Key Takeaways

• Since mid-2022, the NAIC has initiated numerous activities—some directly targeting private equity-owned insurers and others addressing broader investment risks—that demonstrate an ongoing commitment to addressing these concerns.
• Key regulatory issues highlighted in the PE Considerations include the growth of structured securities, asset complexity and opacity, risk-based capital arbitrage, control and conflict of interest challenges, and the need for greater disclosure and transparency in related-party transactions.
• The NAIC’s evolving approach reflects both the unique challenges posed by private equity ownership and the broader transformation in insurer asset management and risk oversight.

Introduction

In June 2022, the National Association of Insurance Commissioners (NAIC), the U.S. standard-setting body composed of all U.S. state insurance regulators, issued a set of principles entitled “Regulatory Considerations Applicable (But Not Exclusive) to Private Equity (PE) Owned Insurers” (PE Considerations), a comprehensive summary of regulatory concerns and potential risks associated with private equity ownership and activity in the insurance sector. Since then, the NAIC has undertaken a broad array of initiatives—some directly targeting PE, others more generally addressing the complexity and risk in insurer investments—that collectively demonstrate a sustained and evolving response to the issues raised in the PE Considerations.

Since the publication of the PE Considerations, the NAIC’s committees, task forces and working groups have initiated a number of activities that both directly and indirectly addressed the regulatory concerns about PE’s role in insurance, as expressed in the PE Considerations. These efforts, while often not directed solely at PE-owned insurers, reflect the NAIC's recognition of the unique risks and complexities introduced by PE ownership and the evolving landscape of insurer asset management, control, and risk. The following are examples of NAIC activities since mid-2022 that have affected PE’s role, whether or not they were aimed specifically at PE. 

The PE Considerations: A Foundation for Regulatory Action

The PE Considerations identified a wide range of regulatory issues, including:

• Growth in structured securities (CLOs, CFOs, etc.)
• Complexity and opacity of insurer assets
• Risk-based capital (RBC) arbitrage and adequacy
• Control and conflict of interest issues, including under investment management agreements
• Disclosure and transparency of related-party transactions
• Challenges in identifying PE relationships and their impact on insurer risk profiles
• Reliance on credit ratings
• Use of offshore and asset-intensive reinsurance

1. Complexity of Insurer Assets and Structured Securities

CLOs and Structured Securities

• CLO Regulatory Overhaul: Since 2022, the NAIC has advanced a multi-year project to address perceived regulatory arbitrage and RBC treatment of collateralized loan obligations (CLOs) and other structured securities. The NAIC Valuation of Securities Task Force (VOSTF) and the NAIC Securities Valuation Office (SVO) have moved to require modeling of CLOs, removing them from the “filing exempt” category and subjecting them to NAIC modeling and designation, rather than relying solely on commercially-assigned public or private credit ratings. When the NAIC-developed loss model for CLOs becomes effective (currently expected in 2026), CLOs and ultimately all structured securities will have to be filed with the SVO for modeling and assignment of a NAIC Designation, which will translate directly into the associated capital charge.
• RBC Charges for Residual Tranches: The NAIC adopted a new 45% RBC charge for residual tranches in all structured securities (typically, the equity tranche in a securitization) in 2024. This was a direct response to concerns about tail risk and arbitrage opportunities in structured finance, including those often associated with PE-backed insurers.
• Bond Definition Reform: The NAIC’s principles-based bond definition project, effective January 1, 2025, clarifies what qualifies as a "bond" for statutory reporting and RBC purposes. This reform addresses concerns about complex structures, including those used by PE sponsors, by focusing on substance over form and requiring robust documentation and analysis for debt instruments collateralized by equity interests (e.g., CFOs, feeder funds). The SVO has expanded its authority to require “look-through” analysis for structured equity and fund investments, ensuring that in-substance equity or fund investments do not receive more favorable RBC treatment than if the insurer held the underlying assets directly.

2. Control, Conflicts of Interest, and Related-Party Transactions

• Enhanced Disclosure Requirements: In 2022, the NAIC adopted new reporting codes and reporting requirements for related-party transactions to better identify the role of related parties in investment schedules and structured securities. This directly addresses the concerns about hidden fees, conflicts of interest, and the difficulty of identifying PE-related exposures identified in the PE Considerations.
• Insurer Acquisition and Registration Reforms: The NAIC has also focused on control issues, particularly the challenges of identifying and regulating control when ownership is below the traditional 10% presumption threshold. Regulators recognize that control and conflict of interest considerations may exist even where an investor holds less than 10% of an insurer's (or insurance holding company's) voting securities, especially through board representation, contractual arrangements, or investment management agreements. In response, the NAIC Group Solvency Issues Working Group has been tasked with considering enhanced disclosure requirements and targeted questions on applications for the acquisition of control of an insurer (Form A), as well as potential modifications to the insurer Annual Registration Statement (Form B) to better capture these dynamics.

3. Credit Ratings and the Role of Rating Agencies

• Credit Rating Provider Due Diligence: The NAIC has established a new Credit Rating Provider Working Group to implement a due diligence framework for the use of credit ratings in regulatory processes. This is a direct response to concerns about over-reliance on ratings and the need for greater consistency, transparency, and appropriateness in the use of ratings for RBC and investment classification.
• Private Rating Letter Rationale Reports: New requirements mandate that private rating letter rationale reports be filed with the SVO within 90 days of a rating action and that these reports contain sufficient analytical substance. This increases transparency and regulatory oversight of privately rated securities, which are often used in PE-backed structures.

4. Offshore and Asset-Intensive Reinsurance

• Disclosure and Analysis of Reinsurance Structures: Offshore reinsurance and asset-intensive reinsurance transactions, often used by PE-owned insurers to maximize capital efficiency and manage reserves, have been the subject of ongoing scrutiny. In August 2025, the NAIC adopted a new Actuarial Guideline 55 to require analysis of reinsurance collectability and counterparty risk through asset adequacy testing. The NAIC has also discussed the need for additional Holding Company Act requirements for affiliated reinsurers but has deferred further action pending additional industry and regulator engagement.
• Macroprudential Oversight: The NAIC Financial Stability Task Force and the Macroprudential Working Group have prioritized analysis of cross-border reinsurance, sidecars, and retrocessions, with a focus on transparency, risk assessment, and the potential for regulatory arbitrage.

5. Transparency, Disclosure, and Public Access to RBC Data

• Debate Over Public Disclosure: The NAIC has engaged in extensive debate over the public disclosure of RBC ratios and related data, with strong input from industry, consumer groups, and actuaries. While some regulators have proposed limiting public disclosure to prevent misuse of RBC as a ranking tool, stakeholders have emphasized the importance of transparency for policyholders, investors, and market discipline.
• Maintaining Transparency: Despite proposals to limit disclosure, the prevailing view among stakeholders is that public access to summary RBC data (total adjusted capital and authorized control level RBC) is vital for market confidence and aligns with international standards.

6. Ongoing and Future Initiatives

• Investment Framework Reorganization: The NAIC is reorganizing its investment oversight structure, creating new working groups focused on investment analysis, structured securities, and credit rating providers, with explicit charges to monitor complex and evolving investment products, including those favored by PE owners.
• International Coordination: The NAIC continues to engage with the International Association of Insurance Supervisors (IAIS) and other global bodies on issues such as group capital, macroprudential supervision, and the role of alternative assets and PE in insurance. Relatedly, the IAIS recently issued a public consultation on the structural shifts in the life insurance sector related to the increasing allocation to alternative assets and prevalence of asset-intensive reinsurance transactions.

Conclusion

Since adopting the PE Considerations, the NAIC has demonstrated a sustained and multifaceted response to the regulatory challenges posed by private equity’s growing role in the insurance industry. Private equity owners of insurance companies have generally appeared to address initial regulatory concerns to the regulators' satisfaction and have demonstrated effective stewardship, with no negative impact on insurer assets or policyholder claims. Still, the NAIC's continued efforts, while not exclusive to PE-owned insurers, underscore insurance regulators' awareness of the distinct risks and complexities associated with private equity ownership, as well as the shifting dynamics of asset management, control, transparency, and risk within the insurance sector. We will continue to monitor these regulatory developments and their implications for our clients and on the broader transactional landscape.