US NAIC Spring 2025 National Meeting Highlights: Reinsurance (E) Task Force
The Reinsurance (E) Task Force (“RTF”) of the US National Association of Insurance Commissioners (“NAIC”) held a virtual meeting on March 4, 2025, in lieu of meeting in person at the NAIC’s Spring 2025 National Meeting. In addition to routine matters, such as adoption of the minutes from the RTF’s meeting on October 24, 2024, the meeting covered the following matters.
Certified and Reciprocal Insurers
The RTF received and adopted the report from the Reinsurance Financial Analysis (E) Working Group (“ReFAWG”). ReFAWG meets in regulator-to-regulator sessions to assess certified and reciprocal jurisdiction reinsurers for passporting. As of March 4, 2025, ReFAWG has approved 97 reciprocal jurisdiction reinsurers (an increase of four since the RTF last met on October 24, 2024) and 41 certified reinsurers (unchanged since October 24) for passporting. ReFAWG reported that 49 states and territories have already passported at least one reciprocal jurisdiction reinsurer.
“Passporting” is the process under which a reinsurer applies to an initial or “lead” state for recognition as a reciprocal jurisdiction reinsurer or certified reinsurer, following which ReFAWG evaluates and makes its recommendation concerning the status (and any related rating for the reinsurer). Other states can then choose to defer to the lead state’s determination for recognizing a reinsurer as a reciprocal jurisdiction reinsurer or certified reinsurer, which leads to administrative efficiency in obtaining and maintaining that status in multiple states, given the reduced level of information that must be submitted to states other than the “lead” state. The list of passported reinsurers can be found on the NAIC’s Certified and Reciprocal Jurisdiction web page.
Life Actuarial (A) Task Force Working Group
- The RTF received a status report from the Life Actuarial (A) Task Force Working Group (“LATF”) on a project LATF is working on to develop a new actuarial guideline requiring asset adequacy testing (“AAT”) to be performed using a cash flow-testing methodology for certain life and annuity reinsurance transactions. The aim of the project is to address the risk that reinsurance transactions may reduce transparency regarding the reserves held for the reinsured business, as well as the types of assets supporting those reserves and the risks associated with those assets. The project originated from concerns raised by regulators regarding the potential use of reinsurance transactions to materially lower the total asset requirement (the sum of reserves and required capital) in support of asset-intensive business, such as variable universal life, individual annuities, and group annuities, to facilitate significant releases of capital, with a particular regulatory focus on reinsurance ceded offshore. Following discussions over the past several months, LATF has further defined the project’s goals to include providing US state regulators with the information they need to review the reserves supporting the business of ceding US life insurers domiciled in their states, while avoiding conflicts with reciprocal jurisdiction reinsurer status and the Covered Agreements,1 avoiding unnecessary work by US-domiciled ceding companies when there is immaterial risk, and adopting a new actuarial guideline regarding asset adequacy testing by mid-year to be effective for year-end 2025, with the first new reports to be due in April 2026. It is expected that US-domiciled ceding companies will be required to conduct AAT using a cash flow testing methodology for certain life and annuity reinsurance transactions (both affiliated and unaffiliated)—to be performed at the treaty level and on an aggregated basis in some cases. The aim of this testing would be to allow US-domiciled ceding companies to produce and disclose relevant information to US state regulators regarding reinsurance reserves and the assets supporting such reserves. The RTF solicited comments from interested parties, one of which expressed concerns that, even if, as currently contemplated, the proposed guidelines are disclosure-only (as opposed to imposing requirements for insurers or reinsurers to affirmatively change any operations or reserving practices), they could still run into issues with Covered Agreements if, for example, the guidelines require duplicative disclosures for EU reinsurers. That interested party urged LATF and RTF to allow for a discussion of these Covered Agreement issues in greater detail as soon as possible. Dan Schelp, Chief Counsel, Regulatory Affairs at the NAIC, responded that the NAIC’s legal division would not object to such a discussion, but noted that the ultimate resolution of any Covered Agreement issues would likely be handled by the US/EU and US/UK joint committees established by the Covered Agreements. Robert Wake, General Counsel of the Maine Bureau of Insurance, expressed support for the idea that duplicative disclosures should be avoided, and invited suggestions from industry on disclosures which are already being made which can be incorporated by reference into the contemplated new reports. The project was discussed further on March 22 at the LATF meeting at the Spring 2025 National Meeting—see our Legal Update, “US NAIC Spring 2025 National Meeting Highlights: Life Actuarial (A) Task Force.”
Mutual Recognition of Jurisdictions (E) Working Group
The RTF received a status report from the Mutual Recognition of Jurisdictions (E) Working Group (“Mutual Recognition WG”), but did not adopt the status report, as the Mutual Recognition WG now reports directly to the Financial Condition (E) Committee rather than to the RTF. The Mutual Recognition WG last met on October 24, 2024 where it reapproved Bermuda, France, Germany, Ireland, Japan, Switzerland, and the United Kingdom as qualified jurisdictions, and Bermuda, Japan, and Switzerland as reciprocal jurisdictions; the European Union and the United Kingdom qualify as reciprocal jurisdictions based on the existing respective Covered Agreements. According to the Mutual Recognition WG, Bermuda, Japan, and the United Kingdom are in the process of making changes to their regulatory systems; the NAIC staff are monitoring the implementation of these changes, and will report any findings to the Mutual Recognition WG.
Ongoing NAIC Projects Affecting Reinsurance
The RTF heard a report regarding the following current projects at the NAIC that affect reinsurance:
- As previously reported, the Macroprudential (E) Working Group adopted a reinsurance worksheet in June 2023. The worksheet is an optional tool for state insurance regulators to understand reinsurance transactions of the insurance companies that they regulate; however, neither the Financial Analysis Handbook nor the Financial Examiner’s Handbook will require the use of the worksheet, and it will not affect the policies or procedures of the RTF. (The Financial Condition (E) Committee adopted the worksheet at the NAIC Summer 2023 National Meeting.) Further, the information provided to state regulators through the reinsurance worksheet will remain confidential. The RTF asked for feedback from those who had used the worksheet.
- The Valuation Analysis (E) Working Group is conducting its third year of reviews of Actuarial Guideline LIII—Application of the Valuation Manual for Testing the Adequacy of Life Insurer Reserves (“AG 53”), which covers AAT for life insurers. The RTF has focused on this process from the perspective of reinsurance issues for the Covered Agreements with the European Union and the United Kingdom. The review is ongoing and being conducted by a wide range of people, including actuaries from the NAIC, regulators, investment experts, financial staff, and other subject matter experts.
To view additional updates from the US NAIC Spring 2025 National Meeting, visit our meeting highlights page.
1 That is, the agreements formally titled “Bilateral Agreement Between the United States of America and the European Union on Prudential Measures Regarding Insurance and Reinsurance” and “Bilateral Agreement Between the United States of America and the United Kingdom on Prudential Measures Regarding Insurance and Reinsurance.”
