What Insurers Should Be Doing Now
With the effective date December 31, 2026 approaching, insurers should evaluate whether they are prepared to implement the National Association of Insurance Commissioners’ (NAIC) revisions to Statement of Statutory Accounting Principles (SSAP) No. 61R and Appendix A-791.
The amendments clarify how risk transfer should be assessed for reinsurance programs that combine yearly renewable term (YRT), coinsurance, and other economically interconnected arrangements. The Valuation Analysis Working Group (VAWG) identified situations where the mortality risk could effectively be ceded more than once or where interdependent provisions that are based on aggregated experience—such as experience refunds, premium adjustments, or recapture rights—caused separate treaties to function as a single economic arrangement.
VAWG concluded that in some cases, these treaties resulted in non-proportional risk transfer with more reserve credit being taken than intended by original SSAP language. Under the revised guidance, insurers will be required to evaluate interconnected treaties together rather than analyzing each contract separately. As a result, the amendments reinforce a substance-over-form approach, requiring companies to consider the overall economics of the arrangement and whether the reinsurer is genuinely exposed to the risks for which reserve credit is being taken.
Key Considerations Before Year-End
Insurers with YRT, coinsurance, or other reinsurance structures containing interdependent provisions should review their treaties now to identify potential implementation challenges before the effective date. Depending on the outcome of the analysis, companies could experience changes in reserve credit, statutory surplus, risk-based capital (RBC) ratios, and other capital-related metrics.
The amendments are effective for the year-end 2026 annual statement for both new and existing treaties (for existing treaties, adjustments will be made through a SSAP 3 adjustment). Insurers should consider inventorying potentially affected treaties, updating risk transfer analyses, evaluating capital impacts, enhancing supporting documentation, and discussing with their regulators as appropriate. Coordination among accounting, actuarial, reinsurance, legal, regulatory reporting, and audit stakeholders will be critical to help ensure a smooth transition.
How Forvis Mazars Can Help
If your organization is still evaluating the implications of the revised guidance, our team can assist with implementation assessments, risk transfer analyses, and impact modeling ahead of the adoption deadline. If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.