NAIC Updates
The Life Actuarial Task Force (LATF) held two calls last week to discuss the VM-22 framework for non-variable annuities and asset adequacy testing for reinsured business.
- VM-22 Framework: After years of work, regulators are close to finalizing the principles-based reserving methodology for non-variable annuities. The document has gone through several rounds of exposure at the subgroup level, so the exposed version is nearly complete. VM-22 generally applies to all in-force non-variable annuities; subsection 2 clarifies which contracts should go to VM-21 (e.g., registered index-linked annuities, or RILAs) and which are subject to VM-22. In walking through the draft, Ben Slutsker (MN) called special attention to the limit on investment spread for certain annuities in Section 6C(10). Upon adoption, VM-22 will have an effective date of January 1, 2026, with a three-year optional phase-in period. Beginning January 1, 2029, all new non-variable annuity business will be subject to VM-22 (with limited exemptions for small companies).
- Asset Adequacy Testing: The LATF held a call on May 29, 2025, to discuss the most recent draft of the Actuarial Guideline (AG) on asset adequacy testing of reinsured business, with Fred Andersen (MN) responding to stakeholder comments and proposing a path forward on each issue. In response to RAA’s comment letter raising concerns about the AG’s interplay with the Covered Agreement, Andersen emphasized that cash flow testing is necessary to protect U.S. policyholders and that regulators have worked hard to limit the scope of the AG. The revised draft backs out certain assets (e.g., non-admitted assets, assets admitted pursuant to permitted practices, etc.) from the Starting Asset Amount. New language suggests that while the AG will not require product line–level analysis for year-end 2025 reporting, that may change in the future. The changes to the exemption criteria would exempt a few small treaties from larger ceding companies. The revised draft was exposed last week.
- Item 2025-05BWG, which adds a new Part 8 to Schedule S in the Life, Accident, and Health blank requiring companies to disclose detailed information on assets supporting modified coinsurance (modco) or funds withheld agreements (as a result of changes made at the Statutory Accounting Principles Working Group (SAPWG), only arrangements that transfer investment risk are subject to this new schedule)
- Item 2025-06BWG, which updates the instructions and illustrations of Note 5L – Restricted Assets to clarify how assets held under modco or funds withheld agreements should be reflected within the restricted asset disclosure in Paragraph 23 of SSAP 1 – Accounting Policies, Risks & Uncertainties, and Other Disclosures
- Item 2024-19BWG Modified, which updates Schedule BA for reporting of collateral loans
- Item 2025-01BWG, which updates Note 8 – Derivatives and Note 11 – Debt to reflect SSAP 86 – Derivatives revisions previously adopted by SAPWG
- Item 2025-02BWG, which updates Note 9 – Income Taxes to reflect changes to SSAP 101 – Income Taxes previously adopted by SAPWG
- Item 2025-03BWG, which modifies the Life Insurance (State Page) in the Life, Accident, and Health blank to include Accident and Health data for Direct Premium Earned and Direct Losses Incurred
- Item 2025-04BWG, which adds a new part to Note 28 – Health Care Receivables to include Medicare Part D Prescription Payment Plans
- 2025-07BWG, which updates Schedule P with editorial revisions exposed at the Casualty Actuarial and Statistical (C) Task Force
- 2025-08BWG, which removes Life/Fraternal General Interrogatory #14 that reports total dividends paid to stockholders—this interrogatory is not included across all annual statement blanks and is not clearly included as a required disclosure in SSAP No. 72
- 2025-09BWG, which updates Life/Fraternal Note to Financial #35 for separate account transfers and adds a general interrogatory to the Separate Account Blank for transfers and repurchase agreements and reverse repurchase transactions (see SAPWG Item #2024-10)
- 2025-10BWG, which updates Note 5L to identify assets held under funds withheld and modco reinsurance agreements that are affiliated with the reinsurer and would also require that companies include the disclosures in Note 5L – Restricted Assets in quarterly statements (currently only required in annual statements unless there is a material change) (see SAPWG Item #2025-25)
- 2025-11BWG, which removes the capital structure code reporting column on Schedule D, Part 1, Sections 1 and 2
- 2025-12BWG, which removes Line 8 – Unrated Multi-Class Securities Acquired by Conversion from AVR: Default Component – Basic Contribution and relabels with “intentionally left blank” to prevent renumbering all lines in the AVR schedule
- 2025-13BWG, which updates Note 13K with disclosure updates to SSAP No. 41 – Surplus Notes
- 2025-14BWG, which adds instructions to include Medicare Part D Prescription Payment Plan information to the Health Care and other amounts receivable line on the Asset Page, Supplemental Health Care Exhibit, Exhibit 3 – Health Care Receivables, and Exhibit 3A – Analysis of Health Care Receivables
- 2025-15BWG, which updates Note 8 – Derivatives in the Notes to Financial Statements and Schedule DB to clarify the terminology used for derivative financing premium
International Developments
The NAIC held its 2025 International Insurance Forum in Washington, D.C., on May 29–30. In his welcoming remarks, NAIC President and North Dakota Insurance Commissioner Jon Godfread emphasized that the NAIC position on eliminating the Federal Insurance Office (FIO) is about maintaining “clarity” that the U.S. voice for international activity should be the state-based system rather than FIO. He also noted that the work of the RBC Model Governance Task Force is not in response to external pressure but rather is an exercise of leadership.
The first half day of meetings focused on the International Association of Insurance Supervisors' (IAIS's) draft Issues Paper on structural shifts in life insurance—namely, the increased allocation to alternative assets and asset-intensive reinsurance. Following a summary of the paper from Dieter Hendrickx (Chair, IAIS Macroprudential Committee), a panel consisting of industry representatives and Gareth Truran (Prudential Regulation Authority, or PRA) provided insights into the paper. John Hele (Resolution Re, Vice Chair of Bermuda International Long Term Insurers and Reinsurers, or BILTIR) emphasized that alternative assets, namely private credit, are a good match for life insurers’ long-term liabilities, calling the growth in private credit one of the best innovations in life insurance in the last 15 years. Panelists also noted that asset-intensive reinsurance helps free up capital to allow companies to write more business, thus assisting with closing the protection gap. Panelists discussed structural protections in asset-intensive reinsurance that help mitigate any potential risk. Hele previewed an upcoming Oliver Wyman analysis of alternative assets and asset-intensive reinsurance and their impact on systemic risk. Commissioner Nathan Houdek (WI), who moderated the panel, noted the importance of regulators adapting to changing markets to ensure they have appropriate expertise to analyze risk.
In an armchair chat with Director Dwyer (RI), Conor Donaldson (IAIS, Head of Implementation and Assessment) discussed the IAIS’ work on protection gaps, highlighting its 2023 call to action paper and recent coordination with the World Bank. This year’s Global Insurance Market Report (GIMAR) special topic will address the financial stability implications of protection gaps. Donaldson noted the dearth of research on this topic. He explained regulators’ role in protection gaps, including assessing gaps, enhancing consumer financial literacy, and giving insurers tools to address key risks.
The topic of artificial intelligence (AI) and its potential impact on the industry was raised in many of the panels. Commissioner Mais (CT) suggested that the potential benefits of AI outweigh the risks.
The IAIS Executive Committee will hold its annual strategic retreat on June 18–19. In addition to assessing progress made on its 2025–2029 Strategic Plan, the Executive Committee intends to:
- Finalize supervisory guidance on the use of AI in the insurance sector
- Sign off on a draft application paper on operational risk supervisory objectives and a toolkit for public consultation
- Review the initial results of the 2025 Global Monitoring Exercise (GME) and agree upon the GME themes and individual insurers in scope
- Finalize the triennial GME methodology review for public consultation
- Review high-level principles that will guide the implementation assessment methodology for the Insurance Capital Standard and consider the reports from the second Targeted Jurisdictional Assessment, which includes Bermuda