2025 US statutory changes tighten investment schedules and life reinsurance

The most dramatic changes to statutory investment schedules in 14 years will reshape how companies classify bond holdings and provide new transparency to regulators keeping pace with rapidly evolving asset management strategies. New reinsurance disclosures also demand transparency on where assets and investment risks are placed when liabilities are ceded through modified coinsurance and funds-withheld arrangements.

The NAIC's 2025 blank revisions fall broadly into three themes. The investment schedules are being redesigned to implement the Principles-Based Bond Definition framework, most visibly through the reorganization of Schedule D, Part 1 into Issuer Credit Obligations vs. Asset-Backed Securities, alongside more granular collateral-type classifications that bring greater precision to how insurers categorize fixed-income holdings.

The second theme is the most significant for reinsurance transparency. The life statement now includes Schedule S, Part 8, requiring insurers to report ceded and assumed assets supporting modified coinsurance and funds-withheld arrangements where investment risk transfers to the assuming reinsurer while the underlying loans and securities remain on the cedant's balance sheet. Spanning all major asset classes, the new schedule pulls a historically opaque area of assets that remain legally on the cedent's books but economically support transferred risks into a standardized, comparable reporting frame that regulators can tie directly to reserve financing structures, counterparty concentration, and investment-risk migration. It does not include disclosures at the individual investment level as regulators had initially proposed, however.

Life reporting expands to better align state-level and note disclosures with emerging product and financing structures, including updates to the State Page and several notes. These changes reflect regulators' growing focus on ensuring that statutory filings keep pace with the structural complexity now common across P&C and life insurance balance sheets. Adding more context for why investment and reinsurance structure transparency is increasingly relevant for assessment of overall insurer balance sheet risk.

Investment schedules — Principles-Based Bond Definition

The Principles-Based Bond Definition reorganizes Schedule D, Part 1 (long-term bonds) into two primary sections — Issuer Credit Obligations and Asset-Backed Securities — each with subcategories mapping to the NAIC's revised categories, responding to years of industry concern that the statutory bond definition had not kept pace with the complexity of modern fixed-income markets. New data fields include interest income due and accrued, interest received during the year, payment due at maturity, jurisdiction, aggregate deferred interest, payment-in-kind interest and investment characteristics. Asset-backed securities receive additional fields covering origination balloon payment percentage, overcollateralization and payoff dates.

The revised collateral-type field sharpens the picture further. Issuer credit obligations must now be tagged to specific structure types like equipment trust certificates, enhanced equipment trust certificates, ground lease financing, credit tenant loans, funding agreement-backed notes or other. Asset-backed securities are broadly organized into three structural classifications: Financial, non-financial, and lease-backed, which is further granulated into seven granular categories. The historical bond label collapsed meaningfully different risk structures into a single reporting bucket; the new approach requires explicit disclosure of what backs each instrument and how cash flows are generated, giving regulators a cleaner basis for assessing credit quality, liquidity, and risk-based capital treatment across increasingly diverse insurer portfolios.

The reclassification logic also carries through to transaction and summary schedules. Schedule D, Parts 3, 4, and 5 now align with Schedule D, Part 1 categories. Schedule D – Verification Between Years separately reports issuer credit obligations, asset-backed securities, preferred stocks and common stocks. Schedule D – Summary by Country breaks holdings down by instrument type, affiliated versus unaffiliated, and geographic region dimensions that matter when structured credit and cross-border reinsurance are both in play. One practical consideration is the difficulty of year-over-year comparisons in the near term because many of these fields are new, 2025 filings will lack a prior-year baseline, making trend analysis limited until at least one full comparative cycle is available.

The portfolio context adds further relevance. Through the first three quarters of 2025, ABS holdings grew significantly faster than issuer credit obligations across both P&C and life sectors. Life insurers remain far more concentrated in NAIC-2 rated bonds, which are equivalent to securities with issuer credit ratings of BBB- through BBB+ by S&P Global Ratings, than their P&C counterparts. This distinction becomes more analytically meaningful once the new classifications make cross-sector and cross-entity comparisons cleaner. Private letter rated bonds stood at an industry benchmark of 11.6% of estimated bond fair value for life groups as of Sept. 30, 2025, and the investment schedules will continue to indicate whether individual investments are associated with those confidential ratings.

Given the magnitude of the changes and the granularity of the new asset types, we would caution that the initial reporting cycle may include an array of inconsistencies and prospective delays. Our review of the asset types assigned to identical loans and securities acquired by multiple insurers during the first nine months of 2025 finds consistent reporting for roughly 70% of the applicable investments. For the remaining 30% of acquisitions with multiple holders, between two and nine different asset types were selected even after eliminating any noise associated with affiliation suffixes. Many of these securities had private placement number CUSIPs, which suggest they were originated and/or created specifically for the purpose of placement on an insurance company balance sheet. While we would expect these inconsistencies to right themselves over time, it will complicate year-over-year comparisons in 2025 at a minimum and require subjective judgment in analyzing asset allocations over time and among different entities.

Schedule S, Part 8

The new schedule responds to a reporting gap that has grown alongside the life sector's increasing use of capital-motivated reinsurance like assets that remain legally on the cedent's books but whose investment control has effectively shifted to the assuming reinsurer. The schedule targets modified coinsurance and funds-withheld transactions where the entire investment risk associated with assets supporting reinsured business is transferred to the assuming reinsurer for the full duration of the transaction. The NAIC is explicit that it covers only assets supporting ceded or assumed liabilities and not every asset under a transaction's legal mechanics making the economic asset base the reporting object.

The schedule requires a ceded and assumed split across general account and guaranteed separate account, and details the full invested-asset spectrum: Bonds, stocks, mortgages, real estate, derivatives, and tax credit investments, among others. That breadth reflects the scope of the transparency problem. The discussions around modco and funds-withheld arrangements often center on the composition of the underlying asset portfolio like private credit exposure, structured securities, derivatives overlays, and tax-advantaged investments and a broader reporting frame should prove useful to regulators, rating agencies and others.

Complementing the new schedule, Note 5L (Restricted Assets) now requires disclosure of book adjusted carrying value, fair value, related obligations, percentage of total assets, and categorization across general and separate accounts and moves on a quarterly basis, reflecting the NAIC's oversight to track these exposures as ongoing balances rather than on annual basis.

Other changes

Outside of Schedule S, Part 8, the life blank revisions are targeted but meaningful. The life filers State Page adds direct premiums earned and direct losses incurred for accident and health lines. Note 11C expands debt disclosure to separately identify unused commitments and unused lines of credit, split between short- and long-term by contract termination, which is an important transparency enhancement for liquidity and undrawn Federal Home Loan Bank (FHLB) capacity. Note 28C adds disclosure for Medicare Part D Prescription Payment Plan receivables, including aging and write-offs. A new separate account transfers disclosure, effective 2025 but mandatory in 2026, requires disclosure of risk charges, asset adequacy testing confirmation, repo activity, and non-cash transfers for separate account products with general account guarantees.

In most jurisdictions, annual statutory filings are due to be submitted to regulators on or before March 1.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.