2024 ValAct Meeting Virtual - Session 9D: Bridging Accounting Valuation and Reinsurance Economics for Strategic Financial Planning 9.19.24 Recording

The life insurance industry has a long tradition of trying to calculate the economic value with different forms of concepts. Especially with reinsurance, which is often a strategic part of a company's operation, it is important to understand the economics of the transactions given the complexities involved. However, despite the focus on economic value creation, the financial metrics demanded by various stakeholders often tie to one or more accounting basis. This session will provide an overview of the potential valuation mismatch between direct and ceded business under the new accounting frameworks, International Financial Reporting Standards (IFRS17) and Long-duration Targeted Improvements (LDTI), and how to potentially bridge the gap with the underlying economics. It will also discuss the impact of new accounting frameworks on financial planning and forecast for reinsurance business, for example, the generation of potential 'phantom income'. Attendees will gain an understanding of the 'current value' focus of the new accounting standards and how they may deviate from the true economic value of the (re)insurance business. Attendees will also better appreciate actuary's role as trusted business advisor in providing insights on insurance company's future financial plan and forecast.