Video Transcript

Long Duration Targeted Improvements or LDTI is a change in the way the FASB is requiring insurance companies that follow US GAAP to account for long term contracts, such as life insurance.

Depending on the type of insurer the implementation date varies; the current proposed dates are Early Adopters 2022; SEC filers in 2023; and other entities in 2025.

The goals are to make financial statements more comparable and transparent with changes in 4 main areas:

  • The measurement of the insurance liability must now be regularly updated to reflect experience, changing assumptions and discount rates. The discount rate should be one that reflects the liability and not the underlying assets.
  • Products that contain Market Risk Benefits (MRB) will need to be valued at fair value, with clearer definitions for products that meet the definition of an MRB product.
  • Acquisition costs will be deferred and amortized on a straight-line basis over the life of the policy.
  • There will be enhanced and more detailed disclosure requirements.

These changes will affect both actuarial and finance teams and is a great opportunity to review and improve underlying processes.

A powerful Accounting Rules Engine and Subledger will help insurers manage these changes as well as providing a future-proofed platform for further transformation.

Meeting the new requirements for Long Duration insurance contracts under US GAAP will be a significant challenge for many firms. Use our latest online tutorial, “LDTI Explained”, to help your company better understand Long Duration Targeted Improvements.

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About Legerity FastPost

The world of finance is transforming. Legerity FastPost is a third-generation accounting rules and sub-ledger platform.

Combining the latest advances in technology, data and application architectures, it allows firms to rapidly adopt new accounting standards.

Legerity FastPost allows firms to deliver:
– Greater agility
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Legerity FastPost is changing the way Insurance, Banking and Telco firms think about accounting.

To discuss how Legerity’s FastPost can transform your finance and risk function, contact info@legerityfinancials.com

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