Key Takeaways
- National Association of Insurance Commissioners (NAIC) updates expand investment reporting, requiring disclosure of Securities and Exchange Commission (SEC) status, book-adjusted carrying value (BACV), fair value and allowable earned yield (AEY) methods.
- Statutory Accounting Principles Working Group (SAPWG) revisions remove the investment subsidiary concept and introduce look-through reporting for mortgage trusts, improving consistency, transparency and risk-based capital (RBC) alignment.
- Income tax and retirement guidance updates incorporate Financial Accounting Standards Board (FASB) and Generally Accepted Accounting Principles (GAAP) concepts, requiring timely tax recognition and net asset value (NAV) disclosures to enhance reporting clarity.
The regulatory and statutory accounting environment continues to change as the National Association of Insurance Commissioners (NAIC) updates accounting guidance and reporting instructions. While many of these changes stem from working group discussions and technical amendments to the Accounting Practices and Procedures Manual, they can have an impact on financial reporting, disclosures and risk-based capital.
Below is a summary of key takeaways from the NAIC’s Fall 2025 National Meeting and several areas that insurers should pay attention to in the year ahead.
Enhanced Investment Reporting and Transparency
The Statutory Accounting Principles (E) Working Group (SAPWG) adopted revisions aimed at giving regulators greater visibility into insurers’ investment portfolios. Beginning December 31, 2026, insurers will be required to:
- Identify whether private placement securities are SEC-registered, issued under an exemption such as Rule 144A, Regulation D or Section 4(a)(2) or not subject to SEC registration requirements. Ref #2025-19
- Expand note disclosures in statutory statements to include the total book-adjusted carrying value (BACV), fair value (separately identifying Level 2 and Level 3 measurements), total deferred and paid-in-kind interest and total BACV supported by a private letter rating for SEC-registered securities or issued under exemptions for private placement securities. Ref #2025-19
- Clarify how debt securities and residual interests are presented in statutory statements. Insurers must disclose whether they apply the allowable earned yield (AEY) method or are transitioning from the practical expedient and those using AEY must provide impairment information similar to Statement of Statutory Accounting Principles (SSAP) No. 43 disclosures. Ref #2025-20
Overall, these changes are designed to increase transparency around investment holdings and valuation methodologies.
Elimination of the “Investment Subsidiary” Concept (Ref #2024-21)
SAPWG also addressed inconsistencies surrounding the classification and reporting of “investment subsidiaries,” which are entities insurers use to hold investments on their behalf. Although prior SSAP guidance had eliminated this concept, certain parts of the annual reporting and risk-based capital (RBC) instructions still referenced it. This led to inconsistent reporting and differences in capital treatment.
In response, regulators adopted revisions in December 2025 to remove the investment subsidiary concept from the Annual Statement Instructions effective December 31, 2026. This change aligns reporting with SSAP No. 97 and eliminates a separate look-through framework.
Insurers with complex holding structures should reassess reporting classifications and capital modeling before 2026 implementation.
Residential Mortgage Loans Held in Trusts (Ref #2025-13)
SAPWG amended SSAP No. 37 to allow insurers to apply a “look-through” approach for residential mortgage loans held in qualifying statutory trusts. Instead of reporting the trust structure separately, insurers can report the underlying loans directly on Schedule B as mortgage loans, provided certain criteria are met.
This change better reflects the economic substance of the investment and promotes more consistent reporting across insurers that use trust structures. The guidance is effective January 1, 2027, with early adoption permitted.
Income Taxes (Ref #2025-18)
SAPWG adopted, with modifications, key provisions of the Financial Accounting Standards Board’s (FASB’s) Accounting Standards Update (ASU) 2019-12 to simplify statutory income tax accounting and formally incorporate certain generally accepted accounting principles (GAAP) concepts into statutory guidance. The main change is about how income taxes are handled during interim periods. When tax laws change, companies are to recognize the impact in the period the law is passed, instead of spreading it out over multiple periods, and any effects related to prior years is to be recorded in the current year. It also reinforces that insurers need to estimate an annual effective tax rate for interim reporting and only recognize tax benefits from losses when they’re expected to be realized.
The changes improve clarity and consistency in reporting deferred taxes and related disclosures. The changes are effective immediately for year-end 2025 reporting.
Retirement Plans (Ref #2025-21)
SAPWG clarified that retirement plan assets, such as pension investments, may be measured using net asset value (NAV) when appropriate and must be included in required fair value disclosures.
This clarification ensures consistent measurement and transparent reporting of potentially significant retirement plan balances and became effective upon adoption on December 9, 2025.
Risk-Based Capital
NAIC adopted new guiding principles aimed to modernize the Risk-Based Capital (RBC) framework. The intention is to make sure the framework keeps up with what’s going on in the industry, including changing investment strategies and new types of risk. The NAIC task force is planning a 2026 gap analysis that could result in governance changes and potential updates to the RBC formula. While specifics are still developing, insurers should expect continued focus on capital adequacy and risk sensitivity.
Looking Ahead
The topics discussed above represent only a few of the topics addressed at the NAIC’s Fall 2025 National Meeting. Regulators also discussed capital adequacy, governance, investment risk oversight and use of artificial intelligence in the business of insurance.
Insurers should evaluate the operational, financial reporting and capital implications of these changes in advance of their respective effective dates to ensure smooth implementation.
We Can Help
Keeping up with evolving NAIC requirements takes more than just understanding the guidance; it requires coordination across accounting, reporting, tax and capital functions. PKF O’Connor Davies works with insurers to assess the impact of regulatory changes, enhance statutory reporting and disclosures and evaluate potential effects on risk-based capital.
With experience serving insurers of all sizes, our integrated assurance, tax and advisory teams help clients maintain compliance, strengthen internal controls and implement practical solutions that support day-to-day operations.
Contact Us
With our experience in statutory accounting and NAIC reporting, we help insurers stay ahead of regulatory change while maintaining efficient and compliant financial reporting. If you have any questions, please contact your PKF O’Connor Davies client service team or:
Antonia Giordano, CPA
Director
agiordano@pkfod.com
Vincent J. Cartelli, CPA
Partner
vcartelli@pkfod.com