NAIC adopts AG 55 guidance for reinsurance reserve reporting

State insurance regulators adopted guidance and reporting templates Thursday for a new reinsurance reserve disclosure framework, while deferring debate over whether the framework should require additional reserves when asset adequacy testing identifies a deficiency.

The National Association of Insurance Commissioners’ Life Actuarial Task Force approved the Actuarial Guideline 55 guidance document and templates using a version exposed for comment the previous week.

The guidance is intended to help appointed actuaries report on reinsurance transactions and the assets supporting policyholder obligations.

The NAIC formally adopted AG 55 in 2025 as a tool to help tighten oversight of offshore reinsurance reserves. Regulators reviewed the first filings this summer and are tweaking the guideline in response.

Three changes suggested

Cecilia Mendoza is the managing actuary for the New Jersey Department of Banking and Insurance.

She spoke on her comment letter recommending three changes to improve transparency and clarify reporting requirements: Request more information about assets by type, identify the reserving framework used by reinsurance counterparties, and clarify when companies must complete a counterparty portfolio tab if assets differ significantly from those reported in the ceding company’s AG 53 filing.

Counterparties may use reserving frameworks that differ from U.S. statutory accounting, including Bermuda’s scenario-based approach or modified generally accepted accounting principles used in some other jurisdictions, she said.

While expressing appreciation for the comments, Fred Andersen, chief life actuary at the Minnesota Department of Commerce, said time is crucial.

"We want to be really respectful of the appointed actuaries and their deadlines that are coming up," Andersen said. "We're almost into November, and the quicker we can adopt this guidance document, the earlier they can start working to provide responses associated with the year-on-year report."

He suggested discussing the additional recommendations at a subsequent meeting and potentially addressing them in an FAQ or supplemental document before considering more formal changes next year.

Is disclosure enough?

The discussion also focused on comments from Risk and Regulatory Consulting, a professional services firm, which argued that disclosure alone may not adequately protect policyholders when asset adequacy testing identifies a reserve deficiency.

"We believe that if a transaction causes reserves to decline below a level that is needed to cover policyholder obligations under moderately adverse conditions, cash flow testing should be performed to determine if additional reserves are needed and any such additional reserves should be held," the RRC comment letter reads.

RRC acknowledged that requiring additional reserves for every reported deficiency could be burdensome. Instead, it suggested applying such a requirement when defined significant risks are present, including material reserve decreases, substantial reliance on assets excluded under the guideline or meaningful concerns about a counterparty’s ability to pay.

Matt Cheung, the chief life actuary for the Illinois Department of Insurance, cautioned that requiring additional reserves could be problematic when companies lack sufficient information to calculate AG 55 results with confidence, particularly for third-party reinsurance transactions.

"I feel it's a little much to say that it's a requirement if there's so much room for estimation when it comes to that AG 55 calculation," Cheung said.

Task force participants emphasized that AG 55 reporting is already subject to actuarial and regulatory review. Appointed actuaries must consider the results in their opinions, and domestic regulators can assess whether companies have adequately supported their conclusions.

Andersen said the question of requiring additional reserves was a broader policy issue that would need further discussion, public input and additional analysis. He said it went beyond the immediate task of finalizing the guidance.

The task force adopted the guidance document and templates after a motion and second, with no opposition voiced during the vote. Participants said they expected to revisit the outstanding issues in future discussions.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.