The Actuarial Standards Board's second exposure draft, released July 2026, puts life, annuity, and health reinsurance pricing under its own actuarial standard of practice for the first time, with a comment deadline of October 15, 2026 (Actuarial Standards Board, June 2026). No ASOP has previously governed that work: ASOP No. 54 and ASOP No. 2 both explicitly carve reinsurance pricing out of their scope, leaving assuming-entity actuaries to price treaties on firm convention alone.

That absence carries real financial weight. Bermuda-domiciled reinsurers held more than 40% of the reserves U.S. life and annuity writers ceded in 2024 (AM Best, June 2025), a concentration large enough to draw its own parallel regulatory response: the NAIC's Actuarial Guideline 55, adopted in August 2025, now requires asset-adequacy testing disclosure on roughly 100 asset-intensive reinsurance transactions beginning with the December 31, 2025 annual statement (Willis Towers Watson, September 2025). The ASB's second exposure draft arrives as pricing's companion to that reserve-side scrutiny, converting assumption setting, treaty structure, counterparty and recapture risk, and reliance on ceding-company data into a documented, disclosed record for the first time.

A Six-Year Path From a Flagged Gap to a Standalone Standard

The gap surfaced almost by accident. In February 2020, the task force revising ASOP No. 11, Treatment of Reinsurance or Similar Risk Transfer Programs Involving Life Insurance, Annuities, or Health Benefit Plans in Financial Reports, noticed that its own standard covered only the financial-reporting side of life, annuity, and health reinsurance, and that no ASOP addressed how that reinsurance gets priced in the first place. ASOP No. 54, Pricing of Life Insurance and Annuity Products, specifically excludes the pricing of reinsurance assumed even though it treats reinsurance ceded as a risk-mitigation technique on the direct side. ASOP No. 2, covering nonguaranteed elements, excludes reinsurance too, because managing nonguaranteed terms as an assuming company is a different exercise than managing them as a direct writer.

The ASB appointed the Reinsurance Pricing Task Force in April 2021 to close that gap, chaired by Donna C. Megregian with Scott R. Campbell, Bruce A. Stahl, Winston T. Hall, Larry N. Stern, and Alec Loudenback. A first exposure draft went out in August 2024 with a comment deadline of November 1, 2024, and drew 12 comment letters, some filed jointly on behalf of firms or committees. The ASB voted to approve the second exposure draft in June 2026, and the transmittal memo states the underlying rationale in language the task force has carried since 2021: "pricing of reinsurance assumed for life, annuities, and health benefit plans as well as management of nonguaranteed reinsurance elements are significant areas of practice that lacked guidance" (Actuarial Standards Board, June 2026). The proposed standard applies from the assuming entity's perspective only; it does not reach an actuary pricing an underlying product on behalf of a ceding entity, and it explicitly excludes property/casualty risk transfer, which ASOP No. 53 already covers.

Assumption Setting, Treaty Structure, and Counterparty Risk Become Disclosed Judgment

The standard's Section 3.1.2 lists the treaty characteristics an actuary must take into account when pricing: the transaction type (coinsurance, yearly renewable term, or stop loss), the structure and parameters of the agreement, and, notably, "risks inherent in the reinsurance transaction, such as ceding entity optionality in the reinsurance agreement (for example, recapture or retention changes) or counterparty, financial, investment, regulatory, operational, and outsourcing risks (for example, those related to third-party administrators)." A separate item covers potential risk mitigation strategies, including nonguaranteed reinsurance elements, retrocession, and hedging. None of that language is new in the sense of describing unfamiliar practice; reinsurance actuaries have always weighed recapture provisions and counterparty exposure informally. What is new is that Section 4.1 requires those characteristics, along with the profitability metrics used and their limitations, to appear in the actuarial report.

Section 3.3.1, Assumption Setting, does the same for the numbers underneath the treaty terms. When setting or reviewing pricing assumptions, the actuary must use relevant experience, "including actual experience from an existing reinsurance transaction, when available," and refer to ASOP No. 23, Data Quality, and ASOP No. 25, Credibility Procedures, for guidance on that experience. The actuary must then evaluate, among other things, whether mortality or morbidity assumptions reflect risk selection and risk classification effects, whether sales-mix assumptions match the current or anticipated distribution across modeling cells, whether policyholder-optionality effects such as lapse timing are captured, and whether the assumptions reflect the assuming entity's and ceding entity's own capacity and intent regarding in-force management. Actual experience from an existing reinsurance transaction gets its own subsection, 3.1.4, requiring the actuary to weigh the credibility and quality of the experience data, any reporting lags, whether observed trends are significant and ongoing, and how far actual experience has diverged from the original pricing assumptions. Reinsurers building block acquisitions on ceding-company mortality studies, the kind of data underpinning recent pension-risk-transfer and payout-annuity pricing work the site has covered in its geospatial PRT mortality analysis and its SOA/LIMRA payout annuity data, would now need to show that reliance was reasonable, not simply assert it.

What Changed Between the First and Second Drafts

A second exposure draft, rather than a final standard, means the task force made substantive changes after digesting the first round of comments. The transmittal memo lists six notable revisions, set out below.

Area What Changed in the Second Draft
Definitions (Section 2) Added a new definition of "existing reinsurance transaction"; modified several other terms
Actual experience (Section 3.1.4) Relocated from Section 3.2 and renamed "Actual Experience from the Existing Reinsurance Transaction"
Assumption setting (Section 3.3.1) Added new guidance directing actuaries to incorporate actual experience
Assumption adjustments (Section 3.3.1) Moved from the former Section 3.4.5 and modified for clarity
Model adjustments (Sections 3.4.1–3.4.2) Modified guidance on adjusting the model or its output
Nonguaranteed reinsurance framework (Sections 3.6–3.7) New guidance added on record and framework, not present in the first draft

Source: Actuarial Standards Board, second exposure draft transmittal memo, June 2026.

What the First Round of Comments Pushed Back On, and What the ASB Held

The task force's own appendix summarizing the 12 first-round letters shows a board that gave ground on operational specificity while holding the line on scope. One commentator asked the ASB to restrict the standard to new-business reinsurance pricing only; the reviewers "believe the ASOP is appropriate as drafted" and made no change. Another wanted the standard to address novation, the substitution of one reinsurer for another; the response noted flatly that "the ASOP does not address costs to the cedent" and left the scope untouched. A third flagged that the exclusion for appraisals, covered separately under ASOP No. 19, could let an actuary route around the standard's requirements by labeling reinsurance pricing work an appraisal instead; the task force disagreed with the substance of the concern but modified the cross-reference language in Section 1.2 anyway, a small concession that closes an obvious loophole without conceding the underlying point.

The one comment the task force fully adopted came from a suggestion to add a section covering redetermination of in-force nonguaranteed reinsurance elements, the periodic resetting of yearly-renewable-term rates or renewal allowances on business already on the books. That request produced the entire nonguaranteed reinsurance element framework now sitting in Sections 3.6 and 3.7, the single largest substantive addition in the second draft. An earlier first-round letter from John Blocher, FSA, MAAA, of Liberty Bankers Insurance Group, illustrates the kind of granular pushback the task force fielded on scope clarity: reviewing the definition of a reinsurance transaction, Blocher wrote that "some actuaries may mistakenly believe the ASOP doesn't apply when pricing assuming business in a retrocession type of reinsurance transaction," since retrocession appeared only as a passing consideration rather than a clearly in-scope activity (ASB comment letter, September 2024). The second draft's definitions section now folds retrocessions, pension risk transfers, longevity swaps, and financial reinsurance directly into the definition of a reinsurance transaction, addressing exactly that ambiguity.

The Recapture Problem: Pricing a Treaty That May Not Run to Maturity

The standard's treatment of recapture risk is where its practical bite is clearest. Section 3.1.2(e) lists "ceding entity optionality in the reinsurance agreement (for example, recapture or retention changes)" as a relevant risk the actuary must take into account, and Section 3.2(d) requires the actuary to weigh "the anticipated duration of the reinsurance transaction including consideration of items such as rate guarantee period or recapture provisions" when selecting profitability metrics. Neither requirement describes new economics. A reinsurer pricing a coinsurance or YRT treaty has always had to guess at how long the business will stay ceded before a recapture right gets exercised. What is new is that the guess becomes a disclosed, documented assumption rather than an implicit one buried inside a spreadsheet's duration input.

The mechanism matters because recapture is rarely exercised at random. A ceding company holding a recapture option is most likely to use it once its own retained mortality, morbidity, or lapse experience turns favorable relative to what it ceded, precisely the scenario in which the reinsurer's pricing assumptions were too conservative and the treaty has become profitable for the assuming entity. Recapture under those conditions leaves the reinsurer holding the remaining, less favorable in-force block while the cedent keeps the upside it identified first. An actuary who priced the treaty's internal rate of return assuming a level, undisclosed average duration, rather than modeling a duration distribution conditioned on the recapture trigger and the ceding entity's likely information advantage, has built anti-selection risk into the pricing file without ever naming it. Section 3.1.1(b) already requires the actuary to account for "situations where profits are expected to be followed by losses" when setting profitability targets; combined with the duration and recapture disclosure requirements, the standard effectively forces that anti-selective recapture scenario onto the page rather than leaving it as an unstated risk the pricing actuary carried informally.

A Documentation Floor Where "We Always Priced It This Way" Was the Standard

The professionalism stakes are the least visible part of this story and arguably the most consequential. Because ASOP No. 54 and ASOP No. 2 both exclude reinsurance pricing, an actuary defending a pricing decision in an ABCD complaint, a malpractice dispute, or a regulatory examination has had no ASOP to point to, only firm practice and negotiated convention with the ceding company. Section 4.1's nine required disclosures, covering the criteria of the principal, transaction characteristics, profitability metrics and their limitations, pricing assumptions and their development, model considerations, risk evaluation results, renewal or termination recommendations, governance and controls, and reliance on other parties, change that calculus once the standard takes effect four months after ASB adoption. An actuary who cannot show that a mortality assumption reflected relevant trends in the ceding company's experience, or that reliance on a third-party administrator's data was reasonably assessed under Section 3.8, is now exposed to a standard-based finding rather than only a contractual one.

That shift is part of a broader pattern actuary.info's own tracking of the ASB's 2026 cycle has flagged before: more than 20 of the roughly 52 ASOPs currently in effect are simultaneously under revision or development, spanning risk classification, catastrophe model output, profit provisions, and now reinsurance pricing (see the site's ASOPs 2026 update). Reinsurance pricing was one of the last major gaps in that build-out precisely because it sat at the intersection of two other standards, ASOP No. 54 and ASOP No. 2, each of which excluded it on the assumption the other might cover it. The comment period runs through October 15, 2026, and the task force's track record on the first round, holding scope firm while conceding real ground on nonguaranteed element governance, suggests the final standard will look close to this draft rather than a substantially narrower one. For pricing actuaries at reinsurers and retrocessionaires, the practical work is not waiting for adoption; it is confirming that current treaty files, model documentation, and reliance memos already contain what Section 4.1 will soon require them to show.

Further Reading

Sources

  1. Actuarial Standards Board, "Pricing Reinsurance or Similar Risk Transfer Transactions Involving Life Insurance, Annuities, or Long-Duration Health Benefit Plans" (Second Exposure Draft), June 2026
  2. Actuarial Standards Board, Second Exposure Draft PDF, including Transmittal Memorandum and Appendix 2 comment summary, June 2026
  3. Actuarial Standards Board, Comment letter of John Blocher, FSA, MAAA, Liberty Bankers Insurance Group, September 2024
  4. Actuarial Standards Board, Exposure Drafts Open for Comment, accessed July 2026
  5. American Academy of Actuaries, Actuarial Standards Board Members and Committees, 2026
  6. AM Best, "Bermuda Remains the Largest Offshore Life/Annuity Reinsurance Domicile", June 2025
  7. Willis Towers Watson, "Actuarial Guideline 55: A New Guardrail for Asset-Intensive Reinsurance", September 2025
  8. actuary.info, "Actuarial Standards of Practice (ASOPs) 2026 Update: The Busiest Standard-Setting Cycle in a Generation"