Meeting the LDTI accounting challenges

Robert Barg, vice president, solutions management and strategy at FIS, explains how the company is helping insurers implement the US Long Duration Targeted Improvements (LDTI) accounting standard in challenging times

Robert BargHow has FIS been helping insurers implement LDTI in the US?

From the very beginning, we have been on top of the changes forthcoming with US GAAP LDTI. Within weeks of the initial LDTI announcement in August 2018, we had introduced changes to the product to perform the LDTI calculations and a solution which included data management and process control. Even now, we're continuing to refine our offering by working closely with our customers, consulting partners, and accounting firms to ensure we make changes as the industry evolves in its interpretation of the changes. On top of the continual enhancements, we also introduced a US GAAP LDTI example model in 2019, which clients can use as a starting point or template, and we plan to expand our offering by integrating our LDTI solution with the existing FIS accounting and general ledger solution, EAS.

What have been FIS's key achievements in insurance over the past year?

In May, we just released our 2020 Q2 version of Prophet. This was a major upgrade to the system and included key enhancements to streamline the US GAAP LDTI process and reporting, along with other highly anticipated performance enhancements. I'm very proud of our ability to keep focused and deliver, even as our personal and professional lives have been highly disrupted by Covid-19. Even after shutting down our offices, shifting our entire workforce to remote working, we have not lost our focus on delivering for our clients.

How has Covid-19 changed the LDTI landscape?

The most tangible answer is another one-year delay. The FASB recently announced a new proposed one-year delay to the effective date of LDTI due to the impact of Covid-19. While the extra year will certainly bring relief to the industry, companies needed this delay and regulators acknowledged that. Covid-19 has put tremendous pressure on companies as they execute on their plans to adopt LDTI. The fact is, even without LDTI on the horizon, insurance companies have a lot to deal with; employees navigating new ways of working from home, insurers trying to understand the complex impacts of Covid-19 on their business, stock market declines, and redesigning processes like quarter-end close to be done remotely to name but a few. Inevitably, these pressures would draw some resources away from the LDTI implementation to focus on more immediate concerns and priorities of their employees and policyholders.

Longer-term, Covid-19 has highlighted the need for insurance companies to modernise. It will accelerate the industry's shift to cloud computing, automation, and other forms of modern computing and technology to enable their employees to work anywhere. As companies proceed on their LDTI journey, I expect to see these themes coming out as they make decisions about new technology and processes.

How pressing is the implementation of LDTI and should insurers be looking to do this now?

Even before the disruption caused by Covid-19, insurers were challenged to meet the LDTI implementation timelines. You must consider the fact that, for many companies, LDTI represents new accounting policies, new data collection and analysis, new actuarial modeling platforms, and an opportunity to modernise their modelling and reporting functions.

Insurers must also grapple with the medium-term and longer-term changes that have been brought on by Covid-19, such as a workforce that might primarily work remotely, governance of solutions, automation, data management, and designing processes and systems that can be accessed from anywhere.

These need to be built across all insurance solutions to ensure operational resiliency across the insurer, but also built into the design of LDTI programmes as part of a modernisation and transformation of the risk and finance areas. So, the short answer is yes, companies need to start working on their LDTI implementation plan now, alongside a critical review of how their systems and processes performed over the last three to four months.