LDTI solution of the year: Moody's Analytics

US insurers are facing some significant changes to the US GAAP accounting model for certain long term insurance contracts, under amendments commonly known as the Long-Duration Targeted Improvements (LDTI).

The updated accounting standard will take effect in 2023 for SEC filers (public entities), and in 2025 for all others (not on the stock market), and its implementation is creating major challenges for life insurers.

Moody's Analytics says LDTI requires a new collaboration between actuaries and accountants, and demands a fresh look at how the basic accounting processes, receive, accumulate and present data.

The provider says its new end-to-end modular solution for LDTI combines its AXIS actuarial modelling system, which is enhanced to address the LDTI accounting framework requirements, and its RiskIntegrity for LDTI solution.

InsuranceERM's judging panel was impressed by the way Moody's Analytics has approached the challenge of developing a solution for LDTI by building on its extensive experience in regulatory reporting and combining it with expertise in actuarial modelling, accounting and data management.

Commenting on how insurers can best prepare for LDTI, Colin Holmes, General Manager-Insurance at Moody's Analytics, says insurers will need to find a good trade-off between acquiring a standard solution, allowing them to leverage investments in processes which are common to all insurers, and ensuring they can sufficiently tune it to their specific needs for management reporting and internal analysis.

He comments: "Under LDTI, actuarial assumptions must be monitored closely and updated at least annually. Insurers must have a process in place to make sure that assumption updates are made accurately and on time, and as part of a strong governance framework."

"Targeted improvements are intended to bring transparency to the financial reporting process, and insurers must have the proper tools to take advantage of it," adds Holmes.