Fintech Insights

LDTI – learn four ways to benefit from another one-year delay.

Scot Glasford | senior solutions manager, Solutions Management and Strategy, Insurance, FIS

June 25, 2020

On June 10, 2020, the Financial Accounting Standards Board (FASB) voted to push back the effective date of the Long Duration Targeted Improvements (LDTI) to U.S. GAAP. The new deadline now awaits industry approval, but is expected to delay the introduction of LDTI to 2023 for public companies and 2025 for private companies.

That essentially gives U.S. insurers an extra year to complete their implementation – and significant opportunities to shift their LDTI priorities.

With 12 more months potentially to play with, it’s well worth considering as soon as possible how to make best use of the extended timeline and add value to compliance.

At FIS, we recommend concentrating on four key areas:

  1. Plan for an end-to-end modeling process
    Ask yourself whether your actuarial software can produce and provide ongoing support for LDTI calculations and do so in an automated fashion.

    You’ll also need to evaluate your assumption management process if you haven’t already, that could mean moving from spreadsheets to an assumption repository.
  2. Deep dive into LDTI calculations
    Identify any grey areas in the standard. As you develop your own interpretation and application of the rules, it can be helpful to follow and participate in practice notes on the finer points of implementation, and compare it with your own company’s accounting policy.

    At the same time, start building an understanding of how financials will move around under LDTI. Perform stress-testing of income statements and balance sheets, and assess how the standard may affect hedging programs and hedge accounting, too.
  3. Determine your data design
    Work out how you will house both the results of your risk models and actual data from administration systems. Additionally, you should define how you’ll organize your data for robust reporting on business intelligence platforms.
  4. Focus on automation
    To improve efficiency and minimize errors, it’s important to automate as many LDTI processes as you can. Leverage business process management tools and robotic process automation to build an end-to-end process with minimal touchpoints and required connections to the various source and downstream systems. For all of these priority projects, a robust actuarial and risk management solution and services will put you in a stronger position to succeed. Rest assured that the team behind FIS’ Prophet is ready, willing and able to help you meet your new objectives – and make the most of another year’s delay to LDTI.