12 Days of SSAP: Enhancing Transparency for Reinsurer-Affiliated Assets
Recent trends in life and annuity reinsurance, particularly coinsurance with funds withheld (FWH) and modified coinsurance (Modco) arrangements, have highlighted potential gaps in financial reporting. These arrangements often transfer investment advisory responsibilities to the reinsurer or its affiliates, while the underlying assets remain on the ceding insurer’s books.
A recent examination revealed a significant concentration of assets invested in securities affiliated with the reinsurer, which was not immediately visible in existing statutory reporting. This raised concerns for regulators about investment concentration and valuation accuracy.
In response, the NAIC’s Financial Analysis Working Group (FAWG) recommended enhanced reporting to improve visibility of Modco/FWH assets that are related or affiliated with the reinsurer. Proposed changes include:
- Expanding restricted asset disclosures to capture aggregate amounts of Modco/FWH assets linked to related parties or affiliates.
- Utilizing existing related-party investment codes to ensure consistent identification.
- Including these disclosures in all quarterly and annual financial statements to reflect material changes over time.
Be prepared for expanded disclosures with the Blanks (E) Working Group proposal 2025-10 BWG to expand the restricted asset note disclosure to capture information, by investment schedule, of funds withheld assets that are related to/affiliated with the reinsurer.
These updates aim to give regulators better insight into potential concentration risks, improve transparency, and ensure assets supporting reinsured liabilities are accurately reported.
Effective Date
December 31, 2025
Deep Dive
You can read more by downloading the NAIC’s PDF here.
