Life Insurers Rapidly Adopt Cash Flow Testing Under AG 55 Reinsurance Rules — Milliman, Inc.

Event summary

Milliman surveyed 23 life insurers, with 22 in scope for AG 55 testing.
22 of 23 respondents use cash flow testing as the primary method for AG 55 compliance.
Key challenges include asset traceability, governance expansion, and explainability of results.
Year two of AG 55 implementation will focus on process repeatability and documentation.

The big picture

AG 55 is pushing life insurers to demonstrate that reinsured liabilities are supported by appropriate assets, shifting the focus from technical actuarial exercises to explainable, repeatable processes. The survey highlights the industry's rapid adoption of cash flow testing, but also reveals evolving practices in governance and asset traceability. As insurers move into the second year of AG 55 implementation, the focus will likely shift to building more robust and consistent compliance frameworks.

What we're watching

Process Standardization: How insurers will build more repeatable AG 55 processes, including stronger asset data feeds and clearer documentation.
Governance Evolution: Whether broader governance practices, such as project planning and independent review, will become industry standards.
Regulatory Adaptation: The pace at which insurers can address timing and operational challenges, such as asset data availability and reinsurer coordination.