NAIC Proposes Enhanced Transparency for Funding Agreement-Backed Securities
NAIC Proposes Enhanced Disclosures for Funding Agreement-Backed Securities Programs
The Macroprudential (E) Working Group, in collaboration with the Financial Stability (E) Task Force, has introduced a directive to increase transparency for funding agreements backing funding agreement-backed notes (FABNs) issued by life insurers. This initiative seeks to clarify potential risk channels between the insurance sector and capital markets, emphasizing regulatory compliance requirements. Stakeholders have the opportunity to provide feedback on this proposal until January 26, 2026.
Originally introduced in November 2025, the plan aims to provide regulators with accurate data on the FABN market, which is currently underreported in statutory Annual Statements. Following a presentation in July 2025 by NAIC staff on FABN and funding agreement-backed securities (FABS) activities, state regulators identified the need for detailed reports on the issuance and types of FABNs/FABS to assess industry risk management more effectively.
The American Council of Life Insurers (ACLI) has requested more time to prepare a comprehensive response, highlighting the importance of including various funding agreement applications like funding agreement-backed repurchase agreements (FABRs). This proposal does not currently separate reporting requirements for each type of FABN, and further research will determine if funding agreement-backed loans (FABLs) need categorization under FABNs.
If approved, the proposal will integrate into SSAP No. 52 concerning Deposit-Type Contracts, potentially instituting new footnote requirements in financial disclosures by 2026, reinforcing regulatory compliance and transparent underwriting practices.
NAIC Enhances Requirements for Life Insurance Policy Illustrations with Index-Based Interest
The NAIC's Executive (EX) Committee and Plenary have updated Actuarial Guideline XLIX-A (AG 49-A) to address life insurance policies with index-based interest issued after December 14, 2020. These modifications refine sections 7.B and 7.C, curbing practices involving historical averages that exceed maximum illustrated rates, ensuring regulatory compliance and enhancing transparency. Policies initiated on or after April 1, 2026, will reflect these standardized disclosure practices.
Safe Harbor Guidance for Annuity Transactions Model Regulation Adopted
The Life Insurance and Annuities (A) Committee has endorsed a guidance document on the safe harbor provision within the revised Suitability in Annuity Transactions Model Regulation (Model 275), initially adopted by the NAIC in Spring 2020. This adoption assists in streamlining compliance and enhancing provider risk management strategies.
NAIC Modifies Long-Term Care Insurance Multistate Rate Review Framework
Revisions to the long-term care insurance multistate rate review framework have been approved by the NAIC's Executive (EX) Committee and Plenary. Sanctioned initially by the Health Insurance and Managed Care (B) Committee during the 2025 NAIC Summer Meeting, these changes aim to strategize a comprehensive, cross-state rate review process, aiding carriers in aligning with regulatory compliance and underwriting efficiency.