Highlights from the NAIC’s 2026 Spring National Meeting: CLOs, Collateral Loans, and RBC Model Governance in the Spotlight

San Diego hosted the NAIC’s Spring 2026 National Meeting during a period of meaningful acceleration across the regulatory landscape for insurance investments. Several workstreams that have been developing over the past two years are now converging on concrete proposals and timelines. At the same time, the NAIC’s organizational evolution is setting the stage for how investment regulation will operate in the years ahead.

This update covers the key developments from the Spring National Meeting and other recent NAIC meetings that we believe are most relevant for insurance investment professionals.

Please reach out to your relationship manager or kkrinsurance@kkr.com to discuss these initiatives further.

CLO Risk-Based Capital

Where Things Stand

The Academy of Actuaries has now published a full set of proposed C-1 factors for CLO tranches, building on its modeling of broadly-syndicated loan (BSL) CLO deals. The factors use a CTE(90) framework consistent with existing C-1 bond factors, with security rating serving as the primary risk differentiator. Tranche thickness provides an additional layer of differentiation for BBB- and lower-rated tranches, identifying increased risk for thin tranches.

At the National Meeting, the Academy shared additional details of the regression model used to calibrate the factors, along with certain design decisions they needed to make and the impact of those decisions. Interested parties requested this detail in order to provide thoughtful comments ahead of the April 16^th 2026 comment deadline.

What the Proposed Charges Look Like

Senior investment-grade tranches (Aaa–A2) would carry factors of roughly 0.03–0.14%, reflecting the very low tail risk at these levels. A3 to Baa3 tranches quickly jump to 1.8–2.7% and reflect a 0.5-1.5% increase over current factors. The most significant differentiation occurs at the boundary: a Baa3 tranche with more than 4% thickness would carry a 2.7% factor, while one with less than 4% thickness would face a 12.5% charge. The charges then increase steeply for below investment grade-tranches, with many carrying C1 charges higher than equity investments or residual tranches, though these are only a very small portion of industry holdings.

EXHIBIT 1: Post-Tax C1o Factors by Rating

The MML Question

Whether these factors will apply only to BSL CLOs or extend to middle-market loan CLOs remains the most consequential open question. The Academy’s analysis was performed exclusively on BSL data, and they noted that while ratings should be predictive for MMLs, the tranche thickness component warrants separate study. The ACLI has proposed distinct reporting categories for BSL, MML, and non-CLO structures. Regulators did not reach consensus: some viewed BSL factors as a reasonable proxy, while others acknowledged meaningful differences between BSL and MML CLOs that may warrant tailored treatment. This debate will continue through the comment period ending April 16th and into the Summer National Meeting.

Timeline

The NAIC continues to target year-end 2026 implementation, which requires an adopted structural framework by mid-year. Updates on portfolio adjustment factors and residual tranche treatment are expected in early April.

Collateral Loans RBC

The Life Risk-Based Capital (E) Working Group continued to develop a revised framework for collateral loan RBC. Currently, collateral loans are subject to a uniform base factor of 6.8% for life insurers. The NAIC is working to refine this approach, particularly for collateral loans backed by JV/LLC interests or residual tranches where underlying RBC charges are significantly higher (30–45%).

The proposed approach moves to a look-through framework where the RBC charge reflects the nature of the underlying collateral, with adjustments to account for overcollateralization. The ACLI has supported this direction and proposed a framework that haircuts the base RBC charge depending on the loan-to-value ratio, reflecting the credit enhancement provided when the loan balance is less than the collateral value. The ACLI’s proposed factors can be seen in the below table:

EXHIBIT 2: ACLI Collateral Loan Proposal

While the NAIC modified their exposure to match ACLI’s proposal above, they have expressed some concerns about valuation methodologies used in overcollateralization calculations, and they are looking for industry to propose prudent solutions as part of their comments. Comments on the proposal are due by April 13^th, with adoption likely for year-end 2027.

Residential Mortgage Loans: Overview for IATF

The Invested Assets (E) Task Force (IATF) held its inaugural session and featured a presentation from Neuberger Berman on residential mortgage loans, which has seen rapid growth in insurer portfolios. The presentation provided an overview of the asset class, major subsectors, why insurers are growing allocations, and key risk factors, and it was met with balanced and curious questions from regulators. This constructive tone is consistent with the IATF’s stated goal of engaging with industry to understand investment trends, and regulators welcomed similar presentations on other asset classes in the future. For insurers with meaningful RML exposure, this dynamic is encouraging but also signals that regulatory attention to the asset class, including potential disclosure and RBC enhancements, will continue to build.

As a reminder, January 1^st, 2026 marked the end of the Valuation of Securities Task Force (VOSTF) and the beginning of its successor, the IATF. The new 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.

RBC Model Governance Task Force

The Model Governance Task Force continues to develop the governance infrastructure that will shape how future RBC changes are evaluated and prioritized. The Task Force received comments on the Bridgeway Analytics-led gap analysis, which surfaced a wide range of potential issues, from asset-specific calibration inconsistencies to broader structural gaps across Life, Health, and P&C formulas. The Task Force will review and discuss these comments in the coming months.

The Task Force also discussed a draft decision-tree process for RBC adjustments designed to ensure policy alignment before technical groups undertake extensive work. While many regulators agreed in principle that the process could be more efficient, some signaled a need to get technical group input before they could make an informed policy decision. The Task Force will continue to develop a process framework that balances top-down policy and bottom-up technical considerations.

While this Task Force’s initiatives remain early-stage, it is an important one to follow as the governance frameworks established by this group will have meaningful impact on how RBC formula changes are made. As a reminder, at the Fall 2025 meeting they adopted 11 principles to provide a foundation for evaluating both existing RBC components and future changes, with a focus on “equal capital for equal risk,” materiality, and transparency.

Statutory Accounting Updates

FABN Disclosures (Ref #2026-01)

Expanded funding agreement-backed product disclosures were exposed, broadening scope to include FABCP, FABRs, and other structures alongside traditional FABNs. The disclosure captures balances by product type, puttable amounts, maturity distribution, currency exposure, hedging status, and collateral pledged. This is targeted for year-end 2026 reporting.

SSAP No. 48 / Equity Changes (Ref #2025-26)

SAPWG is convening a small industry focus group to develop proposed revisions to SSAP No. 48 (joint ventures, partnerships, and LLCs). Areas of focus include treatment of unaudited financials as the basis for equity value changes, goodwill application for investments purchased at a discount, and drivers of negative investment income. The NAIC has signaled a desire to keep this review focused and manageable. Mortgage loan fund classification on Schedule BA will also be addressed as part of this review.

ALM Derivatives (Ref #2024-15)

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 guidance applies to symmetrical derivatives within a clearly defined hedging strategy that demonstrates high effectiveness. By allowing amortized cost treatment, the proposal would reduce the balance sheet volatility these strategies currently create under statutory accounting, potentially encouraging more widespread adoption of duration management tools. Deferred gains and losses would amortize over a period up to ten years. Comments are due May 1^st, 2026, with a potential effective date of January 1^st, 2027.

IMR: Proof of Reinvestment (Ref #2025-23)

SAPWG adopted the proof of reinvestment concept for negative IMR. Insurers whose IMR balance becomes or goes further negative must demonstrate that sales proceeds were reinvested in fixed income assets, based on both volume and yield comparisons from the cash flow exhibit. Those who cannot satisfy the template must recognize net losses immediately. The comprehensive overhaul of SSAP No. 7 and accompanying issue paper is expected to be exposed for comment between the Spring and Summer National Meetings.

Other SAPWG Items

• Commitments & Contingencies (Ref #2025-24): SAPWG is working with industry to consolidate and clarify disclosure requirements, with potential RBC implications for contingent commitments. Industry asked for additional time to assess.
• Modco/FWH Codes (Ref #2025-27): SAPWG is evaluating whether restricted asset codes for modco and funds withheld arrangements would be useful to regulators, or whether the existing restricted asset code column is used by regulators at all. If not, the NAIC may proposed removing this column from statutory reporting.

Additional Developments

• Fair Value Hierarchy Reporting: The Investment Analysis Working Group referred a proposal requiring explicit identification of fair value hierarchy levels in asset reporting, including when NAV is used. This will enhance transparency around valuation practices.
• C-3 Field Test: The Life RBC Working Group exposed field test specifications for C-3 alignment with the new Generator of Economic Scenarios (GOES), targeting a summer 2026 field test with adoption by year-end 2027.
• Credit Rating Provider Framework: PwC presented its proposed CRP due diligence framework to regulators in a closed session on March 10th. A public update is expected in the coming months.
• SVO Resource Constraints / PLR Growth: The SVO highlighted another increase in carry-over filings for 2025 and the third straight year above its 10% threshold for signaling resource constraints. They flagged that a key driver is the increase in private letter ratings (PLRs) from ~2,000 in 2022 to ~12,000 in 2025.

DISCLOSURES