Raising Private Equity Capital from U.S. Insurance Companies: Recent Developments, Relevant Rules and Practical Guidance

State regulators oversee U.S. insurance companies, and nearly every U.S. state has adopted laws governing investments by insurance companies.  Many U.S. states have adopted one of the two versions of the Investments of Insurers Model Act (the “IIMA”) promulgated by NAIC – the

A. LifeCos.

Under the IIMA, LifeCos are also permitted to hold equity interests in domestic entities, including limited partnership interests, private funds making equity investments and common stock of operating companies.  However, the IIMA limits a LifeCo’s ownership of limited partnership interests in private funds and all other non-exchange listed equity securities (e.g., shares of private companies) to 5% of its admitted assets in aggregate.⁶Investments of Insurers Model Act (Defined Limits Version) § 13(A) (“An insurer shall not acquire an investment under this section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under  this section would exceed twenty percent (20%) of its admitted assets, or the amount of equity  interests then held by the insurer that are not listed on a qualified exchange would exceed five percent (5%) of its admitted assets.”)

LifeCos also have access to two “additional investment authority” baskets that augment the LifeCos ability to make equity (or other capped) investments of a size that exceeds the flat 5% limitation.⁷A third “basket” is available if the commissioner of the relevant state grants prior approval.  If the LifeCo receives such approval from the commissioner, it may hold investments in an aggregate amount up to the greater of (a) 25% of its capital and surplus and (b) the difference between 100% of its capital and surplus minus ten percent of its admitted assets. Id. § 20(B) These baskets are as follows:⁸Id. § 20(A)-(C)

• Basket A: (1) Aggregate limit on all “Basket A” investments of additional 3% of admitted assets and (2) aggregate limit on one category of investment of 1% of admitted assets (i.e., up to a 6% aggregate limit for equity).
• Basket B: Aggregate limit on investments not prohibited by law in an aggregate amount of up to the lesser of (a) 10% of admitted assets or (b) 75% of capital and surplus, subject, in each case, to a per-issuer limitation of 3% of capital and surplus.

Basket A and Basket B are both available for investment (rather than on an “either-or” basis).  Between these two baskets, LifeCos considerably increase their capacity for equity investments.

B. P&C Cos.

The IIMA imposes stricter limitations on P&C Cos compared to LifeCos.⁹Capvisor Assocs., A Strategic Analysis of Short-Duration High-Yield Bonds: Optimizing Investment Portfolios for Small to Medium-Sized Property & Casualty Insurers (July 2025), https://capvisorassociates.com/research/Research%20Report%20-%20A%20Strategic%20Analysis%20of%20Short-Duration%20High-Yield%20Bonds%20-%20July%202025.pdf. Specifically, a P&C Co. must maintain specified classes of assets in an amount equal to the value of its “reserve requirement.”¹⁰Investments of Insurers Model Act (Defined Limits Version) § 22(A) The IIMA calculates a P&C Co.’s “reserve requirement” based on the P&C Co.’s adjusted loss reserves, loss adjustment expense reserves, unearned premium reserves, and statutorily required policy and contract reserves, in each case, measured as of the most recent annual or quarterly statement of the P&C Co. In other words, the reserve requirement represents the underwriting liabilities of the P&C Co.¹¹Id.

These specified classes of assets include cash and cash equivalents, certain rated debt securities and publicly listed equity securities (collectively, “Specified Asset Classes”).¹²Id. § 22(A)(1) The Specified Asset Classes do not include limited partnership interests in private funds or other unlisted equity securities.

The P&C Co. may only invest using admitted assets in excess of its reserve requirement, in other asset classes, including limited partnership interests in private funds; however, such investments are subject to additional quantitative limitations.¹³Id. § 26 For example, the value of a P&C Co.’s aggregate investments in all equity interests may not exceed the greater of (x) twenty-five percent (25%) of its admitted assets or (y) one hundred percent (100%) of its policyholder’s surplus (a measure roughly analogous to its shareholder equity).¹⁴ Id. § 26(B) There is also a general single-issuer limit on investments of 5% of the insurer’s admitted assets.¹⁵Id. § 23(A)(1)

P&C Cos also have additional unallocated basket capacity allowing the P&C Co to make any otherwise permitted investment if the aggregate amount of investments made using this basket capacity does not exceed the greater of (1) the P&C Co’s unrestricted surplus¹⁶ Id. § 2(HHHH) (“‘Unrestricted surplus’ means the amount by which total admitted assets exceed 125 percent of the insurer’s required liabilities.”) or (2) the lesser of (x) 10% of the P&C Co’s admitted assets or (y) 50% of its policyholder’s surplus.

3. IIMA Defined Standards

In contrast to the “Defined Limits” rules, U.S. states that adopt the “Defined Standards” version pivot from strict quotas to a “prudent person” framework for the investment of assets.¹⁷Capvisor Assocs., supra note 17. More specifically, the insurer and its board are required to invest the insurer’s funds so that “investments [are] of sufficient value, liquidity and diversity to assure the insurer’s ability to meet its outstanding obligations….”¹⁸Nat'l Ass'n of Ins. Comm'rs, Investments of Insurers Model Act (Defined Standards Version) (Model Law 283) (Apr. 2001) § 4(B) The insurer and its board must evaluate investments in light of statutorily specified factors such as general economic conditions, risk and reward characteristics, diversification and quality and liquidity of the investments.¹⁹Id. § 5

Such insurers must adopt a written investment policy that incorporates quantified goals and objectives regarding the composition of the investment portfolio, including maximum internal limits on investments into different classes of assets.²⁰Id. § 6 The law requires the insurer and its board to evaluate the policy at least once per year.

In addition to the general “prudent person” standard, the Defined Standards version of the IIMA imposes asset-class based quantitative limitations on insurers.  Like the “Defined Limits” version of the IIMA, these quantitative limitations vary depending on whether the insurer is a LifeCo or a P&C Co.  LifeCos may invest up to 20% of their admitted assets into equity securities, while P&C Cos may invest up to 25% of admitted assets into such securities.²¹Id. § 8(A)(3) Further, LifeCos may hold up to three percent (3%) of admitted assets in securities of one issuer. P&C Cos may hold up to five percent (5%) of admitted assets in securities of one issuer.²² Id. § 8(B)

Only a small minority (e.g., Minnesota, Ohio, Utah and Washington) of U.S. states have adopted the “Defined Standards” version of the IIMA.²³Nat'l Ass'n of Ins. Comm'rs, Investments of Insurers Model Act (Defined Standards Version): State Page (ST-283) (2025), https://content.naic.org/sites/default/files/model-law-state-page-283.pdf.

III. U.S. Insurance Investment Regulation: Risk-Based Capital

1. Background

In addition to the explicit investment restrictions described above, regulators steer insurer behavior through “Risk Based Capital” (RBC) reporting and control statutes adopted in some form by all U.S. states based on the NAIC Risk Based Capital (RBC) for Insurers Model Act (“RBCA”).²⁴Nat'l Ass'n of Ins. Comm'rs, Risk-Based Capital, https://content.naic.org/cipr-topics/risk-based-capital (last visited July 21, 2026). The purpose of the RBCA and related reporting and control requirements is to allow regulators to identify undercapitalized insurers and to allow for early regulatory intervention and imposition of supervisory measures.²⁵Id.

At a high level, the RBCA requires that insurers file an annual report before March 1 each year calculating the requisite amount of capital and surplus (“authorized control level” or “ACL”) for such insurer based on quantitative measures of such insurer’s asset risk, credit risk, underwriting risk and other business risks.²⁶Nat'l Ass'n of Ins. Comm'rs, Risk-Based Capital (RBC) for Insurers Model Act (Model Law 312) (2011). A preparer takes the input data for the quantitative assessment from the insurer’s annual statement. The annual statement is a financial statement that state insurance statutes require insurers to prepare and file containing significant detail regarding the insurer’s investments and other assets, liabilities, reinsurance and capital, and surplus.²⁷E.g. Nat'l Ass'n of Ins. Comm'rs, 2025 Annual Statement Instructions: Property/Casualty (adopted June 2025), https://content.naic.org/sites/default/files/publication-asi-pua-25.pdf. On its RBC report, the insurer must calculate its ACL, its “total available capital” (TAC) and the ratio of its TAC to ACL²⁸See, e.g., Nat'l Ass'n of Ins. Comm'rs, 2025 NAIC Property & Casualty Risk-Based Capital Report Including Overview & Instructions for Companies (Nov. 1, 2025), https://content.naic.org/publications.. If the insurer’s ratio of TAC to ACL falls below certain thresholds, the insurer’s domiciliary regulator may take (or may be required to take) certain actions to preserve the value of the insurer for its policyholders.²⁹ Risk-Based Capital (RBC) for Insurers Model Act § 4 These regulatory actions may include orders to stop writing new business and, in an extreme case, placing the insurer into supervision or even receivership.³⁰E.g., 28 Tex. Admin. Code § 7.402(g) (2025).

2. Required Capital for Equity Assets

One major RBC input is “asset risk” –the risk that assets decline in value or liquidity so that the insurers are no longer able to obtain income or sale proceeds from such assets to pay policyholder claims.³¹Nat'l Ass'n of Ins. Comm'rs, Risk-Based Capital, https://content.naic.org/cipr-topics/risk-based-capital (last visited July 21, 2026). To quantify the asset risk borne by the insurer for purposes of calculating the insurer’s required capital, the insurer will multiply (x) the adjusted carrying value for such asset, as reflected on the investment schedules to the insurer’s annual statement times (y) a percentage “capital charge” assigned to such asset class in the instructions for calculating RBC published annually by NAIC for the relevant insurer type.³²See NAIC, 2025 NAIC Property and Casualty Risk-Based Capital Report Including Forecasting and Instructions for Companies as of December 31, 2025 (November 1, 2025), http://content.naic.org/publications

Insurers list their assets on the various schedules (Schedule A, Schedule BA, Schedule D) attached to the insurer’s annual statements. NAIC guidance classifies interests in private fund assets as “other invested assets” to be listed on Schedule BA of the insurer’s annual statement.³³Jennifer Johnson, Private Equity, Nat'l Ass'n of Ins. Comm'rs, Capital Markets Bureau Primer, https://content.naic.org/sites/default/files/capital-markets-primer-private-equity-investment.pdf. The annual statement classification and scheduling of an asset determines the “capital charge” for the asset that the insurer and its regulators use for purposes of calculating the insurer’s required capital.³⁴Phil Garner, What Insurers Should Know About New NAIC Bond Project Guidance, Forvis Mazars (Aug. 14, 2024), https://www.forvismazars.us/forsights/2024/08/what-insurers-should-know-about-new-naic-bond-project-guidance.

There are multiple ongoing NAIC initiatives that have resulted in, or may result in, an increase in the amount of capital that must be retained for investments held by insurers.³⁵Id. See also Josh Recamara, NAIC Tightens Grip on Insurers' Investment Risk With Bond and CLO Overhaul, Ins. Bus. (Apr. 20, 2026), https://www.insurancebusinessmag.com/us/news/claims/naic-tightens-grip-on-insurers-investment-risk-with-bond-and-clo-overhaul-572390.aspx. As noted above, the PBBD requires a bond now be defined as "any security representing a creditor relationship, whereby there is a fixed schedule for one or more future payments, and which qualifies as either an issuer credit obligation or an asset-backed security.”³⁶Nat'l Ass'n of Ins. Comm'rs, Statement of Statutory Accounting Principles No. 26R—Bonds (issued Aug. 13, 2023, effective Jan. 1, 2025), https://content.naic.org/sites/default/files/committee_related_documents/19-21a%20-%20SSAP%2026R%20-%208-13-23_0.pdf. Securities that fail the tests set forth in the PBBD are reclassified from financial statement Schedule D (lower RBC charges) to Schedule BA (higher charges for ‘other assets’), directly increasing required capital.³⁷ Id. 

Similarly, as a result of the RBC Investment Risk and Evaluation (E) Working Group ("RBCIRE") study of "residual tranches" (i.e., the “equity tranche”) of structured securities—the lowest tranches that absorb first losses, the NAIC adopted an interim RBC capital charge of 30% for residual tranches for year-end 2023.³⁸NAIC Adopts Change to Better Monitor Life Insurer Investments, Nat'l Ass'n of Ins. Comm'rs (Aug. 16, 2023), https://content.naic.org/article/naic-adopts-change-better-monitor-life-insurer-investments. This capital charge rose to 45% for year-end 2024 and is currently at 45%.³⁹A Review of the Framework for the Regulation of Insurer Investments, AAM Ins. Inv. Mgmt. (Jan. 14, 2025), https://aamcompany.com/insights/investment-accounting-regulatory/a-review-of-the-framework-for-the-regulation-of-insurer-investments/.

3.  Amount of Capital Charge and Implications for Investments

The amount of the capital charge for each class of assets depends on whether the insurer is a P&C Co. or a LifeCo.⁴⁰Memorandum from Academy Joint RBC Task Force to Lou Felice, Chair, NAIC Risk-Based Capital Task Force, Comparison of the NAIC Life, P&C and Health RBC Formulas (Feb. 12, 2002), https://actuary.org/wp-content/uploads/2017/11/jrbc_12feb02.pdf.

For P&C Cos, interests in private equity funds and joint ventures listed on Schedule BA as “Other Invested-Assets” are subject to a significant capital charge.⁴¹See NAIC, 2025 NAIC Property and Casualty Risk-Based Capital Report Including Forecasting and Instructions for Companies as of December 31, 2025 (November 1, 2025), http://content.naic.org/publications (In contrast, common stock of operating companies (listed on Schedule D) is subject to a smaller capital charge.)⁴²See id. 

For LifeCos, interests in “Other Invested Assets” (including private equity fund interests) are listed on Schedule BA and subject to a significant capital charge.⁴³See NAIC, 2025 NAIC Life and Fraternal Risk-Based Capital Report Including Forecasting and Instructions for Companies as of December 31, 2025 (November 1, 2025), http://content.naic.org/publications Common stock in a privately held, unaffiliated operating company is also subject to a similarly onerous capital charge, and is subject to further increases based on asset concentration.⁴⁴See id.

These capital charges are relatively high compared to the capital charges imposed on highly rated bonds, which have very modest capital charges.⁴⁵See NAIC, 2025 Life and Fraternal RBC Report, supra note 43. NAIC materials assign highly rated commercial mortgage loans held by LifeCos with modest capital charges.⁴⁶See id. Capital charges for such assets held by P&C Cos are similarly low.⁴⁷See NAIC, 2025 Property and Casualty RBC Report, supra note 41.

The upshot of these calculation differences is that it is expensive from a risk-based capital perspective for a U.S. insurer to hold private equity fund assets.⁴⁸See Florian Weinlich, Changes in Risk-Based Capital and Reaching for Yield (Univ. of Iowa, Tippie Coll. of Bus., 2024) (“Insurers are incentivized to acquire assets that offer favorable returns on a risk-adjusted basis… Regulators play a vital role in safeguarding policyholders by imposing standards on capital regulation for insurers. The risk-based capital ('RBC') requirement in the U.S. introduced by the NAIC sets a minimum level of capital that insurers must hold, considering their risk exposures.") That is, the insurer must ensure that it has surplus available (i.e., assets that are not backing insurance reserves) to absorb 20 or more of the carrying value of such assets (subject to additional modifications for concentration risk). All things equal, holding private equity fund interests as assets means that the insurer can write “less limit” and earn less in premium income or income from other investments.⁴⁹See id. As a result, the return from the investments in private equity funds must be sufficient to compensate the insurer for both the risk and illiquidity inherent in the fund interest and for some portion of the premium/investment income that is foregone as a result of the capital charge.

IV. Recent Regulatory Developments

In recent years, the National Association of Insurance Commissioners (NAIC) has launched several initiatives aimed at modernizing and strengthening the regulatory framework governing insurer investments.  While much of the regulatory focus has been on structured credit and private debt (such as CLOs), these developments are also highly relevant for private equity sponsors seeking capital from U.S. insurance companies.

1. The Principles-Based Bond Definition.

The NAIC's multi-year "Bond Project" culminated in a revised SSAP No. 26, effective January 1, 2025, which fundamentally redefined what qualifies as a "bond" for statutory accounting and RBC purposes.⁵⁰NAIC, SSAP No. 26R, supra note 36. The Principles Based Bond Definition (“PBBD”) requires a substantive, principles-based analysis of the economic characteristics of each investment, regardless of its legal form.⁵¹Todd Rosenbaum, Navigating NAIC Principles-based Bonds Guidance for Insurers, Cherry Bekaert (Jan. 23, 2025), https://www.cbh.com/insights/articles/naic-guidance-2025-bond-compliance-for-insurers/. The core definitional change requires that a bond now be defined as "any security representing a creditor relationship, whereby there is a fixed schedule for one or more future payments, and which qualifies as either an issuer credit obligation or an asset-backed security.”⁵²SSAP No. 26R, supra note 36. Securities that fail the principles-based bond definition are reclassified from financial statement Schedule D (lower RBC charges) to Schedule BA (higher charges for ‘other assets’), directly increasing required capital.⁵³Rosenbaum, supra note 50.

2. NAIC’s Holistic Review and Strategic Framework. 

In October 2024, the NAIC’s Financial Condition Committee released a framework document outlining a “long-term, strategic direction for the regulation of insurer investments.⁵⁴Nat'l Ass'n of Ins. Comm'rs, Framework for Regulation of Insurer Investments—A Holistic Review (Oct. 2024), https://content.naic.org/sites/default/files/inline-files/Oct%202024%20Investment%20Framework.pdf/.” The framework stated that its primary objective was to ensure “state insurance regulators have appropriate tools to ensure the solvency of insurers.”⁵⁵Id. Identified areas of focus were (1) the modernization of the SVO and development of the SVO’s capabilities so that the SVO could perform due diligence on credit rating providers, portfolio risk analysis of insurance companies and the industry as a whole, modeling and analyses of structured assets and (2) review of RBC capital factors for different types of investments.⁵⁶Id.

3. Creation of the Invested Assets (E) Task Force (IATF). 

In July 2025 and December 2025, the NAIC adopted proposals to reorganize its Valuation of Securities Task Force (VOSTF) into the Invested Assets (E) Task Force (IATF).⁵⁷Nat'l Ass'n of Ins. Comm'rs, Purposes and Procedures Manual of the NAIC Investment Analysis Office (Dec. 2025), https://content.naic.org/sites/default/files/publications-ppm-manual.pdf. The VOSTF held its final meeting on December 10, 2025, and the IATF formally commenced operations on January 1, 2026.  Under the IATF, three different working groups were created: the Investment Analysis Working Group (InvAWG), the Investment Designation Analysis Working Group (IDAWG) and the Credit Rating Provider Working Group (CRPWG).⁵⁸Id. The InvAWG is particularly relevant — its mission is to monitor the risks associated with all types of investment assets, including Schedule BA investments (which includes interests in private equity funds).⁵⁹Id.

The IATF held its inaugural session at the NAIC’s Spring 2026 National Meeting, which featured a presentation from a major asset manager on residential mortgage loans, an asset class that has seen rapid growth in insurer portfolios.⁶⁰Nat'l Ass'n of Ins. Comm'rs, Invested Assets (E) Task Force, Minutes of the Mar. 24, 2026 Meeting (Draft Pending Adoption, dated Mar. 31, 2026), https://content.naic.org/sites/default/files/national_meeting/24_Minutes-IATF.pdf (last visited July 21, 2026). Regulators expressed a constructive interest in understanding investment trends and welcomed similar industry presentations on other asset classes in the future, signaling a collaborative but attentive posture toward evolving insurer investment practices.⁶¹Id.  While the IATF’s initial work has focused on debt securities and structured products, its stated goal of engaging with industry to understand investment trends suggests that a closer examination of equity and alternative asset exposures may follow.⁶²Nat'l Ass'n of Ins. Comm'rs, Joint Meeting of the Investment Designation Analysis (E) Working Group and Invested Assets (E) Task Force, Meeting Materials, 2026 Spring National Meeting, San Diego, California (Mar. 24, 2026) (draft dated Mar. 9, 2026), https://content.naic.org/sites/default/files/national_meeting/Materials-IDAWG-IATF-3-24-26_1.pdf (last visited July 21, 2026).

4. Modernization of the RBC Framework

On February 5, 2025, the NAIC announced the formation of the Risk-Based Capital Model Governance (EX) Task Force (the “RBC Task Force”).⁶³See Risk-Based Capital Model Governance (EX) Task Force, Nat'l Ass'n of Ins. Comm'rs, https://content.naic.org/committees/ex/rbc-model-governance-tf (last visited July 21, 2026).  This group is charged with developing guiding principles for the RBC framework and establishing a process for both retrospective and forward-looking adjustments to RBC requirements (described in greater detail below).⁶⁴Id.  The initiative is a response to the increased complexity and illiquidity in insurer investment portfolios, much of which is attributable to the growth in alternative assets.⁶⁵Id.

On December 10, 2025, the RBC Task Force achieved its initial goal and adopted 11 “Principles of RBC Requirements,” which serve as a “guiding North Star for governing the purpose and use of, as well as maintaining and prioritizing updates to, RBC requirements.”⁶⁶Nat'l Ass'n of Ins. Comm'rs, Risk-Based Capital Model Governance (EX) Task Force, Agenda & Meeting Materials, 2025 Fall National Meeting, Hollywood, Florida (Dec. 10, 2025) (draft dated Dec. 5, 2025), https://content.naic.org/sites/default/files/national_meeting/RBC%20MG%20TF%20Agenda%20%26%20Materials.pdf (last visited July 21, 2026). Among these principles are concepts such as “equal capital for equal risk,” materiality, objectivity, accuracy, transparency and a requirement that RBC be updated to incorporate emerging risks (including macroprudential risk) by the time they become material.⁶⁷ Id.

Having adopted the guiding principles, the RBC Task Force has turned its attention to the next phase of work: a comprehensive gap analysis led by a technology and consulting firm, which will initially focus on inventorying all Life investment RBC components to identify gaps, inconsistencies, or stale modeling within the RBC formula.⁶⁸Nat'l Ass'n of Ins. Comm'rs, Minutes of the Risk-Based Capital Model Governance (EX) Task Force, 2026 Spring National Meeting, San Diego, California (Mar. 24, 2026) (draft pending adoption), https://content.naic.org/sites/default/files/national_meeting/05_Minutes-RBCMGTF_0.pdf. Some gaps/inconsistencies between Life and P&C RBC identified included: (1) use of risk categories for Commercial Mortgage Loans for Life RBC, but not P&C RBC; (2) use of a beta adjustment for common stock in Life RBC, but not in P&C RBC; (3) increased granularity regarding Schedule BA assets in Life RBC and different Schedule BA asset limitations between states; and (4) insufficient treatment of illiquidity, interest rate and spread duration risk.⁶⁹Id. Bridgeway Analytics also proposed a decision tree for determining whether risks should be treated as an RBC component or through another regulatory mechanism.⁷⁰Id.

The RBC Task Force discussed these gaps and decision trees at the NAIC’s Spring 2026 National Meeting, with a stated intention of putting in place a governance process for evaluation of changes to RBC before technical working groups begin to focus on specific changes.⁷¹Id. While the governance frameworks being developed remain early-stage, the processes established by this group will have meaningful impact on how RBC formula changes are evaluated and prioritized in the coming years, including potential changes to capital charges for various asset classes.⁷²Id.

5. SSAP No. 48 Review and Schedule BA Reporting Enhancements.

In a development of direct relevance to private equity sponsors, SAPWG has initiated a comprehensive review of SSAP No. 48, which governs the accounting for joint ventures, partnerships, and limited liability companies (“SSAP 48 Investments”) — the structures through which private equity fund interests are typically held by insurance companies.⁷³Nat'l Ass'n of Ins. Comm'rs, Hearing Materials, Statutory Accounting Principles (E) Working Group, 2026 Spring National Meeting, San Diego, California (Mar. 23, 2026) (draft pending adoption), https://content.naic.org/sites/default/files/national_meeting/Materials-SAPWG%20Hearing%203-23-26.pdf.As a general matter, insurance companies must value SSAP 48 Investments (including limited partnership interests in private equity funds) for statutory reporting purposes using the equity method based on the issuer’s most recent audited financial statements.⁷⁴Id.

At the Fall 2025 National Meeting, SAPWG made a set of requests for comment from industry participants regarding several issues relating to accounting for SSAP 48 Investments: (1) timing of recognition of equity value changes in SSAP 48 Investments and whether to restrict recognition of unrealized gains until audited financial statements of the issuer are available, (2) the reporting of gains in goodwill for SSAP 48 Investments purchased at a discount to equity value (which is relevant for sales of interests via a “secondary transaction”), and (3) the reporting of negative investment income associated with SSAP 48 Investments.⁷⁵Nat'l Ass'n of Ins. Comm'rs, Meeting Materials, Statutory Accounting Principles (E) Working Group, 2025 Fall National Meeting (Dec. 9, 2025), https://content.naic.org/sites/default/files/national_meeting/12-9-25%20Meeting%20SAPWG%20Combined.pdf.

At the Spring 2026 National Meeting, SAPWG directed staff to convene a small industry focus group (of two to four dedicated industry representatives) to develop proposed revisions for subsequent review by the full Working Group.⁷⁶Andrew Phillips, Highlights from the NAIC's 2026 Spring National Meeting: CLOs, Collateral Loans, and RBC Model Governance in the Spotlight, KKR (Apr. 2026), https://www.kkr.com/insights/naic-spring-update-2026. While the ultimate outcome of the SSAP No. 48 review remains uncertain, we can speculate from the requests for comment put forward that the NAIC and its staff may be seeking to update reporting on SSAP 48 Investments to, at a minimum, clarify the timing of audited financial statements supporting changes to the carrying value of SSAP 48 Investments and to report when SSAP 48 Investments are acquired at a discount or premium. Alternatively, the SAPWG and NAIC could take a more restrictive position whereby insurance companies could not report equity value gains on SSAP 48 Investments until such gains are reflected in audited financial statements of the issuers, and whereby insurance companies would have to treat any excess of book value of SSAP 48 Investments over purchase price as negative goodwill to be amortized over time. 

6. Elimination of the “Investment Subsidiary” Concept.

At the Fall 2025 National Meeting, SAPWG adopted a proposal to eliminate the concept of “investment subsidiaries” from annual statement instructions and RBC instructions.⁷⁷Antonia Giordano & Vincent J. Cartelli, Impact of Recent NAIC Updates on Statutory Accounting and Reporting, PKF O'Connor Davies (Apr. 13, 2026), https://www.pkfod.com/insights/impact-of-recent-naic-updates-on-statutory-accounting-and-reporting/. Investment subsidiaries — typically noninsurance subsidiaries holding assets for the direct or indirect benefit of the reporting insurer — had been permitted under prior reporting instruction to receive look-through RBC treatment based on underlying assets.⁷⁸Ind. Dep't of Ins., 2024 Life/Fraternal Risk-Based Capital Forecasting and Instructions (November 1, 2024), https://www.in.gov/idoi/files/RBCL24-INpdf.pdf

Regulators expressed concern that this framework could permit life insurers to obtain more favorable RBC treatment by moving assets into investment subsidiaries rather than reporting those assets directly on investment schedules.⁷⁹Nat'l Ass'n of Ins. Comm'rs, Statutory Accounting Principles (E) Working Group, Ref. #2024-21, Investment Subsidiary Classification (adopted Dec. 9, 2025), https://content.naic.org/sites/default/files/inline-files/24-21%20-%20Investment%20Subsidiaries.pdf. At the Spring 2026 National Meeting, the Capital Adequacy (E) Task Force exposed a proposal to remove look-through RBC treatment for investment subsidiaries, to be effective for year-end 2026 reporting.⁸⁰J.P. Morgan Asset Mgmt., NAIC 2026 Spring National Meeting, https://am.jpmorgan.com/us/en/asset-management/institutional/investment-strategies/insurance/insights/naic-2026-spring-national-meeting/ (last visited July 21, 2026).

While the proposal would not prohibit holding investments through subsidiaries, it would require investment subsidiaries to be reported and valued consistently with SSAP No. 97, using existing subsidiary reporting lines that do not allow the current look-through RBC treatment.  This change may affect certain insurance company investment structures, including structures used to hold alternative asset portfolios.

V. Implications of Developments for Private Fund Sponsors Looking to Raise Capital from Insurance Companies

Aside from the impact of the PBBD on collateralized fund obligations (discussed below), no immediate changes have been made to the rules that directly affect insurance company private equity fund investments.  However, these regulatory developments signal several important trends and potential future impacts for private fund sponsors seeking to raise insurance company capital:

1. New Restrictions on Structuring Collateralized Fund Obligations. 

Previously, private fund managers benefited from demand for fund interests from structured product sponsors, who could establish special purpose entities (SPEs) called collateralized fund obligations (or CFOs) and sell limited partnership interests in private equity funds to the CFO.⁸¹NAIC, Investment Framework, supra note 54, The CFO would then sell to insurance companies notes issued by the SPE. Purchasing insurance companies could obtain exposure to the cash flows of the underlying private equity funds while obtaining Schedule D capital treatment for the notes.⁸²Nat'l Ass'n of Ins. Comm'rs, Statutory Issue Paper No. 169—Principles-Based Bond Definition (adopted Aug. 13, 2024), https://content.naic.org/sites/default/files/inline-files/ip169.pdf. However, the PBBD now provides for a rebuttable presumption that “debt instruments collateralized by equity interests do not represent a creditor relationship in substance," and to overcome that presumption requires that "the underlying equity risks have been sufficiently redistributed through the capital structure of the issuer.”⁸³NAIC, SSAP No. 26R, supra note 36. As a result, notes issued by CFOs that own equity assets are usually ineligible for treatment as Schedule D assets unless the noteholders’ position is enhanced through substantive credit enhancement (e.g., sponsor guarantees), overcollateralization or subordination of the sponsor’s positions.⁸⁴Id. Structured product sponsors are seeking to create CFO products holding private fund interests that can meet the PBBD (e.g., the private equity fund interests are part of a basket of underlying assets that also include interests in private credit funds and U.S. treasuries); however, the additional conditions for Schedule D treatment of CFOs holding private equity fund interests will necessarily raise hurdles to the creation and distribution of these CFO assets and their acquisition by insurance companies.

2. Increased Scrutiny and Potential for Higher Capital Charges.

As regulators continue to review the risk characteristics of alternative assets, there is a possibility that capital charges for private equity fund interests could be revisited and potentially increased, especially if regulators determine that current charges do not adequately reflect the asset risk and illiquidity of these investments.  This risk is reinforced by several recent developments.  The elimination of the investment subsidiary look-through concept may result in higher effective capital charges for certain structures.  In particular, the RBC Task Force’s adopted principle of “equal capital for equal risk” underscores the likelihood that capital charges for all asset classes — including Schedule BA assets — will be subject to closer scrutiny and potential recalibration over time.⁸⁵See Nat'l Ass'n of Ins. Comm'rs, Minutes of the Risk-Based Capital Model Governance (EX) Task Force, 2025 Fall National Meeting, Hollywood, Florida (Dec. 10, 2025) (draft pending adoption), https://content.naic.org/sites/default/files/national_meeting/05_Minutes-RBCMGTF.pdf.

3. Greater Emphasis on Transparency and Reporting.

Insurance companies that invest in private funds will likely face heightened expectations for timely, detailed, and standardized reporting on their illiquid asset holdings. Fund managers should be prepared to provide robust documentation, including audited financials, quarterly capital account statements, and detailed disclosures to support regulatory filings.  This trend is reinforced by SAPWG’s comprehensive review of SSAP No. 48, which specifically identifies the use of unaudited financials as a basis for equity value changes in SSAP 48 Investments as an area of concern.⁸⁶Id.

4. Potential for New Admissibility or Eligibility Criteria. 

The NAIC’s focus on solvency and risk management may lead to new requirements regarding the admissibility of private equity fund interests as admitted assets on insurer balance sheets.  This could include stricter audit requirements, limitations on fund structures, or enhanced due diligence obligations.  In particular, the SSAP No. 48 review’s focus on the treatment of unaudited financials and the application of goodwill to investments purchased at a discount may lead to revisions that directly affect how insurers account for and value their private equity fund interests.

VI. ILPA Best Practices for Relationships with Insurance Company Limited Partners

In addition to investment limitations and RBC charges, there are certain other regulatory and practical requirements of insurance company limited partners (“LPs”) that the Institutional Limited Partners Association (“ILPA”) December 2019 “Best Practices for Relationships with Insurance Company Limited Partners” (the “Insurer LP Best Practices”)⁸⁷Institutional Ltd. Partners Ass'n, Best Practices for Relationships with Insurance LPs (Dec. 2019), https://ilpa.org/wp-content/uploads/2019/12/Best-Practices-for-Relationships-With-Insurance-LPs-December-2019.pdf. highlighted.  We describe some of these requirements and best practices below:

1. Requirement for Annual Audit

Insurance companies may only list a fund interest as an admitted asset if the fund vehicle into which the insurance company has made a commitment is subject to an annual audit.⁸⁸Id. This means that the fund manager must arrange for an annual audit of the relevant feeder fund, parallel fund or other vehicle through which the insurance company invests and to provide the annual audited financial statements and audit opinion to the insurance company in advance of the insurance company’s annual statutory financial filing requirements.⁸⁹ Id. In practice, this requirement is already satisfied by U.S. managers subject to SEC investment advisor registration.⁹⁰Custody of Funds or Securities of Clients by Investment Advisers, 17 C.F.R. § 275.206(4)-2 (2025).

2. Timely Provision of Quarterly Capital Account Statements

Insurance companies must file quarterly financial statements with regulators and must include timely information on the value of their private fund investments in these filings.⁹¹Nat'l Ass'n of Ins. Comm'rs, Industry Filing Participation Deadlines, https://content.naic.org/industry_filing_participation_deadlines.htm (last visited July 21, 2026). To assist with this process, ILPA recommends that fund managers provide insurance LPs with quarterly capital account statements within 90 days of each quarter end or, in lieu of final statements, provide an estimate or draft of the capital account balance.⁹²ILPA, supra note 87 The capital account balance should reflect mark-to-market changes in the fair value of the fund interests, and be issued by the entity to which the insurance company has committed capital.⁹³Id.

3.  Permitted Disclosures

Regulations require insurance companies to periodically disclose information concerning all of their investment holdings through their quarterly and annual filings with state regulators. As a result, insurance company LPs need carveouts from confidentiality obligations to disclose certain fund level information as part of these filings.⁹⁴Id. Specifically, insurance companies must disclose the investment name, unfunded commitment, amount invested, percent ownership, and accounting info such as market value, cost basis, and income.⁹⁵Id. Fund managers should note that this information will become public, as insurance company financial disclosures are publicly available through the NAIC website.⁹⁶Id.  However, they should also bear in mind that an insurance company may not be able to participate in investments unless the insurance company can make these disclosures.⁹⁷Id.

4. Assignment Among Affiliates

Insurance companies are often part of groups of regulated entities with differing capital needs and sometimes transfer fund interests among affiliates to meet those needs.⁹⁸ Id. Requiring GP approval to transfer fund interests among affiliates creates unnecessary regulatory burdens and slows down rebalancing.⁹⁹ Id. Ideally, fund managers should allow automatic transfers among affiliates without consent, but at a minimum, general partner approval should not be unreasonably withheld.¹⁰⁰Id.

VII. Suggestions for Private Equity Fund Managers and Placement Agents Raising LP Capital

As noted above, regulators restrict insurers from holding interests in private equity funds through both “direct” limitations on insurer investments and indirectly through higher capital charges associated with such asset classes relative to other types of investments.  In light of these constraints, private equity fund managers and placement agents should consider the following strategies to efficiently market their products to insurers:

1. Target Larger Insurers and LifeCos for Marketing Efforts:  In our experience, larger insurance groups and, in particular, larger LifeCos tend to have the basket capacity, capital and appropriate skills to evaluate private equity fund investments.  Smaller insurers and, in particular, smaller P&C Cos may lack one or more of these advantages and may either shy away from making private equity investments or outsource such investment selection to third party investment advisors.
2. Confirm whether Target Insurers have “Basket Capacity” for Investments in Private Equity Funds:  For a fee, anyone can obtain the annual statements of insurance company prospects through the NAIC’s INSDATA platform.  By doing so, fund managers and placement agents can compare the investments listed on Schedule A, Schedule BA and Schedule D of the insurer’s annual statement to the total capital and surplus of the insurer to obtain an “initial cut” view of whether the insurer may have capacity for investments in private equity.
3. Supporting Governance and Compliance: As underscored by the ILPA Principles, fund managers seeking insurance investment should be prepared to provide robust documentation and reporting to support regulatory reviews and internal governance.  They should also offer transparency on fund holdings, valuation methods, and risk exposures.
4. Show Understanding of Concerns and Build Long-Term Partnerships: Fund managers and placement agents should learn to “speak insurance” by demonstrating fluency with risk-based capital, investment restrictions and asset-liability matching, and watch other developing trends.