
Van Beach, Principal, Milliman.
The timeline dictated by the Financial Accounting Standards Board (FASB) Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI) has a go-live date of January 2021, a fast-approaching deadline. With this in mind, insurers need to address these six hard realities to make sure they are ready to meet the new requirements:
What does it mean?
Limited time means that compromises are a given. Implementation will too often be strictly compliance-focused rather than strategic. Companies will need to be selective in where they spend their time evaluating methodology options. Multiple work streams will all need to move forward without perfect vision into the final state. Companies will need to make decisions without full information. High costs for controls and compliance, and suboptimal financial outcomes, are very real concerns.
Avoiding these pitfalls will require early action on multiple fronts and high levels of collaboration across internal and external partners. Insurers will need to be comfortable moving forward without perfect vision into the end state. Expert project management along with significant diligence and coordination amongst all parties will be required to deliver the LDTI final answer. A deferral of the implementation date by the FASB would offer an opportunity for clients to mitigate or address many of the negative impacts noted above—and there are many in the industry hoping for that opportunity—but until then, insurers need to live with the hard realities of the current LDTI timeline.
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