Description: The implementation of the IFRS 17 insurance accounting standard has brought significant changes to the financial reporting landscape of insurance companies. With new disclosure requirements and altered profit analysis, understanding and interpreting future profitability have become a topic of concern for the industry. While stability remains a key objective for insurance companies, the earning patterns might become more volatile especially when the contractual service margin (CSM) is exhausted, and a loss component (LC) needs to be established. Reinsurance, a common risk mitigation tool, can play a pivotal role in managing earnings volatility and minimizing losses for onerous measurement units. In this article, we propose a new key performance indicator (KPI) called “loss recoverability” to assess the performance of reinsurance treaties in achieving these objectives. We explain how this KPI can be utilized in multiple scenarios to evaluate the effectiveness of reinsurance strategies and pursue stability in earning patterns.

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: Adjusted earnings has long been a fundamental KPI for investors to assess the core financial performance of a company. As a non-GAAP measure, there is a divergence in practice of how individual companies define adjusted earnings and what activities management views as “core” to their business. The arrival of US GAAP LDTI has led insurers to revisit their existing adjusted earnings framework as the new standard introduces additional “accounting noise” that if left unadjusted obscures the true underlying drivers of performance. This article provides key insights on the influence US GAAP LDTI has had to the adjusted earnings calculation, highlights changes from the pre-LDTI framework, and showcases key themes observed from public insurers 2023Q1 10-Q filings.

Description: This article was first published in 2010 when accounting standards codification (ASC) was new. An explanation of the codification system is given.

Description: Overview of regulations and best practices for governance of PBR valuation processes, including standards, oversight, controls and review related to the PBR analysis

Description: In this article, we collected data from the companies’ roll-forward disclosures related to calendar years 2021 and 2022 on Market Risk Benefit and shared a high-level summary of the Market Risk Benefit volatility that a focus group of companies incurred and summarized the most common ways to mitigate volatility.

Description: Interest Maintenance Reserve ("IMR") has become a hot topic recently due to rising interest rates, causing decreases or even negative IMR balances for some insurers. This article aims to exam some new questions facing financial reporting actuaries: - How should negative IMR be treated for statutory reporting? - What are the other actuarial implications of negative IMR? - What have regulators done and/or plan to do about negative IMR? - What are potential mitigants?