutory Accounting Principles (SSAP) No. 61, Life, Deposit-Type and Accident and Health Reinsurance, contains guidance on the handling of derecognized net positive IMR, but not derecognized net negative IMR. The referral presented two options: a symmetrical approach where derecognized net negative IMR would reduce collateral requirements or an asymmetrical approach where derecognized net negative IMR does not reduce collateral requirements. The Task Force’s response to SAPWG recognizes that SAPWG has the ultimate decision power, but that the Task Force preferred the asymmetrical approach.
Risk-Based Capital Investment Risk & Evaluation Working Group – June 23, 2026
Scheduled for two hours, the meeting took a little longer than that. Even then things felt rushed. Before things started in earnest, the chair commented that hopefully Life/Fraternal RBC factors for collateralized loan obligations (CLOs), collateralized bond obligations (CBOs), and collateralized debt obligations (CDOs), including broadly syndicated bank loans (BSLs), would be finalized during this meeting to be implemented for 2026. The chair pointed out that this was the Working Group’s last opportunity to adopt factors for this year in time for the Capital Adequacy Task Force to put its stamp of approval on the factors at its June 30 meeting. All factors for 2026 were to be finalized by the end of June.
The American Academy of Actuaries (Academy) provided a brief update on its work developing the proposed RBC treatment of CLOs. (Within this meeting summary, CLOs/CBOs/CDOs/BSLs are generically referred to as CLOs.)
The Working Group then moved to discussion of proposal 2026-12-IRE and the various comments that had been submitted. The proposal offered two options: Option one based the factors only on the CLO’s NAIC designation, while option two used a combination of NAIC designations and tranche thickness.
A modified option two was adopted. Under option two, all CLOs first receive a factor based on NAIC designation. Then CLOs with a NAIC designation of 2.c or below and that have a tranche thickness equal to or below 4% (thinly tranched) are assessed a surcharge. This process will involve both middle-market CLOs as well as BSLs through 2026 but will be revisited for future filings.
Understanding tranche thickness can be confusing. Tranche thickness is defined as the difference between the tranche’s attachment point and its detachment point. The attachment point is the tranche’s subordination percentage while the detachment point is the percentage of total per amount of the underlying portfolio including principal proceeds that will completely write off the tranche. The current tranche thickness will be determined by using the most recent report available as of the reporting date (not a stale report).
But decision making was not over. The Working Group next had to decide whether to apply a portfolio adjustment factor (PAF) (sometimes called a bond size factor) to all bonds in the aggregate or to apply separate adjustments for the non-CLOs and the CLOs. The decision was made to have separate PAFs. The non-CLOs will have the size factor calculated as it has been in the past based on the weighted number of issuers. For 2026, the size factor for the CLOs is set to 1.0. This will be revisited in the future.
The CLO issuer count is the number of unique CLO issuers. Where there are combo CLOs or other structures that hold multiple CLO issuers, the insurer “looks through” to the number of unique underlying CLO issuers.
CLO residual tranches will continue to have a 45% pre-tax factor.
The next step is the approval of the Capital Adequacy Task Force. (See its meeting summary below.)
Credit Rating Provider Working Group – via email June 26, 2026
The Working Group posted a question and response document (QA). The QA addresses several questions the Working Group has received during the exposure period of the NAIC Credit Rating Provider Due Diligence Framework white paper. Both the white paper and the QA can be found on the Working Group’s webpage. The white paper is still available under the Exposures tab, while the QA can be found under the Documents tab. (Please note: after the original posting, the QA was revised. If the document was downloaded prior to July 1, the QA should be downloaded again for the revised edition.)
Capital Adequacy Task Force – June 30, 2026
June 30 was the final date for the Task Force to adopt RBC instructional and factor changes for 2026. That was the main, but not the only, focus of the meeting. All adopted items are effective for 2026 unless otherwise noted. The following actions were taken.
| Reference # | Subject | Disposition |
|---|---|---|
| 2026-03-CA | Annual updating of RBC health underwriting risk investment income factors in all formulas. | Adopted. |
| 2026-11-P | Property/Casualty RBC underwriting risk factors annual update. | Adopted. |
| 2025-21-P | Revises Property/Casualty loss and premium concentration factors. (See discussion above.) | Adopted. |
Many of the following items align RBC formula references to annual statement reporting revisions with no factor changes.
| Reference # | Subject | Disposition |
|---|---|---|
| 2026-09-L | Aligns Schedule BA collateral loan RBC reporting with new granular reporting in the annual statement for the Life/Fraternal RBC with no factor changes. | Adopted. |
| 2026-10-CA | Updates Property/Casualty & Health RBC Schedule BA collateral loan annual statement references with no factor changes. | Adopted. |
| 2026-01-L | Revisions to several investment pages to reference new AVR reporting in the Life/Fraternal RBC with no factor changes. | Adopted. |
| 2026-06-L | Updating of annual statement references for page LR027 – Interest Rate Risk and Market Risk in the Life/Fraternal RBC with no factor changes. | Adopted. |
| 2026-02-L | Changes reporting of Schedule BA unaffiliated residential mortgages in good standing in the Life/Fraternal RBC. | Adopted. |
| 2026-12-IRE | Establishes CLO factors (not Schedule BA collateral loan factors) for the Life/Fraternal RBC. | Adopted. |
| 2025-16-L | Version 3 of Schedule BA collateral loan (not the same as CLOs) factors using a look through approach to underlying collateral with a discount for overcollateralization but with a floor for the overcollateralization adjustment. For the Life/Fraternal RBC. (See above Investment RBC summary.) | Adopted effective 2027. |
Because of revisions resulting from comments received during a previous exposure period, 2027 proposed charges were re-exposed for 14 days. The chair announced the Task Force will not meet at the upcoming NAIC Summer National Meeting.
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