The National Association of Insurance Commissioners (NAIC) held its 2025 Summer National Meeting from August 10 – 14 in Minneapolis, Minnesota, where “Minnesota Nice” was on full display, even by the protestors who demonstrated during the Opening Session.
I. Investment-Related Initiatives and Developments
a. Asset Adequacy Testing for Designated Asset Intensive Life Reinsurance Transactions
The NAIC Executive and Plenary voted to adopt Actuarial Guideline LV (Application of the Valuation Manual for Testing the Adequacy of Reserves Related to Certain Life Reinsurance Treaties) (AG 55). The measure was approved without substantive discussion. As background, AG 55 requires asset adequacy testing (AAT) for certain designated life and annuity reinsurance transactions as of year-end 2025. The stated purpose of AG 55 is to enhance reserve adequacy requirements for life insurance companies by requiring that asset adequacy analysis use a cash flow testing methodology that evaluates ceded reinsurance as an integral component of asset-intensive business. It is intended to ensure that assets supporting reserves continue to be adequate based on moderately adverse conditions.
The AAT requirement applies to life and annuity insurers that conclude “Asset Intensive Reinsurance Transactions” with unauthorized and unaccredited alien reinsurers, provided the transaction exceeds specified thresholds for combined life, annuity and separate account reserves or is deemed by the cedent’s actuary to result in “significant reinsurance collectability risk” to the ceding company. An “Asset Intensive Reinsurance Transaction” is defined as any coinsurance arrangement “involving life insurance products that transfer significant, inherent investment risk including credit quality, reinvestment, or disintermediation.” Among other items, the AAT reporting requirement requires ceding insurers to provide information on the underlying reinsurance agreement and cash-flow testing assumptions, cash-flow testing results and an attribution analysis, and to identify risks so associated.
AG 55 will be “disclosure only” for 2026, meaning that the current iteration of AG 55 does not include prescriptive guidance or remedial measures. However, regulators are expected to reassess the disclosure-only approach in light of the 2025 year-end disclosures. Those disclosures are due by April 1, 2026.
b. Risk-Based Capital (RBC) Framework
A number of NAIC workstreams are underway that would update the US risk-based capital (RBC) framework. The Risk-Based Capital Model Governance (EX) Task Force is tasked with developing guiding principles for updating the RBC formulas to address current investment trends with a focus on more RBC precision in the area of asset risk and to ensure that insurance capital requirements maintain their current strength and continue to appropriately balance solvency with the availability of products to meet consumer needs. In Minneapolis, the Task Force received feedback from regulators and other interested parties on its July 3 exposure of proposed preliminary RBC principles and questions. Most commenters spoke in favor of the NAIC’s efforts to conduct a holistic review of the RBC framework and establish core principles that govern the NAIC’s efforts. However, a number of commenters spoke in opposition to secondary considerations (such as consumer needs and global competitiveness) that could result in scope creep and distract from the primary purpose of having RBC represent an unadulterated measure to identify weakly capitalized companies. Several commenters also spoke in opposition to a one-size-fits-all approach to the RBC for life, health and property/casualty insurers.
The Task Force is expected to release updated principles that address this feedback in the next 30 days, and then continue with its broader work plan, which includes:
- Preliminary quantitative guidelines for life investments RBC.
- An initial gap analysis focusing on life RBC investments by year-end 2025.
- An education and messaging campaign by year-end 2025.
- A broader plan for other components of the RBC, including those of property & casualty and health, to be developed by year-end 2025.
The Capital Adequacy (E) Task Force is considering amendments to the RBC Preamble that would (1) clarify that the use of RBC should be limited to identifying potentially weakly capitalized companies to facilitate regulatory action and oversight, and (2) emphasize the confidential nature of RBC instructions and reports. A number of commenters have expressed concern that the amendments are a precursor to making a company’s RBC itself confidential (and removing total adjusted capital (TAC) and authorized control level (ACL) information from the annual statement). Mike Yanacheak, Chief Actuary at the Iowa Insurance Division and Chair of the Task Force, emphasized during the Task Force meeting in Minneapolis that such concerns are unfounded. Interested parties are encouraged to submit any additional comments on the proposed amendments in advance of the Task Force’s next meeting in mid October, where the preamble changes are expected to be finalized.
c. Collateralized Loan Obligations (CLOs)
The Valuation of Securities Task Force (VOSTF) has proposed amendments to the Purposes and Procedures Manual of the NAIC Investment Analysis Office that would delay making collateralized loan obligations (CLO) financially modeled securities (for purposes of calculating RBC) from January 1, 2025, to January 1, 2026. Comments on the proposal are due by September 12.
The delay is intended to give the American Academy of Actuaries time to complete its work on the RBC framework for CLOs (including an assessment of whether individual modelling of CLOs is warranted) and for the Risk-Based Capital Model Governance (EX) Task Force to progress its work to modernize the overall RBC framework (discussed above). Before financial modeling of CLOs is ultimately implemented, a package of proposals, including the Academy’s findings and recommendations and the CLO Modeling Methodology, is expected to be released for public comment.
d. Regulation of Insurer Investments
The Financial Condition (E) Committee approved a reorganization of VOSTF and its working groups to align with the objectives set out in the NAIC Framework for Regulation of Insurer Investments – A Holistic Review. Key changes include:
- VOSTF will be renamed the Invested Assets (E) Task Force;
- VOSTF will oversee the following three new working groups:
- The Investment Analysis (E)Working Group, which is expected to be the primary group under which the NAIC’s “modernized” investment services are achieved;
- The SVO and SSG (E) Working Group, which is expected to: (1) make recommendations regarding the scope of securities required to be filed with the SVO, (2) make recommendations regarding the scope of securities required to be modeled and/or filed with the SSG, (3) oversee private letter rating submissions and reviews, and (4) monitor technology and resources available to implement current and future initiatives; and
- The Credit Rating Provider (E) Working Group, which is expected to implement the credit rating provider due diligence framework (once developed and approved) and the CRP discretion policy adopted in 2024.
II. Life Reinsurance Contracts that Combined Yearly Renewal Term (YRT) and Coinsurance
The Financial Condition (E) Committee deferred action on a proposal to update the risk transfer rules (SSAP No. 61 – Life, Deposit-Type and Accident and Health Reinsurance; Appendix A-791, Life and Health Reinsurance Agreements Q&A) for reinsurance transactions that combine both coinsurance and yearly renewable term (YRT) that have interdependent features, including (for example) aggregate experience refund and recapture provisions that only permit recapture by the cedant if both components are recaptured simultaneously. The change is intended to address instances where companies are reporting an overstated reserve credit due to a bifurcated risk transfer analysis of the interdependent contracts. Notably, the proposal provides:
For contracts that contemplate reinsurance on both a YRT and coinsurance basis, where there are interdependent features such as a combined experience refund or an inability to independently recapture, each of the YRT and coinsurance reinsurance components satisfying risk transfer requirements on their respective bases is necessary but not sufficient for the contract as a whole to satisfy risk transfer. When evaluated in its entirety, such contract(s) cannot 1) potentially deprive the ceding insurer of surplus at the reinsurer’s option or automatically upon the occurrence of some event; 2) potentially require payments to the reinsurer for amounts other than the income realized from the reinsured policies, nor; 3) contain any of the other conditions prohibited by Appendix A- 791 related to risk transfer.
In Minneapolis, the proposal was tabled so that E Committee can consider whether to allow grandfathering of certain contracts (e.g., those with effective dates prior to January 1, 2024). If adopted as proposed, the changes would have immediate effect for new/newly amended contracts, with a December 31, 2026, effective date for other existing contracts.
III. Innovation and Technology Initiatives and Developments
a. Model Law for Artificial Intelligence (AI) and AI Systems Evaluation Tool
The Big Data and Artificial Intelligence (H) Working Group continued its deliberation of whether to draft an artificial intelligence (AI) model law, with some members – including Pennsylvania and Colorado – in support of proceeding with the model law development process and others – including New Hampshire and Virginia – opposed. Working Group chair, Commissioner Michael Humphreys (PA), sought to convey that the Committee’s RFI regarding a Model Law on the use of AI in the insurance industry was an earnest effort to solicit initial input from stakeholders on how to continue shaping the trajectory of the NAIC’s approach to AI regulation. Those in support of model law development highlighted the value of getting ahead of states’ more general AI legislative initiatives, while those opposed suggested that more time should be allowed to implement the 2023 Model Bulletin on the Use of Artificial Intelligence Systems by Insurers before proceeding with a new model law.
The Working Group also recently extended a comment period through September 5, 2025 to respond to their exposed draft of an AI Systems Evaluation Tool meant to provide regulators with a resource that enables them to identify and assess the AI-related risks of an insurer on an ongoing basis. Chair Humphreys ultimately expressed an interest in convening the Working Group again in the coming months to further discuss the broader policy considerations associated with the potential development of an AI model law and revisions to the AI Systems Evaluation Tool.
b. Regulatory Oversight of Third-Party Data and Models
The Third-Party Data and Models (H) Working Group met in Minneapolis to discuss a "Third-Party Data and Model Vendor" Definition Discussion Document underlying their consideration of definitions for third-party data and model vendors. The discussion represents an initial step toward the development of a third-party data and predictive models “regulatory framework.” Working Group Chair Jason Lapham (CO) framed the conversation by reiterating his view on the goals and scope of the Working Group’s efforts and the particular regulatory challenge the Working Group is tasked with solving, i.e., facilitating insurance regulators’ access to information about third-party-provided data and models used in insurance operations. As a next step, the Working Group plans to revise the preliminary definitions based on the comments and discussion at the meeting and then expose draft working definitions for formal public comment. No timeline for completing the “regulatory framework” was provided.
c. Privacy Model Law
Last year, the Privacy Protections (H) Working Group began working on a new privacy model law based on the Privacy of Consumer Financial and Health Information Model Regulation (#672) and set aside prior efforts to draft a more comprehensive model. The Working Group has since continued those efforts, exposing significant revisions to sections of the model addressing, among other things, third-party service provider arrangements; consumer rights to access, correct, and delete nonpublic personal information; limits on the sale of personal information; and limits on the use and disclosure of sensitive personal information.
The Working Group held a meeting on August 1 to discuss public comments on Article V of the model, which currently contemplates (i) consumer opt-out rights from disclosure of nonpublic personal information in targeted advertising; (ii) an affirmative opt-in requirement prior to the sale of nonpublic personal information; and (iii) an affirmative opt-in requirement prior to the disclosure of sensitive personal information.
Interested parties stressed the importance of developing a workable model, raising concerns about the need for exemptions from the restrictions on disclosure of nonpublic personal information for third-party service providers, affiliates, and to perform routine business activities, as well as the need for greater clarity around how the proposal would apply in different circumstances and interact with other applicable laws. The Working Group acknowledged the widespread frustration with its approach of soliciting comments on individual sections of the model, particularly since neither the section addressing exemptions nor the definitions section have been released for public consideration. Nevertheless, the Working Group intends to continue this piecemeal approach before exposing a full revised draft for public comment.
d. Insurance Data Security Model Law Compliance and Enforcement Guide
The Cybersecurity (H) Working Group released a revised draft of its Insurance Data Security Model Law (#668) Compliance and Enforcement Guide, incorporating changes in response to comments received on its July 17 exposure draft. The guide is intended to provide practical tools to assess Model Law compliance and reduce duplicative regulatory efforts by encouraging foreign/non-resident states to rely on domestic/resident state reviews and conduct a gap analysis to identify mismatches between the work that has already been conducted by the domestic/resident regulator and the foreign/non-resident jurisdiction’s requirements. The revisions consisted of clarifying changes, such as acknowledgment of exemptions from certain Model Law requirements for licensees that are subject to data security laws under the federal Health Insurance Portability and Accountability Act. The Working Group ultimately decided to table a vote to adopt the Compliance Guide to allow interested parties additional time to review and respond to the latest proposed revisions. Comments are due by September 13. The Working Group anticipates voting to adopt the guide at its next meeting.
IV. Other Notable Initiatives and Developments
a. Reciprocal Exchanges
E Committee unanimously voted to approve a Request for Model Law Development that proposed re-opening the Insurance Holding Company System Regulatory Act (#440) to address potential “conflict of interest issues” related to reciprocal insurance exchange (exchange) fees paid to its attorney-in-fact (AIF) as set forth in the subscriber/insured’s power of attorney agreement. In particular, the Request Form noted that the general market practice of basing AIF management service fees on a percentage of premium volume creates a potential incentive for the AIF to increase its fee revenue by underpricing or accepting risk that may be above its typical underwriting guidelines. As a solution, the Request Form proposes that the Model Act be amended to clarify that “regardless of definitions of control and affiliation, fees charged insurers from the attorney-in-fact are subject to fair and reasonable standards and subject to approval by the Commissioner and under no circumstances should they exceed the cost of such services plus a modest profit” (emphasis added).
The proposal is based on a referral received by the Risk-Focused Surveillance (E) Working Group, which, in turn, received a referral from the NAIC Chief Regulators Forum in late 2024. Although prior fee-related discussions appeared to extend beyond attorney-in-fact arrangements (e.g., to include managing general agent and program administrator arrangements), the latest initiative pertains only to attorney-in-fact/exchange arrangements.
E Committee also voted to constitute a new Reciprocal Exchanges (E) Working Group, which will report directly to E Committee and will be tasked with considering exchange- and AIF-related amendments to the Model Law. As of the date of this Alert, potential charges for the Working Group, its membership composition, and a timeline for assessing potential changes to the Model Holding Company Act remain pending.
b. Homeowners Insurance Market Data Call
The newly formed Homeowners Market Data Call (C) Task Force met during the Summer National Meeting to discuss a revamped NAIC data call for homeowners’ insurance. If adopted, the draft Data Call Definitions Form would add Renters, Condo Owner’s, and Wind-Only policies to the scope of the revised data call and would collect applicable data elements on an annual basis (ending December 31) rather than a “house months” basis. The current draft also seeks to request more granular claim, loss, cancellation, and discount-related data information from covered insurers. Additional information regarding the data call, including confidentiality, data sharing, and applicability (which will likely based on premium volume) will be determined at a later date.
A timeline for finalization and distribution of the revamped data call is still under consideration: the current template indicates companies will report data for years 2018 through 2024 (in anticipation of a late 2025 or early 2026 data call), through Task Force chair, Commissioner Mike Yaworsky (FL), also suggested that 2025 data could be collected if drafting discussions continued into 2026. Once finalized, regulators expect to issue the data call (and consider enhancements) on an annual basis. Comments on the draft Data Call Template and Data Call Definitions are due by September 15, 2025.
c. Reserves for Non-Variable Annuities
Roughly one month prior to the Summer National Meeting, the Life Insurance and Annuities (A) Committee met in a virtual session to adopt Valuation Manual-22 (Principles-Based Reserve for Non-Variable Annuities) (VM-22). VM-22 is intended to establish a standardized framework for determining reserves for non-variable annuities. VM-22 represents a significant shift towards a more dynamic approach that integrates actuarial judgement and asset-liability management modeling, moving away from prescriptive formulas. The new framework applies prospectively to new business effective January 1, 2026, though covered insurers are permitted delay implementation until January 1, 2029.
d. Indexed UL Policy Illustrations
The Life Actuarial (A) Task Force (LATF) met during the Summer National meeting to expose proposed revisions to Actuarial Guideline 49A for a 30-day public comment period ending on September 9. The exposure would limit illustrations to a table showing actual historical index change and corresponding hypothetical annual rates of indexed credits using current index account parameters for only the most recent 25-year period. If the historical period for the index is at least 5 to 10 years, but less than 25 years, the table would be limited to the historical period.
e. Annuity Suitability Safe Harbor
The Annuity Suitability (A) Working Group exposed a draft of the Annuity Best Interest Regulatory Guidance and Considerations for public comment until September 22, 2025. The Guidance clarifies supervisory obligations for insurers that issue annuities sold under the best interest safe harbor provided under the NAIC Suitability in Annuity Transactions Model Regulation. The Working Group plans to finalize the Guidance by the end of 2025.
f. Opening Session Protests
Individuals associated with the consumer advocacy group Public Citizen interrupted NAIC President and North Dakota Insurance Commissioner Jon Godfread’s Opening Session remarks by unfurling banners and chanting in opposition to insurer investments in fossil fuels. Prior to the disruption, a larger and otherwise passive group of protesters, at least some of whom were registered NAIC attendees, aired a wider range of grievances against state insurance regulators and the insurance industry, including the availability and affordability of property insurance and industry/regulator conflict of interest concerns. Among other things, the activists called for commissioners to adopt an “anti-corruption pledge” to refuse industry-sponsored benefits and campaign contributions, and to commit to a “cooling off period” before going to work in the industry.
Photo by Public Citizen
