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References to "investment subsidiaries" — subsidiaries of insurers existing only to hold permitted investments and conducting no other activities — would no longer appear in annual statement blanks or life insurer risk-based capital (RBC) instructions under a proposal adopted by a key regulatory body on December 9, 2025. During its session at the 2025 Fall National Meeting of the National Association of Insurance Commissioners (NAIC) in Hollywood, Florida, the NAIC's Statutory Accounting Principles (E) Working Group (SAPWG) adopted an agenda item that "communicates support" for a proposal by the Blanks (E) Working Group eliminating investment subsidiary reporting from statutory blanks and would send a referral to the Life RBC (E) Working Group with suggested changes to remove the concept from RBC instructions.
SAPWG noted that the current reporting of "investment subsidiaries" "lacks transparency for regulators and allows companies to self-calculate the RBC treatment simply by placing the investment in an investment subsidiary rather than directly holding the investment." SAPWG goes on to report that "[p]lacing investments within an investment subsidiary could allow companies to obtain favorable look-through treatment by circumventing specific asset and [Statement of Statutory Accounting Principles (SSAP)] treatment of that investment, as there is no explicit asset detail to ensure compliance with SSAP requirements, state investment limitations, or NAIC designation determination requirements." SAPWG cites as an example of this problem a situation in which "an investment held a private letter rating and was placed in an investment subsidiary," where "there would be no way to verify whether that security had complied with" the reporting requirements of the NAIC's Statutory Valuation Office. SAPWG adds, "The same could be true of debt securities and whether they reflect bonds under the principles-based bond definition or if they should be captured as non-bond debt securities." SAPWG specifically notes that the statutory blank "requires reporting entities to measure investment subsidiaries using 'imputed statutory value' which is an undefined term in the instructions and conflicts with SSAP No. 97 which requires measurement based on audited U.S. GAAP. Reporting of the imputed SAP valuation for RBC also relies solely on company-provided records, meaning the calculation cannot be verified using information contained" in the annual statement.
Notwithstanding SAPWG's proposal to expunge "investment subsidiaries" from statement blanks and RBC instructions, some state statutes on permitted investments for insurers expressly contemplate these entities. For instance, New York Insurance Law (NYIL) Section 1702(d) defines a life insurer's "investment subsidiary" as a "subsidiary . . . engaged or organized to engage exclusively in the ownership and management of assets (other than equity securities of subsidiaries) authorized as investments for the parent corporation [i.e., the insurer]. . ." A similar concept applies to property-casualty insurers domiciled in New York. Specifically, NYIL Section 1407(a)(4)(B) permits investments in a subsidiary "organized to engage exclusively in the acquisition, ownership or management of" specified types of permitted investments "provided such subsidiary is wholly-owned by two or more insurance companies domiciled in the United States who are members of the same holding company system." For both life and property-casualty companies, the investment subsidiary is "looked through" (disregarded) for purposes of valuing the investment in the underlying asset, and the insurer is treated as if it invested in the underlying asset directly for purposes of determining compliance with investment concentration limits.
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