The AXIS actuarial system, including the new AXIS US GAAP Link module, delivers improved enterprise-level control, auditability, scalability, reporting flexibility, and end-to-end automation as demanded by the new US GAAP standards, as well as other new frameworks.
Chartis RiskTech Quadrant®
Chartis RiskTech Quadrant®
Moody’s Analytics is a Category Leader in a new report from Chartis Research that evaluates leading vendors of insurance risk systems. The report's RiskTech Quadrants® for IFRS 17/LDTI compliance covers accounting systems, data management and reporting, and actuarial modeling, with Moody’s Analytics earning Category Leader distinction in all three.
The report considers the vendors’ "Completeness of Offering" and "Market Potential" and assesses them on a range of specific capabilities, many of which highlight Moody’s Analytics as “best-in-class.”
The changes from Financial Accounting Standards Board (FASB) Update (ASU) 2018-12, also known as Targeted Improvements for Long-Duration Contracts (LDTI), are significant and introduces new reporting complexities.
Moody’s Analytics RiskIntegrity™ for LDTI solution helps insurance companies address the updated FASB requirements for long-duration insurance contracts and helps insurers make the transition to the new standard. Additionally, it helps insurers kick-start their actuarial and accounting modernization efforts as they prepare for LDTI with a modular, end-to-end solution that improves the record-to-reporting process.
ASU 2018-12 will require:
Changes to systems, processes, and data
More integration of Finance and Actuarial teams
Accounting policy decisions: Before implementing the standard, insurers must understand it and make important decisions about how the standard applies to their business. For example, how should deferred acquisition costs (DAC) be amortized? What level of aggregation will be used in developing cohort groupings? Decisions such as these will drive the implementation approach that follows.
Assumption management: Under LDTI, actuarial assumptions must be monitored closely and updated at least annually. A process must be in place to make sure that assumption updates are made accurately and on time, and as part of a strong governance framework.
Experience studies: Firms must consider whether efforts are undertaken to formalize experience studies and how that workstream should be integrated into their valuation process.
Model input: Calculations for the liability for future policy benefit (LFPB) and several other actuarial balances require historical unlocking of actuarial assumptions by incorporating actual past cash flows. While this concept is familiar to many insurers that currently perform retrospective estimated gross profit (EGP) unlocking, many firms are taking the opportunity to re-engineer existing processes related to data collection and management.
Model output: Insurers must have suitable storage and analysis tools that enable actuaries and accountants to work side by side to better understand actuarial model output, from both an accounting and analytical perspective.
Roll forwards: To produce the roll forwards, insurers must produce many cash flow projections (perhaps 5 or 6 in the case of the LFPB, and 10 or more sets of stochastic projections for a Market Risk Benefit). An automated process must be in place to produce those runs. The results of the runs are then used to produce the accounting entries, and formal roll forward disclosures.
While some insurers might already be producing some form of roll forward disclosures under existing GAAP, the complexity of the process has the potential to be much greater under LDTI. Insurers must streamline and automate the process, and consider whether a dedicated subledger provides the most logical framework for producing the required disclosures.
Consideration of the level of detail to incorporate in the general ledger: At one extreme, firms might prefer to encapsulate the complexities of LDTI measurement in a subledger solution, and only feed aggregated results into the general ledger (GL), thin ledger approach. This keeps the burden of LDTI on the GL low, but implies that the production of LDTI disclosures must come from the subledger solution and analysis on the GL level remains limited. At the other extreme, firms might want to enrich their GL with the granularity required for LDTI, thick GL approach.
Firms may need to reconsider their approach to how they post the difference between statutory reserves and GAAP reserves in their GL, given that GAAP reserves are now subject to a different roll forward analysis.
Right tools for reporting: Targeted improvements are intended to bring transparency to the financial reporting process, and insurers must have the proper tools to take advantage of it. For example, an insurer should perform its roll forwards at the appropriate level of disaggregation necessary to understand the movement of its actuarial balances period to period. In addition, an insurer should have a facility where both actuaries and accountants can analyze results and use those to drive management decisions.
In this webinar, we will use an example term life product to walk through the end-to-end process.
We examine the input data requirements, actuarial model assumptions, accounting treatments, ASU disclosures, and financial statement impacts of Long Duration Targeted Improvements (LDTI)