The National Association of Insurance Commissioners (NAIC) recently completed a comprehensive review of 17,000 Non-agency RMBS-PRIME/NON-QM/2nds bonds, which included 7,000 bonds from the 2.0 vintage and 10,000 legacy bonds. The analysis revealed that approximately 75 percent of all bonds retained the NAIC 1A designation, indicating zero loss. Among legacy bonds, 31 percent maintained the highest designation, which represents a slight decline from previous levels of about 33 percent. The reduction in non-zero loss designations was primarily driven by mezzanine bonds from the 2025 vintage.
Within the Jumbo 2.0 category, 90 percent of bonds across all classifications were designated as zero-loss bonds. Furthermore, about 72 percent of BBB-rated bonds retained a zero-loss designation within the 1A–1G range, which provides them with a more favorable risk-based capital treatment compared to their ratings from traditional rating agencies. The majority of bonds in NAIC categories 3A and lower were concentrated in below-investment-grade Jumbo 2.0, Non-QM, RPL, and second-lien sectors. In the RMBS space, lower-rated tranches received better RBC treatment than collateralized loan obligations (CLOs) and corporate bonds.
Looking at vintage trends, the percentage of zero-loss bonds declined slightly from 71 percent in 2024 to 69 percent in 2025. Movement within AA–BBB categories for the 2023–2024 vintages was not punitive, as most changes remained within the 1A–1D range in the conduit space. In the SASB sector, zero-loss bonds increased from 75 percent last year to 77 percent this year. Approximately 42 percent of bonds that changed designations in 2025 due to losses were in the office sector; however, these changes were not severe, as most bonds moved within categories 1 and 2.
Late in December 2025, NAIC also released updated grids for non-agency and agency CMBS bonds. The new grid includes intrinsic values within each category along with the corresponding risk-based charges. Overall, the changes remain moderate and continue to preserve favorable treatment for high-quality tranches.
These findings have several implications for investors. The outlook remains positive due to the high percentage of zero-loss designations in Jumbo 2.0 and SASB sectors. However, mezzanine bonds and office-related tranches present some risk considerations. Importantly, NAIC designations continue to offer better RBC treatment compared to ratings from traditional agencies, providing a regulatory advantage for insurers. In conclusion, the NAIC’s latest review underscores the resilience of structured products, particularly in Jumbo 2.0 and SASB sectors, while highlighting areas of caution in mezzanine and office-related tranches. The updated RBC grid ensures continued alignment between intrinsic risk and capital requirements, supporting stability in the insurance investment landscape.
Appendix:
NAIC ratings and related RBC factors for non-Agency RMBS bonds:
Exhibit 1
Source: NAIC, MetLife Investment Management, BofA Global Research
NAIC ratings and related RBC factors for Agency and Non-Agency CMBS bonds:
Exhibit 2
Source: NAIC, BofA Global Research
Disclaimer: Asset Allocation & Management Company, LLC (AAM) is an investment adviser registered with the Securities and Exchange Commission, specializing in fixed-income asset management services for insurance companies. Registration does not imply a certain level of skill or training. This information was developed using publicly available information, internally developed data and outside sources believed to be reliable. While all reasonable care has been taken to ensure that the facts stated and the opinions given are accurate, complete and reasonable, liability is expressly disclaimed by AAM and any affiliates (collectively known as “AAM”), and their representative officers and employees. This report has been prepared for informational purposes only and does not purport to represent a complete analysis of any security, company or industry discussed. Any opinions and/or recommendations expressed are subject to change without notice and should be considered only as part of a diversified portfolio. Any opinions and statements contained herein of financial market trends based on market conditions constitute our judgment. This material may contain projections or other forward-looking statements regarding future events, targets, or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that discussed here. The information presented, including any statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Although the assumptions underlying the forward-looking statements that may be contained herein are believed to be reasonable, they can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. AAM assumes no duty to provide updates to any analysis contained herein. Past performance is not an indication of future returns. This information is distributed to recipients including AAM, any of which may have acted on the basis of the information or may have an ownership interest in securities to which the information relates. It may also be distributed to clients of AAM, as well as to other recipients with whom no such client relationship exists. Providing this information does not, in and of itself, constitute a recommendation by AAM, nor does it imply that the purchase or sale of any security is suitable for the recipient. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, inflation, liquidity, valuation, volatility, prepayment, and extension. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
NAIC’s Updated Grid and Bond Designations: What Insurers Need to Know
January 20, 2026
The National Association of Insurance Commissioners (NAIC) recently completed a comprehensive review of 17,000 Non-agency RMBS-PRIME/NON-QM/2nds bonds, which included 7,000 bonds from the 2.0 vintage and 10,000 legacy bonds. The analysis revealed that approximately 75 percent of all bonds retained the NAIC 1A designation, indicating zero loss. Among legacy bonds, 31 percent maintained the highest designation, which represents a slight decline from previous levels of about 33 percent. The reduction in non-zero loss designations was primarily driven by mezzanine bonds from the 2025 vintage.
Within the Jumbo 2.0 category, 90 percent of bonds across all classifications were designated as zero-loss bonds. Furthermore, about 72 percent of BBB-rated bonds retained a zero-loss designation within the 1A–1G range, which provides them with a more favorable risk-based capital treatment compared to their ratings from traditional rating agencies. The majority of bonds in NAIC categories 3A and lower were concentrated in below-investment-grade Jumbo 2.0, Non-QM, RPL, and second-lien sectors. In the RMBS space, lower-rated tranches received better RBC treatment than collateralized loan obligations (CLOs) and corporate bonds.
Looking at vintage trends, the percentage of zero-loss bonds declined slightly from 71 percent in 2024 to 69 percent in 2025. Movement within AA–BBB categories for the 2023–2024 vintages was not punitive, as most changes remained within the 1A–1D range in the conduit space. In the SASB sector, zero-loss bonds increased from 75 percent last year to 77 percent this year. Approximately 42 percent of bonds that changed designations in 2025 due to losses were in the office sector; however, these changes were not severe, as most bonds moved within categories 1 and 2.
Late in December 2025, NAIC also released updated grids for non-agency and agency CMBS bonds. The new grid includes intrinsic values within each category along with the corresponding risk-based charges. Overall, the changes remain moderate and continue to preserve favorable treatment for high-quality tranches.
These findings have several implications for investors. The outlook remains positive due to the high percentage of zero-loss designations in Jumbo 2.0 and SASB sectors. However, mezzanine bonds and office-related tranches present some risk considerations. Importantly, NAIC designations continue to offer better RBC treatment compared to ratings from traditional agencies, providing a regulatory advantage for insurers. In conclusion, the NAIC’s latest review underscores the resilience of structured products, particularly in Jumbo 2.0 and SASB sectors, while highlighting areas of caution in mezzanine and office-related tranches. The updated RBC grid ensures continued alignment between intrinsic risk and capital requirements, supporting stability in the insurance investment landscape.
Appendix:
NAIC ratings and related RBC factors for non-Agency RMBS bonds:
Exhibit 1
NAIC ratings and related RBC factors for Agency and Non-Agency CMBS bonds:
Exhibit 2
Disclaimer: Asset Allocation & Management Company, LLC (AAM) is an investment adviser registered with the Securities and Exchange Commission, specializing in fixed-income asset management services for insurance companies. Registration does not imply a certain level of skill or training. This information was developed using publicly available information, internally developed data and outside sources believed to be reliable. While all reasonable care has been taken to ensure that the facts stated and the opinions given are accurate, complete and reasonable, liability is expressly disclaimed by AAM and any affiliates (collectively known as “AAM”), and their representative officers and employees. This report has been prepared for informational purposes only and does not purport to represent a complete analysis of any security, company or industry discussed. Any opinions and/or recommendations expressed are subject to change without notice and should be considered only as part of a diversified portfolio. Any opinions and statements contained herein of financial market trends based on market conditions constitute our judgment. This material may contain projections or other forward-looking statements regarding future events, targets, or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved and may be significantly different than that discussed here. The information presented, including any statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Although the assumptions underlying the forward-looking statements that may be contained herein are believed to be reasonable, they can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. AAM assumes no duty to provide updates to any analysis contained herein. Past performance is not an indication of future returns. This information is distributed to recipients including AAM, any of which may have acted on the basis of the information or may have an ownership interest in securities to which the information relates. It may also be distributed to clients of AAM, as well as to other recipients with whom no such client relationship exists. Providing this information does not, in and of itself, constitute a recommendation by AAM, nor does it imply that the purchase or sale of any security is suitable for the recipient. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, inflation, liquidity, valuation, volatility, prepayment, and extension. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
Mohammed Ahmed
Principal and Senior Analyst - Structured Products
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