We assist insurers in addressing new and existing requirements by assessing the financial and business impacts of guidance, building implementation plans, and implementing the relevant requirements across areas of financial reporting change (e.g., insurance contracts and principles-based reserves). Changes in regulatory and reporting requirements will place significant demands on actuarial, finance, and risk departments, so we focus on providing our clients with insights into various accounting changes and their business impacts, modeling services to assess the impact of reporting changes on balance sheets and profit and loss statements, impact and readiness assessments, and implementation assistance.
Insurers currently use a variety of approaches to measure the value of the contracts within their U.S. GAAP and/or IFRS financial statements. Proposed guidance from the FASB and IASB provide new standards that would require fundamental change in accounting and how information is presented to stakeholders, including business leaders, investors, and rating agencies.
Such changes include revised approaches to financial reporting, which would require updated strategies to deal with increased financial statement volatility, significant changes to disclosures, and new analysis requirements; business strategy, including stakeholder education, product design, and budgeting functions; operations, including new or revised financial, IT, and actuarial controls and processes as well as functional area resources and staffing; and upgrades or overhauls of systems, including reporting methods, actuarial infrastructure, risk management, and data management capabilities.
The NAIC’s adoption of the current version of the Valuation Manual − a first step towards principles-based reserves for life products − will require a significant review of systems, processes, data, and governance for pricing and valuation. It will also introduce increased volatility to statutory earnings to which management will need to respond.
The application of the Valuation Model means that insurers need to evaluate their organization broadly to ensure that they are able to meet the upcoming requirements as well as understand ongoing reporting requirements. Given the short timeframe relative to the changes insurers may need to take, and because all life products are in scope − thus affecting all insurers issuing individual life products − key areas of consideration for carriers include experience analysis and data, margins, systems capabilities, asset modeling, reinsurance, reporting and management information, and governance and controls. Due to its encompassing scope, insurers are struggling to understand the full effects of the new regulations and identify how to respond and begin compliance efforts.