For a life insurer, few levers matter as much as capital efficiency. A single change in how an asset is treated for risk-based capital (RBC) can lift the return on required capital across an entire allocation. That is precisely what has happened for residential mortgage loans (RMLs) held in fund structures, and it deserves the attention of any insurer or asset manager active in the space.
A Shift Years in the Making
Residential mortgage loans held directly, and in good standing, have long received a favorable RBC factor of 0.68%. Access the same loans through a commingled fund, however, and the position was historically reported as a single line on Schedule BA at a materially higher charge, often on the order of 1.75% for mortgage funds and more for other structures. Insurers therefore weighed the operational convenience of a fund against the capital efficiency of direct ownership.
A series of actions by the National Association of Insurance Commissioners (NAIC) has steadily closed that gap. A 2024 change created a Schedule BA line item that grants qualifying affiliated mortgage funds the same 0.68% factor as directly held loans. In December 2025, an amendment to SSAP No. 37 allowed RMLs held through a qualifying statutory trust to be reported on a look-through basis, effective in 2027 with early adoption permitted. A further proposal exposed in early 2026 would extend the favorable treatment to unaffiliated structures. The direction of travel is clear: the capital benefit now follows the underlying loans.
The Opportunity, In Numbers
The economics are compelling. A 0.68% factor is more capital-efficient than that of an A-rated corporate bond, at 0.82%, or a BBB-rated corporate bond, at 1.52%. For an RML allocation of meaningful size, that difference can translate into a materially higher return on the capital an insurer is required to hold.
Why the Benefit is Not Automatic
The favorable treatment travels with the underlying loans rather than the fund wrapper, which means it must be earned through discipline. To capture and defend it, an insurer needs to look through the fund to the individual loans, demonstrate that the pool holds solely RMLs in good standing, report the position correctly across Schedule BA or Schedule B, RBC, AVR and Schedule Y, and substantiate all of it on audit. Not once, but every quarter.
For most insurers, that is easier said than done. The underlying loan data typically resides with a general partner or asset manager and arrives as PDF documents, loan tapes and portal extracts—precisely the unstructured information that makes look-through both essential and operationally demanding.
Where SS&C Fits
This is the problem SS&C FundHub and SS&C Singularity were built to solve, together, as a single operating model. FundHub captures and normalizes the loan-level data, giving insurers a clear view through the fund to the loans that drive the treatment. Singularity then produces the multi-basis accounting and Schedule BA, Schedule B, RBC, AVR, and Schedule Y reporting on top of that data, with controls and reconciliation behind every figure. The result is one connected, defensible path from a manager's source document to a filed statutory position.
Read the Full White Paper
Our in-depth white paper walks through the full NAIC timeline, the specific data and reporting requirements for each route and how FundHub and Singularity operationalize the treatment on one controlled platform.
Download "Turning a Regulatory Tailwind into Capital Efficiency", or contact us to discuss how it applies to your portfolio.
