Comment: The NAIC's vision for investment oversight takes shape

Insurers' business strategies have undergone significant innovation, and in some cases radical transformation, in recent years.Although life insurers' evolving business and portfolio strategies often draw the most attention, the underlying trends are far-reaching, as explored in our report, The Shifting Investment Strategies Helping Address the P&C Insurance Crisis: Implications for Investment Risk Oversight. NAIC oversight continues to evolve in tandem with industry practice, ensuring sufficient transparency and consistent treatment across practices and their risks. The rate of change often appears to be accelerating, as industry practices and revisions to guidelines accumulate. Much has transpired since my August 2025 report, Turning U.S. Regulatory Ambitions Into Reality, which reviewed the significant initiatives underway at the NAIC to enhance its oversight of insurers' investment practices:

• Initiatives to address specific limitations and known issues that regulators have flagged.
• Strategic initiatives aimed at developing a governance framework for Risk-Based Capital (RBC) and a due diligence framework over the use of agency ratings in the Designation process.

What's new?

Principles for RBC, a significant step toward the NAIC's aspiration of modernizing its investment oversight framework. At the NAIC's 2025 Fall National Meeting, the RBC Model Governance (EX) Task Force (RBC-MG-TF) adopted principles for the purpose and use of, as well as for maintaining and prioritizing updates to RBC, underscoring the vision for broader, long-term changes to come. There are eleven Principles, which include concepts that promote aspirational qualities of RBC requirements, such as assigning equal capital for equal risk, their grounding in Statutory Accounting and reserves, and ensuring updates are conducted transparently and follow a clear process. Successful NAIC Fall National Meeting Continues Progress to 'Secure Tomorrow' explains that the principles will be used to develop governance procedures for potential changes to the RBC formulas identified in the gap analysis to be conducted in 2026, which Bridgeway Analytics has been hired to support. Ultimately, the RBC-MG-TF has been tasked with building a governance structure that brings clarity, transparency, and discipline to a tool that underpins... [the U.S.] ...solvency system.

The due diligence framework overseeing the use of agency ratings takes shape. NAIC practices have been evolving over the last several years to avoid blindly relying on rating agencies that provide their own rating-to-Designation mapping. The Due Diligence Framework is intended to introduce governance over the use of agency ratings. The main objective of the Credit Rating Provider (CRP) Due Diligence Framework project is to establish a structured, scalable, and pragmatic process to support the NAIC's reliance on the translation of credit rating provider ratings to NAIC Designations. The Valuation of Securities (E) Task Force National Meeting included an update from PwC on the Credit Rating Provider (CRP) Due Diligence Framework, which is in the data collection phase of the initiative; additional data were requested from each CRP through a standardized template to supplement known data gaps with the NAIC's available data repository.

What's next? Looking at the horizon, expect ongoing revisions to guidelines in the coming years:

• The NAIC will address limitations and issues that have been flagged by regulators, including life RBC differentiation for CLO tranches targeted for 2026 and the treatment of interest rate risk and hedging programs.
• New disclosure requirements, including those related to the bond project, privately rated credit, and assets supporting reinsurance transactions, will allow regulators to gain a better understanding of business practices, possibly motivating additional revisions to guidelines.
• The 2026 RBC gap analysis will identify a possible need to revise the life RBC investment components. This is expected to be coupled with the development of a broader governance framework for updating the RBC framework.
• Heightened oversight with the use of agency ratings, including NAIC staff discretion over using agency ratings, and progress in developing a Due Diligence Framework.

Discussions at the National Meeting in Florida highlighted growing interest in ensuring the various components of oversight function together in practice. Encouragingly, regulators, NAIC staff, and industry participants appear increasingly aligned on the need for pragmatic sequencing, clear escalation paths, and feedback loops. It suggests a shared recognition that durable reform will require more thoughtful rules along with better governance around how those rules evolve.

* Amnon Levy serves as the CEO of Bridgeway Analytics, which supports insurers and their regulators in navigating capital markets and their regulatory landscapes.