Regulators wave off criticism, adopt reinsurance asset-testing guidance

A state insurance task force adopted a long-anticipated reinsurance asset testing guideline Thursday, kicking off a final adoption phase that regulators hope will result in initial data reporting by April 1, 2026.

The Life Actuarial Task Force (LATF), comprised of National Association of Insurance Commissioners members, worked for about 18 months to create the guideline. The resulting guideline is limited in scope, agreed Fred Andersen of the Minnesota Department of Commerce, and disclosure-only.

LATF met to consider final word changes and typos, before voting to adopt the guideline. A representative for New York abstained from the vote, with no comment. The guideline will need further votes by higher-ranking NAIC committees before being sent to the states for adoption. LATF's timeline requires the first reinsurance asset testing reports to be due in April.

'A full-court press'

A quick four-day comment period yielded one letter of substance from Peter Gould, a variable annuity owner who began joining calls last year and participating in the debate. Gould lamented that the guideline is disclosure only.

"Almost from the inception of this project, there's been a full-court press by insurance industry lobbyists to derail the project from the original intent of the referral," Gould wrote. "As one lobbyist stated, the [asset adequacy testing] guidelines are an 'educational exercise.' Almost immediately, this project morphed from proposing 'enhancement to reserve adequacy requirements' and establishing 'additional safeguards' to a 'disclosure only' data gathering project."

The initial proposal to tighten the reins on reinsurers was made in February 2024 by David Wolf, acting assistant commissioner for the New Jersey Department of Banking and Insurance, and Kevin Clark, chief accounting and reinsurance specialist with the Iowa Insurance Division.

U.S. life insurers have nearly doubled their ceded reserves since 2019, increasing from $710 billion to $1.3 trillion in 2023, Fitch Ratings noted in a recent report. During the same period, reserves ceded to offshore jurisdictions nearly quadrupled, exceeding $450 billion.

Led by Wolf, LATF members pushed back on Gould's criticisms. State regulators always have the option to require more reserves from an insurance company, Wolf noted.

"I don't want anyone to leave this public meeting [and] think that the regulators compromised," he added. "I think it actually puts great responsibility on each state to work with their companies."

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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 [email protected]. Follow him on Twitter @INNJohnH.