Industry experts, Scott D. Houghton, FSA, MAAA,  Bill Cember, FSA, MAAA, and Katherine M. Papillon-Rodrigue, ASA, CERA, discuss the implementation challenges with US GAAP Long Duration Targeted Improvements (LDTI) for life and annuity products, as well as the methods and actuarial models their organizations use to overcome these obstacles.

Some key points from the presentation are:

  • Challenges for annuity insurers within the current GAAP reporting framework.
  • Need for insurers to update and modernize their assumption setting process relative to FAS 60-based life products.
  • Lack of clarity and guidance for the development and implementation of LDTI in a reinsurance framework.

After watching the webcast, you will be better prepared to:

  • Understand the framework for LDTI in life and annuity settings.
  • Anticipate key issues that can arise during LDTI implementation.
  • Solve issues arising from LDTI implementation.

An excerpt from Scott D. Houghton’s presentation on LDTI

Scott D. Houghton’s Full Presentation

Watch the full LDTI webinar

Discount Rate Under ASU 2018-12

“The liability for future policy benefits shall be discounted using an upper-medium grade (low credit-risk) fixed-income instrument yield.

“An insurance entity shall consider reliable information in estimating the…yield that reflects the duration characteristics of the liability for future policy benefits”

“An insurance entity shall maximize the use of relevant observable inputs and minimize the use of unobservable inputs in determining the discount rate assumption.”

Discount Rate Under LDTI

Credit risk level and duration prescribed

  • Consensus to use “A” rated bond yield.
  • Use of liability duration removes differences in duration risk in company investment policies.

Other investment risks not prescribed

Some interpretation needed for liquidity risk, prepayment risk, convexity risk.

Observable and non-observable inputs

  • Bond maturities limited and can be shorter than insurance liability durations
  • Observed rates can vary based on risks

 

 

Valani Global’s Services

Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

nazir-valani-circle2

 

Nazir Valani, President & Co-Founder
nvalani@valaniglobal.com
+1.416.457.8622