On August 13, 2025, the National Association of Insurance Commissioners (NAIC) Executive Committee and Plenary adopted Actuarial Guideline LV (AG 55), a new framework designed to bring asset-intensive reinsurance fully within the scope of asset adequacy oversight.[1] Within these reinsurance structures, reserve sufficiency depends on asset returns, collateral mechanics and counterparty performance.
AG 55 requires disclosure of asset adequacy testing (AAT) results beginning with the December 31, 2025 annual statement. Cedents are expected to evaluate in-scope reinsured blocks through AAT. The analysis considers both post-reinsurance liabilities[2] and the assets supporting them, with projections designed to reflect moderately adverse conditions. This requirement is intended to address a gap identified by regulators: certain reinsurance structures could materially reduce reported reserves without a clear demonstration that assets would remain sufficient under stress.
AG 55 directs cedents to project the combined post-reinsurance obligation, define a defensible “Starting Asset Amount” and evaluate whether that asset base can withstand moderately adverse conditions. The guideline also introduces expectations for attribution analysis to identify and explain changes in reserves resulting from the reinsurance arrangement. Robust reporting requirements must be met, either through integration into the actuarial memorandum or via a dedicated standalone document, reflecting the significance and complexity of the disclosures expected under AG 55.
AG 55 applies to life insurers with asset-intensive reinsurance treaties, such as coinsurance or modified coinsurance (ModCo), including those structured with funds withheld, ceded to counterparties that are not required to file a VM-30[3] memorandum with U.S. regulators. The rule covers transactions executed on or after January 1, 2016 that meet materiality thresholds as well as any transaction judged by the appointed actuary to involve significant collectability risk.
The materiality thresholds are designed to focus attention on treaties with meaningful solvency implications. These include any of the following:[4]
Transactions falling below these thresholds may still come into scope if the actuary determines counterparty collectability risk to be significant. For certain treaties established between 2016 and 2019, exemptions may be available, including if the underlying policies are primarily pre-2010 issues, but these exemptions are subject to regulatory approval.
The overall objective of AG 55 is to ensure that ceded obligations remain adequately supported under moderately adverse conditions. The framework can be understood through four key components:
When attribution analysis is performed, companies must bridge the pre-reinsurance statutory reserve to the post-reinsurance reserve. This bridge should attribute changes to factors such as differences in discount rates, policyholder behavior assumptions, mortality or longevity assumptions, and the removal of reserve floors. The purpose of this analysis is to make any reduction in reserves observable, traceable and explainable.
AG 55 builds directly on the foundation established by VM-30 and Actuarial Guideline LIII (AG 53). VM-30 sets the overall requirements for actuarial opinions and memoranda, while AG 53, adopted in 2022, introduced uniform standards for asset adequacy testing with an emphasis on assumption margins, sensitivity to complex assets and expanded documentation.[5]
AG 55 applies these principles of transparency and risk alignment to reinsurance by requiring treaty-level testing. The concept of the Starting Asset Amount is specifically defined in AG 55, and the guideline also sets expectations for attribution analysis to explain reserve reductions resulting from reinsurance.
Both AG 53 and AG 55 live within the VM-30 ecosystem and are expected to be incorporated into future editions of the Valuation Manual. For now, AG 55 remains a stand-alone requirement alongside VM-30 and AG 53.
A central implication of AG 55 is its application to offshore reinsurance. U.S. insurers increasingly cede asset-intensive blocks such as fixed and fixed indexed annuities to offshore jurisdictions, with Bermuda being the most common example. These reinsurers operate under regulatory regimes that differ from U.S. statutory reserving. For instance, the Bermuda Monetary Authority applies an Economic Balance Sheet framework with Technical Provisions[6], often producing lower reserves than U.S. statutory methods. The result is a basis risk between U.S. and offshore standards that AG 55 seeks to address through enhanced testing and governance.
AG 55 applies broadly to offshore reinsurance transactions where the assuming counterparty does not file a VM-30 memorandum with U.S. regulators. Reciprocal jurisdiction status, which Bermuda holds, removes collateral requirements for credit for reinsurance. U.S. ceding insurers must still comply with AG 55’s asset adequacy testing and disclosure provisions. In practice, this means that even where collateral requirements are waived, the cedent must demonstrate through its own actuarial analysis that the reinsured liabilities remain adequately supported under adverse conditions.
It is important to underscore that AG 55, in its currently adopted form, is a disclosure requirement and does not mandate the establishment of additional reserves. The guideline requires insurers to document and disclose the results of AAT for in-scope reinsurance treaties.
That said, the responsibilities of the appointed actuary are clear within AG 55. The results of this analysis should be considered as part of the actuarial opinion, and the actuary should be prepared to justify their opinion and conclusion in light of the AG 55 analysis.
The adoption of AG 55 introduces new considerations for how insurers and reinsurers manage asset‑intensive reinsurance arrangements. It establishes a framework that requires more granular analysis, documentation and transparency around the adequacy of assets supporting ceded liabilities. These expectations affect not only actuarial modeling but also treaty design, data governance, and operational processes.
For U.S. cedents, AG 55 demands more robust modeling, clearer attribution analysis and expanded documentation. It also heightens the importance of reinsurance data clauses and cross-functional collaboration between actuarial and investment teams, especially when proxy assets are involved.
For offshore reinsurers, AG 55 introduces a layer of U.S.-based actuarial scrutiny that subjects the reserves held under reinsurance agreements to rigorous asset adequacy testing, potentially revealing gaps not apparent under foreign regulatory frameworks. For both reinsurance parties, AG 55 is likely to impact treaty negotiations. Data access, modeling conventions and change-in-law provisions will become central points of discussion as cedents balance the operational demands of compliance with the strategic goals of reinsurance.
AG 55 establishes additional requirements for appointed actuaries of U.S. insurers that engage in asset-intensive reinsurance, extending AAT and related disclosures to ceded business, including treaties with offshore reinsurers. These provisions are intended to provide regulators, boards and other stakeholders with greater visibility into the relevant risks, including asset returns, collateral mechanics and counterparty performance, under moderately adverse scenarios. AG 55 sets out parameters for testing and reporting that allow any reserve reductions associated with reinsurance to be evaluated in a consistent manner. For both insurers and reinsurers, this shifts attention toward the documentation of asset sufficiency and the economic effects of the transaction rather than solely its contractual form.
