LDTI

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, on time, and as part of a strong governance framework.

Experience studies: Firms must consider whether to undertake efforts to formalize experience studies and how that workstream should be integrated into their valuation processes.

Roll forwards: To produce the roll forwards, insurers must produce many cash flow projections (perhaps five or six in terms of liability for future policy benefits 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 (GL): At one extreme, firms might prefer to encapsulate LDTI measurement complexities in a subledger solution and only feed aggregated results into the thin GL 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 by using the thick GL approach.

Firms may need to reconsider 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.