New SAS Solution for LDTI helps insurers manage the most significant FASB accounting shift in decades
In the footsteps of banks and insurers around the globe innovating to meet stringent new accounting and financial reporting standards, US insurers now face their own momentous compliance shift. The Financial Accounting Standards Board’s (FASB) Long-Duration Targeted Improvements standard – known as LDTI – will bring greater transparency to insurers’ financial reporting but require significant effort to implement. The SAS® Solution for LDTI paves a path to addressing its intricacies.
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Taking effect Jan. 1, 2023, US GAAP LDTI will alter how insurance companies assess and report financials for long-duration insurance contracts (i.e., life insurance, disability income, long-term care and annuities). The SAS Solution for LDTI integrates into companies’ existing actuarial and accounting systems. Built on SAS technologies that are helping more than 40 global insurers ready for International Financial Reporting Standard 17 (IFRS 17), the solution provides an end-to-end environment for managing every facet of LDTI compliance, including:
- Analytical framework for comprehensive, integrated process orchestration. Diverse teams can execute and monitor customized workflows from a central dashboard. The entire process is automated – from the collection, aggregation and allocation of data to the calculation of LDTI measures and creation of accounting entries and disclosures – in a controlled, traceable and auditable environment.
- Data management. Comprehensive data management capabilities and tools empower insurers to integrate, enrich, transform and govern data across solution components and sources (i.e., administrative, actuarial and finance systems). They also enable a single source of data for actuarial, finance, risk and other calculations.
- Subledger. The solution supports detailed, standalone accounting processes as well as those embedded in the end-to-end LDTI closing process. Flexible development logic connects calculation and accounting processes and adapts to business requirements while enabling process owners to review and amend prior to general ledger postings.
- Reporting. Interactive, self-service reporting blends predefined FASB-required disclosures with user-defined managerial reporting, complete with drill-down capabilities via visual analytics reports for democratized discovery across users of all skill levels.
Charting a course to compliance and modernization
Perhaps the earliest and most critical decision a company will make on the journey toward LDTI compliance is whether to build in-house capabilities or buy an out-of-the-box solution. Having already faced the complexities of IFRS 17 overseas, a more seasoned insurance industry is trending toward vendor solutions and hybrid approaches that blend such solutions with internally developed components.
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“Insurers are beginning to recognize needs across the entire end-to-end platform, while also wanting system consolidation by leveraging common tools for multiple applications,” said Deloitte Consulting’s Matt Clark, Principal and National Actuarial Leader. “I think a mutual client said it best: ‘Buy what you can; build what you must.’ Our relationship with SAS pairs the best of their system capabilities across the platform with Deloitte’s business expertise in actuarial, finance and technology services. Together, we provide a packaged solution to a difficult regulatory need that also brings value by going beyond just a point solution.”
Forced to reimagine roles, processes and systems, insurers are seizing the opportunity to uplevel their financial and actuarial platforms, notes Laura Gray, Principal and U.S. Actuarial Network Leader at KPMG.
“LDTI has become a catalyst for our clients to evolve their thinking and work to modernize the integration between actuarial and financial reporting processes,” said Gray. “SAS’ LDTI solution bridges the gap between highly detailed actuarial output and financial reporting requirements by automating calculations, journal entries and disclosures to provide simplification and finesse to an otherwise complex and cumbersome process. Coupled with KPMG’s industry acumen, LDTI compliance can be a springboard for creating processes and a technology infrastructure that help insurers transform their business.”
Getting a jump-start
The disparate nature of incumbent accounting systems, actuarial tools and data sources will pose time-consuming challenges for many insurers. Firms can get a leg up on LDTI readiness with industry-leading risk analytics, already proven to help banks and insurers address similarly complex regulatory challenges worldwide.
“Helping the world’s leading financial services firms meet the rigors of regulatory requirements like IFRS 9 and CECL, IFRS 17 and Solvency II, SAS has proven its mettle in the risk and finance compliance arena,” said Naxine Chang, FSA, Head of North America Insurance Strategy at SAS. “Done right, insurers can catalyze LDTI compliance into an integrated risk and finance analytics platform – boosting efficiency and collaboration among IT, actuaries and accounting in the process.”
SAS’ approach to LDTI is to help insurers re-engineer processes that will help them bridge the gap between actuaries/actuarial systems and accountants/accounting systems. Beyond world-class technology, SAS brings the hands-on accounting, finance, risk and actuarial expertise required to successfully deliver on US companies’ LDTI goals.
