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.
Key Takeaways
- No ASOP has ever governed life, annuity and health reinsurance pricing. ASOP No. 54 and ASOP No. 2 each exclude it, each on the assumption the other might reach it.
- More than 40% of the reserves U.S. life and annuity writers ceded in 2024 sat with Bermuda-domiciled reinsurers, the concentration that also produced Actuarial Guideline 55.
- Nine required disclosures in Section 4.1, from assumption development to reliance on third-party administrators, convert an undocumented pricing file into a standard-based record.
- 12 comment letters on the first draft produced six notable revisions, the largest an entire nonguaranteed reinsurance element framework now sitting in Sections 3.6 and 3.7.
- Recapture becomes a disclosed assumption. Section 3.2 requires the actuary to weigh anticipated treaty duration including recapture provisions when selecting profitability metrics.
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, on the treatment of reinsurance in financial reports, noticed that its own standard covered only the reporting side of life, annuity and health reinsurance, and that no ASOP addressed how that reinsurance gets priced. ASOP No. 54 excludes the pricing of reinsurance assumed even while treating reinsurance ceded as a risk-mitigation technique on the direct side. ASOP No. 2 excludes it 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, chaired by Donna C. Megregian. A first exposure draft went out in August 2024 and drew 12 comment letters; the board approved the second draft in June 2026. The proposed standard applies from the assuming entity's perspective only, does not reach an actuary pricing an underlying product for a ceding entity, and excludes property/casualty risk transfer, which ASOP No. 53 already covers.
The financial weight behind that gap is not small. 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 that drew its own reserve-side response: the NAIC's Actuarial Guideline 55, adopted August 2025, requires asset-adequacy testing disclosure on roughly 100 asset-intensive reinsurance transactions beginning with the December 31, 2025 annual statement. This draft is pricing's companion to that.
| 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 |
Pricing a Treaty That May Not Run to Maturity
The standard's practical bite is clearest in its treatment of recapture. Section 3.1.2 lists ceding entity optionality, "for example, recapture or retention changes," among the risks an actuary must take into account, and Section 3.2 requires weighing "the anticipated duration of the reinsurance transaction including consideration of items such as rate guarantee period or recapture provisions" when selecting profitability metrics. Neither describes new economics. What is new is that the duration guess becomes a disclosed assumption rather than an implicit one inside a spreadsheet input.
Recapture is rarely exercised at random, and that is the whole actuarial point. 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, which is precisely the scenario in which the reinsurer's assumptions were too conservative and the treaty has become profitable for the assuming entity. Recapture under those conditions leaves the reinsurer with 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 on a level, undisclosed average duration, rather than a duration distribution conditioned on the recapture trigger and the ceding entity's information advantage, has built anti-selection into the pricing file without naming it. Section 3.1.1 already requires accounting for "situations where profits are expected to be followed by losses" when setting profitability targets. Combined with the duration and recapture disclosure requirements, the draft forces that anti-selective scenario onto the page.
Section 3.3.1 applies the same discipline to the numbers underneath the terms. The actuary must use relevant experience "including actual experience from an existing reinsurance transaction, when available," referring to ASOP No. 23 on data quality and ASOP No. 25 on credibility, and must evaluate whether mortality or morbidity assumptions reflect risk selection and classification effects, whether sales-mix assumptions match the anticipated distribution across modeling cells, and whether policyholder optionality such as lapse timing is captured.
Section 3.1.4 then requires weighing the credibility and quality of that experience data, 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 data underpinning the pension-risk-transfer work covered in the site's geospatial PRT mortality analysis and its payout annuity data coverage, would have to show that reliance was reasonable rather than assert it.
A Documentation Floor, and Where Its Edges Sit
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. Section 4.1's nine disclosures, covering the principal's criteria, transaction characteristics, profitability metrics and their limitations, assumptions and their development, model considerations, risk evaluation results, renewal or termination recommendations, governance and controls, and reliance on other parties, change that 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 exposed to a standard-based finding rather than only a contractual one. That is a genuine shift in professionalism exposure for work that was previously governed by negotiated convention.
The floor's reach depends on edges the task force declined to move. One commentator asked to restrict the standard to new-business pricing only; the reviewers left it as drafted. Another wanted novation addressed; the response noted the ASOP does not address costs to the cedent. A third flagged that the appraisal exclusion under ASOP No. 19 could let an actuary route around the requirements by labelling reinsurance pricing work an appraisal instead. The task force disagreed with the substance but modified the cross-reference in Section 1.2 anyway, closing the obvious version of the loophole without conceding the point.
Definitional ambiguity was the other live edge. A first-round letter from John Blocher of Liberty Bankers Insurance Group warned 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. The second draft now folds retrocessions, pension risk transfers, longevity swaps and financial reinsurance into the definition of a reinsurance transaction. A documentation standard is only as wide as its definitions, and this one closed that gap on a comment letter rather than on its own.
Further Reading
- Actuarial Standards of Practice (ASOPs) 2026 Update: The Busiest Standard-Setting Cycle in a Generation
- ASOP No. 30 Rewrite Reshapes P&C Profit Provision Standards
- ASOP 45 Rewrite Raises the Bar for Risk Adjustment Model Use
- ASOP 49 Gets Its First Rewrite Since 2015, With Comments Due September 1
- Why Reinsurance's Soft Cycle Keeps Testing Its Cost-of-Capital Threshold
- WTW's Geospatial Mortality Model Reshapes PRT Bid Pricing
- SOA and LIMRA Data Reshape Payout Annuity Mortality Pricing
Sources
- 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
- Actuarial Standards Board, Second Exposure Draft PDF, including Transmittal Memorandum and Appendix 2 comment summary, June 2026
- Actuarial Standards Board, Comment letter of John Blocher, FSA, MAAA, Liberty Bankers Insurance Group, September 2024
- Actuarial Standards Board, Exposure Drafts Open for Comment, accessed July 2026
- American Academy of Actuaries, Actuarial Standards Board Members and Committees, 2026
- AM Best, "Bermuda Remains the Largest Offshore Life/Annuity Reinsurance Domicile", June 2025
- Willis Towers Watson, "Actuarial Guideline 55: A New Guardrail for Asset-Intensive Reinsurance", September 2025
- actuary.info, "Actuarial Standards of Practice (ASOPs) 2026 Update: The Busiest Standard-Setting Cycle in a Generation"