Description: This article reviews why financial reporting controls are relevant to actuaries. It also discusses the impact of LDTI on controls and the strategic decisions that insurers need to make.

Description: The article investigates the reasons behind non-zero financial implications for fully reinsured businesses within the regulatory frameworks of US GAAP Long Duration Targeted Improvements (LDTI) and International Financial Reporting Standards (IFRS) 17. It helps companies grasp the nuances of these standards, thereby enhancing their risk management strategies, improving regulatory compliance and optimizing their decision-making processes.

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 article starts with the increasing attention that FP&A receives due to the implementation of new financial regimes and emphasizes the collaborative nature of FP&A. It then describes the roles that actuaries play in FP&A, the new demands for actuaries that we are observing, and suggests some best practices that we are seeing across the clients. This article targets to point out the new demands from FP&A on actuaries and provide some advice on how actuaries can do to meet these demands.

Description: S&P reissued a second Request for Comment (RFC) in May 2023 that proposed changes to their insurer capital adequacy methodology and assumptions, and suggested these proposed changes may become effective at the end of 2023. This paper is to highlight the notable changes between the current capital model criteria and the proposed model. We also discuss major changes from the first RFC and the second RFC, as well as several key items that still require enhanced guidance and clarification. Our analysis is based on information gathered from S&P's public comments, conversations with industry participants, and publications released by S&P Global as of July 2023 when this paper was written. Most U.S. life insurers are rated by S&P using their U.S. Life Statutory Capital model, while other insurers use the GAAP/IFRS Capital Model. Statutory financials will remain the starting point for U.S. life insurers under the proposed model, however there will be additional adjustments made to these numbers in an effort to create consistency and comparability with other accounting and solvency regimes.

Description: This is the second in a series of articles about accounting for reinsurance under GAAP Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). It looks at GAAP, as amended by LDTI, as if there were no precedent, specifically focused on products that require net premium reserves. With possible objectives for compliance, performance, and simplicity, it describes calculation techniques that could achieve all three objectives for a variety of long-duration reinsurance contracts.

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: How does mortality experience impact earnings under the new GAAP financial framework? This article discusses how to isolate key components from financial models related to decrements, as well as how to handle the changes in the financial reporting landscape including: the aggregation of insurance policies into cohorts, dynamic reserving, and the limitations imposed by caps and floors. Looking at the components of earnings, such as the present value of benefits, expenses, and premiums, and how these elements interact is critical to form a comprehensive earnings story.