VM-22 Retrospective Adoption: One-Time Election, 2017-2025

The American Academy of Actuaries' annuity reserves subcommittee wants any insurer that moves pre-2026 annuities onto VM-22 to compute the principle-based reserve on every eligible block, elected or not. It would also explain any material reserve decrease its selection produces. Nine pages of draft text for a new VM-22 Section 14 reached the NAIC on October 30. They cover non-variable annuities issued or assumed on or after January 1, 2017 (Academy, Oct. 30, 2026).

Bruce Friedland, chair of the Annuity Reserves and Capital Subcommittee, signed the letter. It answers an exposure from Ben Slutsker, the Minnesota regulator who chairs the VM-22 (A) Subgroup, which ran for an 81-day comment period ending October 30 (NAIC exposure drafts).

The Life Actuarial (A) Task Force is still arguing over a deadline. Eversheds Sutherland's report on the August Summer National Meeting says regulators suggested requiring elections by 2031 or 2032. The ACLI called that timetable too aggressive. VM-22 took effect for new non-variable annuity business on January 1, 2026, and contracts written before then can stay on CARVM until January 1, 2029.

Key Takeaways

The election is made once: blocks left out cannot be added later, adoption is irrevocable, and no election can be made after December 31, 2031 under the bracketed draft.
The election request goes to the domiciliary commissioner by July 1 of the adoption year, and the commissioner can reject it before October 1.
Every eligible block, meaning business issued or assumed from January 1, 2017, gets a VM-22 reserve whether elected or not, and the company explains any material decrease from its selection.
The attribution analysis reconciles CARVM to VM-22 across 11 listed drivers, from methodology and starting assets to negative IMR and aggregation, then runs four more years standalone.
Any treaty whose collateral moves with the reserve basis must be identified, "with particular identification of arrangements subject to Actuarial Guideline LV", tying the election to the AG 55 debate.

What the Election Lets a Company Do

Section 14.A sets four eligibility tests. A contract must fall within VM-22's scope and have been issued or assumed on or after January 1, 2017. It must not already be required on VM-22, and it must be valued under VM-A, VM-C, VM-M or VM-V immediately before adoption. In March the subcommittee had told task force chair Rachel Hemphill that retrospective application "should go back to at least 2017, but applying to all issue years would be preferable" (Academy, March 3, 2026).

Blocks follow product form. A company "shall not subdivide an otherwise similar block of business solely for purposes of retrospective adoption" (Section 14.C.6). Blocks are defined the way the company "manages, models, and evaluates the risks of the business". Electing every eligible block is not required. A guidance note tells companies to talk to the regulator before they file.

A one-time election settles a question the subcommittee left open in June. Its June 22 letter warned that letting each company adopt different blocks in different years meant "the full impact of retrospective adoption on the company is unlikely to be captured at one point in time" (Academy, June 22, 2026). On one point it did not waver: "Companies should not be allowed to go back to CARVM after electing PBR."

Slutsker's asset-selection amendment, APF 2026-09, received on October 19, already assumes the change. It excuses a company from the new asset-segmentation template if "the Valuation Manual is updated to allow non-variable annuity business written between 1/1/2017 and 12/31/2025 to be valued under VM-22 requirements" and the company attests to that intention (LATF, Oct. 22, 2026 materials). That is the amendment that would send undocumented asset splits to the higher reserve.

The Reserve on Every Eligible Block

Section 14.D fixes four numbers for each adopted block as of the adoption date. They are the Pre-Adoption Reserve, the standalone VM-22 reserve before aggregation, the aggregation benefit under Section 6.A.1.a, and the VM-22 reserve after the aggregation Section 3.F permits. Each is shown pre- and post-reinsurance-ceded (Section 14.D.2). The VM-22 Reserve includes "any required reserve strengthening driven by the Additional Standard Projection Amount" (Section 14.B.6), so the prescribed-assumption floor travels with the block. What moves is mostly the aggregation line, the mechanism the site has described as a pricing floor for new business.

Section 14.E carries the safeguard. A company "shall calculate the reserve assuming all Eligible Retrospective Blocks are valued under VM-22 and aggregated with Existing VM-22 Business to the extent permitted under Section 3.F, whether or not all such blocks are proposed for retrospective adoption" (Section 14.E.4). It then explains its choice block by block, "including an explanation of any material reserve decrease arising from the blocks selected for retrospective adoption" (Section 14.E.7).

Reserve figure	Draft section	What it isolates
Pre-Adoption Reserve (CARVM under VM-A and VM-C)	14.B.4, 14.D.2.a	The baseline being left
Standalone VM-22 reserve for each adopted block	14.D.2.b	The methodology change alone
Each adopted block added individually to existing VM-22 business	14.E.2	That block's own aggregation benefit
All adopted blocks aggregated with existing VM-22 business	14.E.3	The reserve the company will hold
All eligible blocks on VM-22, elected or not	14.E.4	The reserve the company chose against

Source: Academy ARCS proposed VM-22 Section 14, Oct. 30, 2026. Section 14.E.6 requires the company to explain material differences among the last four.

Two further checks target where a benefit could be manufactured. Where aggregation crosses the accumulation and payout categories, the company comments on any impact "on the aggregation benefit that is due to the cash surrender value floor" (Section 14.E.5). Payout blocks carry no surrender value, so the floor on an accumulation block can cap what the pairing is worth.

Section 14.F.7 adds sensitivity testing on "a pro rata allocation of the relevant general account assets or an appropriate benchmark starting portfolio". The test applies where needed to show the starting assets do "not materially or inappropriately influence the VM-22 reserve".

Materiality moved from a threshold to a rationale. In March the subcommittee asked for an exemption below "x% of a company's VM-22 reserves" with a dollar floor for small companies. October's text lets a company skip the calculation on a block it is not electing if the result "would not provide meaningful information or would impose effort disproportionate to the relevance of the block". The rationale may cite "the size, materiality, and/or closed-block status of the business" (Section 14.D.3).

Where the Election Meets AG 55 Collateral

Section 14.G reaches into the treaties. A company "shall identify any existing reinsurance agreement for which collateral requirements or collateral levels are expected to be materially affected by the retrospective adoption of VM-22, with particular identification of arrangements subject to Actuarial Guideline LV" (Section 14.G.3). For each it describes the collateral change and any material effect on the pre- and post-reinsurance-ceded results.

That lands on a live file. On October 26 Wisconsin Commissioner Nathan Houdek wrote that about 70% of life insurers ceding to non-reciprocal jurisdictions hold riskier assets behind generous annuity guarantees. Reserves behind those liabilities "may fall below the newly adopted VM-22 annuity reserve standards", he wrote (NAIC, Oct. 26, 2026). Most of those ceded reserves were written before 2026, as the site reported, which is the business Section 14 covers.

A cedent that elects VM-22 on a ceded 2017 to 2025 block resets the reserve its collateral is measured against. The task force's separate referral would set that collateral at the standalone pre-reinsurance reserve. Section 14.D.2.e makes the company compute that figure in any case. Year-end 2026 AG 55 guidance already asks for RBC recomputed without the treaty.

Nine issue years sit inside the window. LIMRA's final 2025 figures put fixed-rate deferred annuity sales at $165.3 billion and fixed indexed sales at $127.9 billion (LIMRA, March 23, 2026). Total sales were $464.1 billion in a survey covering 93% of the market. Section 14.H.4 then keeps each adopted block on standalone reporting for the four annual valuation dates after adoption, so a 2031 adopter reports through 2035.

The letter closes by asking the task force for "a prescribed template for reporting" so results compare across companies. The brackets around 2028 to 2031 are the subgroup's to fill.

Academy Drafts a One-Time VM-22 Election for 2017-2025 Annuities

Key Takeaways

What the Election Lets a Company Do

The Reserve on Every Eligible Block

Where the Election Meets AG 55 Collateral

Further Reading

Sources

Academy Drafts a One-Time VM-22 Election for 2017-2025 Annuities

Key Takeaways

What the Election Lets a Company Do

The Reserve on Every Eligible Block

Where the Election Meets AG 55 Collateral

Further Reading

Related guides

Sources