NAIC tightens investment reporting rules for insurers

Insurers will face new costs to maintain characteristics data for the debt instruments they use, under new requirements issued by the National Association of Insurance Commissioners (NAIC), the organization of state insurance regulation bodies. 

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The new requirements, set to take effect January 1, 2025, are part of financial statement and investment schedules under statutory accounting principles (SSAPs), that insurers will have to file with state regulators, according to Sabrina Wilson, a regulatory policy expert and product manager at Clearwater Analytics, which consults with NAIC.

Insurers "will have to contact their brokers or front office teams to provide the data, store, organize and analyze it," Wilson wrote in a response to questions. "Insurers will also be required to maintain the supporting documents that back up their decisions on asset classifications and provide them to the regulators at request."

The NAIC updated its Investment Schedules so regulators can take a deeper look at insurers' investment portfolios. NAIC's bond definition guidance now requires insurers to categorize investments at a more granular level, and to move non-bond investments to a reporting schedule format used for fixed-income securities, equities, real estate and other investments.

Also under NAIC's new additions to investment reporting requirements, insurers will have to report paid-in-kind interest included in current principal amounts of investments. Acquisitions, disposals and holdings of asset-backed securities will need to be reported at lot level, not just position level, under capital gains or losses reporting.

NAIC is making these changes to standardize reporting under SSAPs, according to Wilson.

"For sure, back office teams will have to work closely with the front office teams to understand the characteristics of debt instruments for accounting and reporting purposes," she wrote.