Description: This is the first in a series of articles about accounting for reinsurance under GAAP Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). It provides an introduction to the topic, giving an overview of what has and hasn't changed. Changes include a few that directly address reinsurance and others that indirectly result from changes to direct accounting and the existing ties between reinsurance and direct accounting.

Description: Performance measurement is not the primary purpose of either GAAP or statutory accounting. This article discusses alternative methods of reporting used by life insurance companies to better measure financial performance.

Description: The introduction and effective application of US GAAP LDTI have increased the scrutiny of those reviewing the updated financial results. That is because LDTI has resulted in significant changes in actuarial reserving and deferred acquisition cost (DAC) models for long-duration contracts, including significant changes to data, assumptions and required disclosures. In light of the changes, greater reliance has been put on companies’ model risk management (MRM) teams and model validations to assess the conceptual soundness and accuracy of their companies’ actuarial models and to assess that the underlying data and process utilized are suitable and appropriate. This article covers a brief background on model validation, walk through a sample LDTI-focused model validation framework/test plan, then provide insights on common LDTI-related validation observations based on the authors' prior validation experience.

Description: As a follow-up to a previous five-part series on accounting for ceded reinsurance under LDTI, this article focuses on one issue that has, until now, been left without a general solution—how to measure the reinsured portion of a direct loss from capping a net premium ratio or flooring a liability. After acknowledging limited guidance on the issue, the article describes the various events that can lead to a loss, how reinsurance protects against loss, and how that is translated into formulas for measuring the reinsured portion of a loss.

Description: As an addendum to a July 2022 article, this article restates the formulas then presented for a framework to measure the reinsured portion of a direct loss from capping a net premium ratio or flooring a liability. The article corrects a flaw in one of the original formulas and shows, by example, how the framework can be applied to a specific application of reinsurance accounting.

Description: This is the fourth in a series of articles about accounting for reinsurance under GAAP Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). It looks at some concerns that arise from the relationship between ceded reinsurance and the underlying contracts. Recognizing a lack of formal guidance addressing these concerns, the article aims mostly to achieve performance and simplicity objectives

Description: Earlier this year, the Securities and Exchange Commission informed one of its registrants that prospective unlocking of benefit reserves for long-term care LTC insurance was not an acceptable practice under current US GAAP. The purpose of this article is to make actuaries aware of this action and provide some additional context.

Description: This is the final article in a five-part series about accounting for reinsurance under GAAP Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). It looks at some concerns that arise when new reinsurance is purchased to cover previously-issued contracts. The article describes what formal guidance is available. Where that guidance leaves off, the article presents practical solutions to achieving performance objectives.

Description: The article summarizes implications of rising interest rates on U.S. GAAP and statutory financial reporting for life insurers, highlighting potential tailwinds from steady increases and headwinds from sharp increases. We further provide insights into how insurers can leverage ALM programs and interest rate risk hedging practices to favorably position themselves in a rising rate environment

Description: GAAP's elimination of gross profit as a basis for amortization of deferred acquisition costs enables the accounting for reinsurance of universal life contracts to better reflect the economic protection provided by reinsurance. This article takes a fresh look at the standards of accounting for universal life contracts and for reinsurance, then puts them together to find the techniques that best account for that protection.