Evolving Insurance Policies: Impact of AI and Private Assets

Insurance Industry Implications of Evolving Federal and State Policies on Private Assets and AI

Private assets and artificial intelligence (AI) are reshaping financial systems, particularly in capital markets and the insurance sector. Federal initiatives aim to expand access to private market strategies while adapting regulatory compliance requirements. This evolution presents significant opportunities and challenges for insurance carriers, payers, and providers.

Federal and State Dynamics on Private Assets

Federal policies aim to democratize private asset investment, a focus highlighted by Executive Order 14330. The Department of Labor (DOL) is preparing rules to facilitate investor access to private credit within retirement plans, thus bridging the gap between individual and institutional investors. Meanwhile, the Securities and Exchange Commission (SEC) is considering investor classification revisions to align with these objectives.

At the same time, authorities such as the Financial Stability Oversight Council (FSOC) and the Federal Reserve Board monitor private credit's growth closely. The FSOC's 2025 Financial Stability Report emphasizes understanding the sector's impact, particularly during economic stress. State-level insurance regulators, led by the National Association of Insurance Commissioners (NAIC), are revising the Risk-Based Capital framework to better manage insurers' private asset involvement and align with economic risk management strategies.

AI Developments in Insurance Operations

AI is transforming underwriting, claims processing, and risk management within the insurance industry. The federal administration, through Executive Order 14365, seeks to establish a national AI regulatory standard to reduce state-level inconsistencies and foster innovation. While AI holds the potential for economic enhancement, the FSOC's Financial Stability Report advises vigilant monitoring of related exposures.

State regulators, through the NAIC, are piloting the AI Systems Evaluation Tool to enhance transparency and accountability. Despite efforts for a universal framework, the NAIC resists measures that may undermine state-specific AI regulations, reflecting a tension that could impact strategic operational approaches for insurers.

Strategic Focus for Insurance Professionals

As the regulatory landscape evolves, insurance professionals must adeptly navigate new guidelines surrounding private assets and AI applications. Understanding these dynamics is essential for managing underwriting practices, balancing risk portfolios, and ensuring regulatory compliance. Strategically aligning with these changes can propel growth and foster innovation within the insurance industry.