IAIS Targets FundedRe and Complex Assets in 2026 Global Capital Revamp

From tracing FundedRe flows across five consecutive Schedule S filings at the top ten PE-owned US life insurers, the concentration in affiliated asset managers is the part the IAIS Insurance Capital Standard draft is actually targeting. The April 2026 IAIS commentary picked up by Insurance Business UK is not a generic call for transparency. It is a specific signal that the global standard-setting body, the Bermuda Monetary Authority, and the NAIC are converging on the same set of structures: funded reinsurance treaties backed by bespoke private credit and rated note feeders, ceded by US life insurers to Bermuda or Cayman vehicles affiliated with their asset manager. This article walks through what FundedRe actually is, why the IAIS flagged it now, how the ICS, BMA Economic Balance Sheet, and NAIC AG 55 frameworks fit together for US actuaries, and what the modeling implications are for the 2026 year-end capital plan.

The shorthand most trade publications use, treating the IAIS, BMA, and NAIC as three separate stories on three separate tracks, misses how aligned the three regulatory machines have become on this specific question. The IAIS Global Monitoring Exercise has been collecting data on cross-border asset-intensive cessions for several reporting cycles. The BMA's March 2025 "Insights and Reflections on Asset-Intensive Reinsurance" publication and the 2026 EBS refinements run on a parallel track. The NAIC's AG 55 first filings have produced asset-level data the Reinsurance Task Force did not previously have. Each piece is part of one coordinated supervisory response to the same balance-sheet phenomenon.

What FundedRe Actually Is

"FundedRe" has become trade-press shorthand for a cluster of related structures, and it is worth being precise about which ones the IAIS is actually flagging. In the strictest definition, funded reinsurance is a treaty in which the reinsurer prefunds the assets backing the reinsured liabilities, typically by depositing assets into a trust or modified coinsurance arrangement, so that the cedent has direct or quasi-direct access to the asset pool if the reinsurer fails. That mechanism is decades old. What is new is the asset composition inside the trust and the affiliation pattern between the cedent, the reinsurer, and the asset manager.

Three structures dominate the IAIS focus list:

Asset-intensive coinsurance with affiliated Bermuda reinsurers. A US life insurer cedes a block of fixed annuities, indexed annuities, or pension risk transfer business to a Bermuda affiliate. The Bermuda affiliate holds the reserves on its own balance sheet under the BMA's Economic Balance Sheet framework, with assets that frequently include CLO equity feeders, middle-market direct lending wrappers, and bespoke asset-backed finance. The cedent takes credit for the reinsurance and reduces its own statutory reserves and required capital.
Funding agreement-backed reinsurance sidecars. A purpose-built reinsurance vehicle, often capitalized by an asset-manager-affiliated sponsor, accepts a slice of new annuity production or PRT volume in exchange for ceding commissions and asset-management fees. The sidecar's capital is partly funded by third-party institutional investors, partly by the affiliated asset manager, and frequently includes a funding agreement layer that itself behaves like an internal reinsurance arrangement.
Asset-manager-affiliated reinsurers. Standalone reinsurance platforms majority-owned or strategically aligned with a private credit or alternatives manager. These platforms have built up substantial annuity and PRT books over the past five years and now hold tens of billions in general account assets sourced through the affiliated manager. The reinsurance treaty is the legal wrapper; the economic substance is a fee-bearing asset-management mandate funded by insurance liabilities.

The IAIS view, surfaced repeatedly in the Global Monitoring Exercise and now in the 2026 capital workstream, is that these three structures share a common feature: they move long-duration insurance liabilities and the assets backing them into balance sheets where the consolidated supervisory view is incomplete. The cedent's home regulator sees the reinsurance credit but loses sight of the asset side. The Bermuda regulator sees the EBS view of the reinsurer but does not see the originating policyholder. The asset manager sees the fee stream but is not regulated as an insurance entity. The seams are where the IAIS thinks the risk lives.

Why the IAIS Flagged It Now

The IAIS adopted the Insurance Capital Standard in late 2024 after more than a decade of development. ICS adoption was always going to be followed by a calibration and refinement period, and the first major calibration cycle is running through 2026. The decision to put complex assets and funded reinsurance at the center of that cycle reflects three converging pressures.

First, the volume of cross-border asset-intensive cessions from US cedents to Bermuda reinsurers has continued to grow. The BMA's March 2025 reflections paper documented the scale of the asset-intensive book in Bermuda and the asset-mix shift toward private structured credit. Mayer Brown's March 2026 globalization-of-asset-intensive-reinsurance update tracked the parallel growth in Cayman and the use of UK and EU domiciled vehicles as additional links in the chain. The IAIS has the GME data to see the aggregate trend, and the trend has not flattened.

Second, the volatility events of 2022 to 2024, including the regional banking stress, the rate spike, and several high-profile private credit downgrades, gave supervisors a stress-test read on how complex asset positions actually behaved during a real episode. The findings were not catastrophic, but they were instructive: liquidity in private structured credit is a function of how many other holders are forced to sell at the same time, and the look-through correlation between affiliated CLO equity, middle-market loans, and asset-backed finance positions is materially higher than the headline diversification statistics suggest.

Third, the political economy of cross-border insurance regulation has shifted. The European supervisors that were skeptical of the ICS during its development period have, since 2024, become the most active proponents of using the ICS as a coordination tool against asset-intensive arbitrage. The European Insurance and Occupational Pensions Authority has flagged asset-intensive cessions out of European insurers to Bermuda affiliates as a prudential concern, and the BMA's own commentary has acknowledged the cross-border tension. The IAIS's 2026 capital workstream is partly a response to that pressure.

How the ICS Treats Complex Assets and FundedRe

The ICS at the design level is a market-consistent framework. Assets are valued on a current-market basis where observable, on a model basis where not, and the resulting balance sheet generates a Required Capital figure calibrated to a 99.5 percent value-at-risk over a one-year horizon. That high-level architecture is similar to Solvency II in Europe and the BMA EBS in Bermuda, which is intentional: the ICS was designed to function as a comparative measure across jurisdictions with different statutory regimes.

For complex assets, the ICS calibration in the post-2025 adoption draft does several things that matter for US actuaries reading the draft for the first time:

Look-through treatment for structured assets. The capital charge on a CLO equity tranche, a rated note feeder, or a bespoke asset-backed finance position is not based on the credit rating of the wrapper. It is based on a look-through analysis of the underlying collateral, with stress assumptions calibrated to the ICS standard. The wrapper rating is informational, not load-bearing. This is the single largest divergence from the US RBC framework's reliance on NAIC designations sourced through the SVO and NRSRO ratings.
Liquidity premium constraints. The ICS allows a liquidity premium on the discount rate used to value long-duration insurance liabilities, but the premium is constrained by the actual liquidity profile of the assets and the predictability of liability cash flows. Aggressive liquidity premium assumptions, which can materially reduce the present value of liabilities and inflate available capital, are explicitly capped under the calibration. The BMA EBS has been moving in the same direction.
Counterparty default risk on reinsurance recoverables. The ICS treats reinsurance recoverables as exposures requiring a counterparty default capital charge calibrated to the credit quality of the reinsurer and the collateralization structure. For affiliated Bermuda reinsurance with trusted assets that themselves carry concentrated credit risk, the look-through and the counterparty risk interact. The cedent does not get full credit for the reinsurance plus full credit for the asset diversification at the same time.
Concentration risk and intra-group exposures. Where a cedent and its reinsurer are part of the same group or share an affiliated asset manager, the ICS group-level view consolidates the exposures rather than treating them as independent. Affiliated FundedRe structures that look efficient under solo statutory accounting can produce a different picture under the ICS group consolidation.

For US life insurers that are not direct ICS reporters, the relevance of these calibrations is indirect but real. The NAIC participates in the ICS through the Aggregation Method, the US alternative measure intended to be deemed comparable to the ICS. The Aggregation Method aggregates state-based RBC across the group rather than rebuilding the balance sheet on a market-consistent basis. The IAIS comparability assessment is the live regulatory question, and the assumptions and adjustments embedded in the AM are the bridge that connects US RBC to the global standard.

The BMA's March 2025 Reflections and the 2026 EBS Refinements

The BMA's March 2025 Insights and Reflections on Asset-Intensive Reinsurance publication was, in retrospect, a deliberate signaling document. It walked through the BMA's findings from supervisory reviews of asset-intensive reinsurance arrangements, flagged the patterns the BMA was concerned about, and previewed the EBS refinements that would follow. The 2026 refinements, rolled out in stages through the first and second quarter, sharpened several technical pieces:

Tightened standards on internal capital model approvals. Reinsurers using internal capital models for the BMA's Bermuda Solvency Capital Requirement are facing more rigorous reviews of asset-side stress assumptions, particularly for private structured credit. The BMA has signaled willingness to require partial standard formula treatment where internal models cannot demonstrate adequate calibration of tail risk in complex assets.
Enhanced collateral and trust requirements. The collateralization arrangements supporting asset-intensive reinsurance have been subject to more granular requirements on asset eligibility, valuation methodology, and look-through transparency to the ceding regulator.
Affiliated asset manager governance. The BMA has formalized expectations on the governance separation between a Bermuda reinsurer and its affiliated asset manager, including conflict-of-interest disclosures, fee benchmarking, and independent investment oversight.
Liquidity stress framework. Reinsurers with material long-duration liabilities and concentrated private credit asset positions are subject to enhanced liquidity stress testing, with required reporting on the time horizon over which assets could be monetized under stress and the corresponding liability cash flow profile.

The Skadden BMA reflections note and the BILTIR trade response captured the industry view: the BMA refinements are not a retreat from the asset-intensive reinsurance market, but they are a tightening that raises the cost of capital for the most aggressively structured arrangements. For the BMA, the strategic objective is clear. Bermuda's competitive advantage as a domicile depends on regulatory credibility with US, UK, and EU supervisors. Allowing the asset-intensive book to develop without commensurate prudential rigor would invite the kind of cross-border friction that ultimately damages the franchise.

NAIC AG 55 Interplay With the IAIS Aggregation Method

The piece that ties the global standard back to US actuarial practice is the interaction between AG 55 and the Aggregation Method. AG 55 requires US cedents with material asset-intensive reinsurance arrangements to perform asset adequacy testing using the assets actually backing the treaty, with disclosure at a granularity that prior VM-30 filings did not require. The first AG 55 filings, covered in detail in our prior first-filing analysis, produced an asset-level dataset that is now being aggregated and reviewed by the NAIC Reinsurance Task Force.

That dataset feeds two parallel uses. The first is the traditional supervisory use: state regulators reviewing individual cedents' asset adequacy and reserve adequacy. The second is the aggregation use: NAIC staff and the Capital Markets Bureau aggregating the asset-level data across cedents to produce a system-wide view of the assets supporting US-originated insurance liabilities reinsured offshore. That aggregated view is the input the NAIC needs to negotiate the Aggregation Method's calibration with the IAIS Reference Group.

The strategic significance of AG 55, in other words, is bigger than its disclosure mechanics. It is the data layer the US needs to defend the Aggregation Method as a comparable measure to the ICS. Without AG 55, the NAIC is in the position of arguing that aggregated state-based RBC is comparable to the ICS without having the underlying asset data to back the argument. With AG 55, the NAIC has a quantitative basis to engage the IAIS calibration discussions on its own terms.

For the appointed actuary at a US cedent, this means the AG 55 filing is not just a state-level disclosure obligation. It is a contribution to a national dataset that will be cited in international regulatory negotiations. The quality and rigor of the asset adequacy testing inputs matter at a level beyond the cedent's individual exam.

Balance-Sheet Impact on the Major Platforms

The platforms most exposed to the convergent IAIS-BMA-NAIC agenda are the large PE-affiliated retirement services franchises that have built the bulk of their general account assets through affiliated managers and that operate Bermuda or Cayman reinsurance structures alongside their US life insurance entities. The cohort includes Athene, Global Atlantic, Resolution Life, Brookfield Reinsurance, and Corebridge among the most visible US-anchored platforms, and several additional platforms with significant cross-border activity.

The balance-sheet implications break into three buckets:

Asset designation and capital charge sensitivity. Platforms that have built capital efficiency around favorable RBC treatment of PLR-supported private structured credit are exposed to the parallel work the SVO is doing on filing exempt discretion, the IAIS look-through calibration, and the BMA stress framework on internal models. Each piece on its own is incremental. Together they raise the marginal cost of capital on the next dollar of structured credit allocation.
Liquidity premium recalibration. Platforms whose discount rate assumptions on long-duration liabilities embed aggressive liquidity premiums are exposed to the BMA's tightening and the ICS calibration. A 25 to 75 basis point reduction in the assumed liquidity premium has a material impact on the present value of liabilities and on available capital.
Counterparty and concentration risk on intra-group reinsurance. Platforms with significant intra-group reinsurance to affiliated Bermuda or Cayman entities are exposed to the ICS group consolidation and to potential NAIC AG 55 disclosure expansion. The aggregate view that consolidates the cedent and reinsurer onto a single supervisory page tends to compress the apparent capital efficiency of intra-group cessions.

None of this is a near-term solvency story. The platforms in this cohort are well-capitalized by every conventional measure and run by experienced management teams that have been navigating regulatory tightening for years. The story is about the trajectory of marginal capital efficiency over the next 24 to 36 months, and about the strategic positioning of the affiliated asset manager economics as the regulatory ceiling on the most efficient structures comes down.

Actuarial Modeling Implications for the 2026 Year-End Capital Plan

For US life actuaries building the 2026 year-end capital plan, the IAIS-BMA-NAIC convergence translates into specific modeling work that should be underway now, not deferred to the regulatory adoption dates.

Look-Through Treatment of Structured Assets

Build a model module that re-derives the credit risk profile of every PLR-supported private structured credit position from the underlying collateral, not from the NAIC designation. For CLO tranches, run a stand-alone CLO model with the underlying loan pool's expected loss, recovery, and prepayment assumptions. For rated note feeders, decompose the underlying fund holdings to their loan-level constituents. For bespoke asset-backed finance, examine the actual collateral pool and the structural enhancement layers. The output is a "look-through equivalent rating" that should be compared to the SVO designation on file. The gap is the actuarial visibility into where the IAIS calibration would land.

Illiquidity Premium Sensitivity

Run cash flow testing with a base liquidity premium assumption, a 25 basis point reduction, and a 50 basis point reduction. Document the impact on AOCI, on the LFPB calculation under LDTI's first full-year disclosure regime, and on the asset adequacy testing margin. Where the platform's strategic narrative depends on a particular liquidity premium assumption, the sensitivity exercise produces the dollar value of that assumption, which is the number management needs to understand the regulatory exposure.

Credit Migration Stress

Model the impact of a one-notch downgrade across 25 percent of the PLR-supported portfolio, a two-notch downgrade across 10 percent, and a default on the most concentrated single-name exposures. Track the RBC impact, the C-1 capital requirement change, and the knock-on effect on the AG 55 asset adequacy testing. Where the stress produces a meaningful change in the capital ratio, the result feeds into both the year-end capital plan and the strategic conversation about portfolio composition.

Affiliated Reinsurance Look-Through

For platforms with material intra-group reinsurance, build the consolidated view that the IAIS group methodology would produce. The mechanics are straightforward: combine the cedent's and reinsurer's asset and liability balance sheets, eliminate the intercompany reinsurance recoverable and corresponding liability, and re-derive the consolidated capital requirement. The result is the aggregate view and a quantification of the diversification credit that disappears under consolidation. That quantification should be in the year-end capital plan documentation, even if no current rule requires it.

Counterparty and Trust Asset Quality

Where the cedent's reinsurance credit depends on collateralization through a trust, document the asset-level quality of the trust. The granularity should be sufficient to support a counterparty default stress under the ICS calibration. Where the trust assets concentrate in private structured credit with the same affiliated manager that runs the cedent's general account, the apparent diversification is narrower than the headline counts suggest, and the actuarial documentation should reflect that.

The Cross-Border Coordination Trajectory

The trajectory across 2026 and 2027 is a coordination story, not a single-rule story. Several specific milestones to watch:

IAIS 2026 ICS calibration update. Expected mid-to-late 2026, with refinements to the look-through treatment of structured assets, the liquidity premium framework, and the counterparty risk treatment. The Aggregation Method comparability assessment runs in parallel.
BMA 2026 EBS final refinements. Already partially in effect, with the remaining elements expected to phase in through year-end 2026. The collateral and trust requirements and the affiliated asset manager governance pieces are the most consequential for US cedents.
NAIC Spring 2026 Reinsurance Task Force highlights. The Spring meeting outputs included continued work on AG 55 implementation, clarification of materiality thresholds, and signals on the second-year template expansion. The Summer National Meeting is the next inflection point.
NAIC RBC Investment Risk and Evaluation Working Group. Parallel work on CLO and structured credit RBC factors that will, if adopted, partially close the gap between US designation-based capital and the IAIS look-through approach.
EIOPA cross-border supervision. The European supervisor's continued focus on asset-intensive cessions out of EU insurers to Bermuda and Cayman affiliates, which contributes pressure to the IAIS coordination process even though the direct US relevance is limited.

The pace of any one of these workstreams can slow or accelerate. The combined trajectory is what matters, and the combined trajectory points consistently toward tighter coordination on the same set of structures.

Why This Continues a Pattern Visible in Adjacent Workstreams

This continues a trend visible across other recent NAIC and IAIS work. The third-party AI vendor registry proposal is an attempt to extend supervisory visibility upstream into the technology supply chain that touches insurance products. The Brookfield-Just close is an example of a cross-border PRT transaction whose pricing read-across depends on the regulatory framework around the receiving Bermuda platform. The asset-intensive reinsurance question is the same kind of upstream visibility problem. Supervisors are systematically pushing the perimeter of the regulated entity outward to capture the assets, the affiliates, the vendors, and the structures that materially affect policyholder outcomes.

For the appointed actuary, the consistent message across these workstreams is that the disclosure burden is moving up. The information that supervisors want is more granular, more frequent, and more cross-border. The actuarial function is the natural locus for organizing that information, because the actuarial perspective is the one that thinks about long-duration liabilities, asset-liability matching, and tail risk in an integrated way. The carriers that treat the FundedRe and complex assets workstream as an actuarial-led initiative, rather than an investment-led one with actuarial consultation, are the ones that will be in front of the trajectory rather than chasing it.

The Bottom Line

The IAIS 2026 capital revamp is not a discrete event. It is the visible piece of a coordinated supervisory response that includes the BMA's EBS refinements, the NAIC's AG 55 implementation, and the parallel work on RBC factors and SVO designation discretion. The common thread is a tightening of the prudential treatment of complex private assets and the funded reinsurance structures that mobilize them across borders. For US life actuaries, the modeling work to prepare for this trajectory is concrete: look-through credit profiles, liquidity premium sensitivities, credit migration stresses, affiliated reinsurance consolidations, and trust asset quality documentation. None of that work needs to wait for the rules to be final, and the carriers that begin it now will have the most strategic flexibility through 2026 and 2027.