On April 30, 2026, the NAIC Life Risk-Based Capital (E) Working Group (Life RBC WG) voted to reduce the C-1 risk-based capital (RBC) factor to 0.68% for life insurance companies investing in performing residential mortgage loans (RMLs) through unaffiliated joint ventures (JVs), partnerships, or limited liability companies (LLCs). Schedule B investments in performing RMLs have long benefited from an attractive RBC charge of 0.68%. The new NAIC change can provide similar capital treatment without the need for loan-level reporting, subject to certain qualifying factors.
This development reflects a substance-over-form approach, allowing a 0.68% RBC factor regardless of investment structure. For Schedule BA funds or vehicles, reporting would consist of a single line item, with a 0.68% RBC factor applied to mortgage loans in good standing (defined as less than 90 days delinquent). The Schedule BA vehicle would need a mechanism to identify and remove loans that are more than 90 days delinquent in order to maintain eligibility for the 0.68% RBC factor. This requirement underscores the importance of active portfolio management and disciplined delinquency mitigation within a fund or strategy dedicated to this asset class.
The adoption of this proposal comes at a time when life insurers have been increasing their exposure to the asset class, driven by favorable risk-adjusted yields and attractive capital treatment within general account portfolios. RML holdings have grown to over $150 billion, and according to Bank of America research, insurers purchased approximately $60 billion of RMLs in 2025.
Currently, the top 10 life insurance companies account for approximately 75% of all insurance company RML investments. The NAIC’s update to the capital framework may broaden participation, making it easier for smaller and midsize insurers to access the asset class. Increased structural flexibility may enable life insurers to implement residential mortgage strategies more efficiently in support of their general account objectives.
Angel Oak continues to partner with insurers to design tailored access solutions for RML investments, including separately managed accounts, funds, and securitizations. As a vertically integrated mortgage platform with a strong track record of differentiated credit performance, Angel Oak is positioned to support insurance companies seeking to expand or introduce this asset class within their portfolios.
Life Insurance Company RML Holdings
Source: NAIC, S&P Global as of 12/31/25.
Non-Qualified Mortgage (Non-QM) Relative Value
Source: Angel Oak estimates, BofA Research as of 5/31/26.
Residential Mortgage Loan Investment Structures for Insurance Companies
As of May 31, 2026
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