NAIC Statutory Accounting Working Group Calls an Audible on ICOLI

The statutory accounting playbook for insurance company-owned life insurance (ICOLI) is simple. Under Statement of Statutory Accounting Principles No. 21—Other Admitted Assets (SSAP No. 21), paragraph 9:

1. An insurer may acquire a life insurance policy;
2. An insurer may report its realizable value (generally, the cash surrender value) as an admitted asset as an “other-than-invested asset” even if the cash surrender value is allocated to an underlying investment vehicle; and
3. Because ICOLI is reported as an “other-than-invested asset,” no risk-based capital (RBC) charge applies for life insurers purchasing ICOLI.

This playbook, however, only applies if the life insurance policies:

• Comply “with Internal Revenue Code (IRC) § 7702, in which the reporting entity is the owner and beneficiary”; and
• Are “acquired with the primary consideration of the costs related to employee benefit obligations or the loss of a key person.”

But the National Association of Insurance Commissioners (NAIC) Statutory Accounting Principles (E) Working Group wonders if some insurers are running a different play. During its meeting on August 12, the working group exposed Ref #2026-08, an agenda item to reconsider reporting guidance for ICOLI under SSAP No. 21, paragraph 9. Vice Chair Dale Bruggeman of the Ohio Department of Insurance expressed concern over the alleged marketing of ICOLI by some for its RBC advantage and the use of these assets for cash flow testing, which he explained was outside the spirit of SSAP No. 21, paragraph 9. Bruggeman stated that when things go beyond the principles that the working group laid out, then the group needs to tighten the reins.

During the meeting, the Institutional Insurance Group (IIG) explained that ICOLI is first and foremost an insurance contract, not an invested asset. But it acknowledged that some arrangements may not fit that description. The IIG stated that it could support:

• A separate Schedule BA reporting line for ICOLI; and
• Exposure limits based on a percentage of an insurer’s capital.

But the IIG's support is conditioned on risk-based capital treatment that reflects differences in the guarantees and volatility of ICOLI products. Further, Hannover Re raised concerns about changing RBC treatment for existing ICOLI contracts, noting that changes could cause policy lapses or create other solvency risks.

As a result of the meeting, the working group is seeking:

• Public comment by October 2, 2026, on whether amounts reported under SSAP No. 21 for ICOLI should be captured on Schedule BA (similar to other invested assets), with reporting lines to capture the amounts outside an investment vehicle, and the amounts within an investment vehicle, divided by investment category; and
• Feedback from the Capital Adequacy (E) Task Force on the potential RBC treatment of such amounts.

In the end, the working group may rewrite a playbook that has long treated qualifying ICOLI as insurance rather than a conventional invested asset. A blunt shift in reporting, concentration limits, or RBC treatment could penalize or disincentivize long-recognized uses of ICOLI, disrupt in-force contracts, and create surrender and liquidity pressures that undermine — rather than advance — solvency oversight.