# ASC 815-944-55: Derivatives and Hedging — Financial Services—Insurance — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/815/944/#55-implementation-guidance-and-illustrations) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:40:41.496Z to 2026-09-10T01:40:41.496Z Record version: sha256:47a6d3737ca5b637665b3dbb19edf716432ca99e9fd76cfc8b2b3535e6e5e648 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 815-944-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/815/944/#55-implementation-guidance-and-illustrations) SEC content: no ### Long-Duration Contracts #### Implementation Guidance ##### [815-944-55-1](https://asc.understandingaccounting.org/asc/815/944/#815-944-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:41.496Z to 2026-09-10T01:40:41.496Z Record version: sha256:d7c730404d47ad8ca7c0e9a6f382c473c11993c38fce3774239280cdceb71f9f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some insurance contracts (for example, certain whole life policies, universal life policies, repetitive premium variable annuities, and single premium deferred annuities) contain an option allowing the policyholder to put (surrender) the contract to the issuer at contract value. Those contracts, which are not carried at [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") by the issuer, bear interest at a fixed rate. ##### [815-944-55-2](https://asc.understandingaccounting.org/asc/815/944/#815-944-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:41.496Z to 2026-09-10T01:40:41.496Z Record version: sha256:cc6e10f9e29a8f1aff9c991cde6368f1a201ec26ff24d9d921513ad2c06950b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The issuer is exposed to the risk that an increase in market interest rates will cause the policyholder to exercise its put. Accordingly, the issuer may voluntarily increase the contractual rate on the contract to forestall the policyholder's exercising its put. As a result, the issuer wants to hedge the risk of an increase in future interest cash flows due to an increase in interest rates associated with either of the following circumstances: 1. a The issuer's voluntary increase in the contractual interest rate on existing fixed-rate contracts 2. b The policyholder's exercise of its put option and the insurance entity's issuance of new higher fixed-rate contracts to new policyholders. ##### [815-944-55-3](https://asc.understandingaccounting.org/asc/815/944/#815-944-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:41.496Z to 2026-09-10T01:40:41.496Z Record version: sha256:0cccab471a1d7237da7ebee56472c66c98f20ba4dc51953284956768fa52b260 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subtopic 815-20 would permit an insurance entity to qualify for cash flow hedge accounting if it is hedging the possibility that it may need to voluntarily increase the interest rate used to credit interest on certain contract liabilities. Under the cash flow hedging model, the hedged forecasted transactions would be the future interest credited on its then-existing contracts. The hedged forecasted transactions for each interest crediting date could include both the future interest credited on older contracts whose contractual rate has been voluntarily increased and the future interest credited on new contracts with the current higher interest rate issued to new policyholders (which will have replaced older contracts that have been surrendered). In defining the forecasted transactions, the insurance entity shall ensure that the hedged interest relates to a volume of contracts whose existence at the future interest crediting dates is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur."). ##### [815-944-55-4](https://asc.understandingaccounting.org/asc/815/944/#815-944-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:41.496Z to 2026-09-10T01:40:41.496Z Record version: sha256:1326c51e4ef3f373b66a44f856cea8b4e39b89338c5c0c66b3451270146c614c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In designating the hedged risk, the insurance entity should decide whether it is hedging the total variability in those future interest payments or just the variability in the future interest attributable to changes in the designated benchmark interest rate. Although the occurrence of the forecasted transactions (that is, the crediting of interest) must be probable, paragraph [815-20-25-16](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-16) states that the cash flow hedging model does not require that it be probable that any variability in the hedged transaction will actually occur—that is, in a cash flow hedge, the variability in future cash flows must be a possibility, but not necessarily a probability. However, paragraph [815-20-25-16](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-16) states that the hedging derivative must be highly effective at achieving offsetting cash flows attributable to the hedged risk whenever that variability in future interest does occur. ##### [815-944-55-5](https://asc.understandingaccounting.org/asc/815/944/#815-944-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:41.496Z to 2026-09-10T01:40:41.496Z Record version: sha256:eb97863633688d1b6492180db6e9726f8d8208213e1ce6ade20b79ea6d5f1d3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity may find it difficult to identify a derivative instrument that will qualify for cash flow hedge accounting, which requires that the hedging relationship be expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk. Because the decision to adjust the interest rate to match the change in interest rates is at the discretion of the insurance entity, it may be difficult to conclude that the changes in the hedged interest payments attributable to the hedged risk will be sufficiently correlated with changes in the cash flows of the hedging derivative.