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ARTICLE · 26 JUNE 2025

Regulatory Task Force Adopts Asset Adequacy Testing For Asset-intensive Life Reinsurance

Herbert Smith Freehills Kramer LLP
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U.S. life carriers engaging in "asset intensive reinsurance transactions" should consider new requirements for reporting and actuarial testing...

United StatesInsurance
Daniel Rabinowitz
Daniel Rabinowitz
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U.S. life carriers engaging in "asset intensive reinsurance transactions" should consider new requirements for reporting and actuarial testing of these arrangements being developed by the National Association of Insurance Commissioners (NAIC). On June 5, the NAIC's Life Actuarial Task Force (LATF) adopted Actuarial Guideline LV (Guideline or AG 55) titled "Application of the Valuation Manual for Testing the Adequacy of Reserves Related to Certain Life Reinsurance Treaties." The Guideline, if adopted by the NAIC, would impose new requirements on life reinsurance arrangements perceived by the NAIC to carry heightened risk of asset inadequacy.

As the Guideline explains,

"State insurance regulators have identified the need to better understand the amount of reserves and type of assets supporting long duration insurance business that relies substantially on asset returns. In particular, there is risk that domestic life insurers may enter into reinsurance

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