For years, insurers using statutory trusts to hold residential mortgage loans have lived with an awkward compromise. The trust structure solved a real operational problem: originating and holding loans without a lending license in every state, but the accounting never caught up. Insurers booked the trust wrapper on Schedule BA instead of the loans themselves and absorbed a punishing RBC charge for the tradeoff.
This is now changing! The NAIC’s Statutory Accounting Principles (E) Working Group amended SSAP No. 37 to permit “look-through” treatment for residential mortgages held in qualifying statutory trusts. Some companies adopted early for year-end 2025 and mandatory compliance hits January 1, 2027.
To help you get up to speed, we’ve put together five questions worth answering before structural review meetings start filling calendars.
If your trust qualifies, you look through it entirely. Each individual residential mortgage loan (RML) goes on Schedule B at amortized cost. The trust itself disappears from the investment ledger and lives only in Schedule Y as a subsidiary disclosure. You keep the trust structure that allows you to operate in various states and now get the added benefit of significantly better RBC treatment.
Your books finally reflect what you actually own. The improved capital implications are the reason the CFO cares.
A trust must meet all four criteria:
Commercial mortgage trusts don’t qualify. The guidance is residential only. Mixed-collateral and multi-investor structures stay on Schedule BA.
One item that applies regardless of adoption: all statutory trusts must now be disclosed in Schedule Y as subsidiaries. This requirement is already live.
The math is uncomfortable for anyone still on Schedule BA.
A non-qualifying trust on Schedule BA, where the underlying RBC / delinquency classification can’t be determined, carries a 30% pre-tax RBC charge (NAIC LR008). A residential mortgage in active foreclosure — the “worst” category on Schedule B, equating to an NAIC 5 bond — carries a 23% pre-tax charge (NAIC LR004).
That means your most distressed individual loan gets a more favorable capital treatment than an unclassified trust wrapper holding performing loans.
For a typical whole-loan portfolio with low LTVs and current payment status, the loan-level RBC factor is a fraction of that 23% ceiling. The gap is significant!
You’re no longer reporting one line item per trust. You’re reporting every individual loan: UPB, rate, term, property type, LTV, geographic data, and loan standing on Schedule B. For a larger portfolio, that is thousands of new positions on your statutory ledger. That is A LOT for most organizations to take on.
Clearwater’s private credit capabilities were built for whole-loan accounting natively. Each residential mortgage is treated as an individual position, with Schedule B output produced automatically directly from the underlying data. RBC factors apply at the loan level, consistent with the look-through framework. For insurers with mixed portfolios, some qualifying trusts and some that stay on Schedule BA — both schedules are managed in the same platform without separate reconciliation.
The short version: if you’re tracking at the loan level today, the operational lift is manageable. If you’re still tracking at the trust wrapper level, that’s the gap to close first. Clearwater can help.
This depends on three factors:
My guidance is straightforward: start the structural review immediately, regardless of the adoption path. The Schedule Y disclosure is already required. The 2027 mandate arrives faster than you might think. And the insurers treating this as a 2026 problem will be the ones explaining to auditors why they didn’t treat it as a 2025 one.