What a thrill it is to be honoured as a 2022 Most Admired Corporate Cultures™ Winner! This award celebrates the Bold Attitude and Entrepreneurial Spirit each of us embodies. Our inclusion in this year’s list speaks to the commitment each of us has to ensuring we have an amazing culture. By building a consulting organization where we want to work, our employees come first, culture is key, and our clients love working with us, we have created a positive and engaging work environment where everyone succeeds.
Canada’s Most Admired™ Corporate Cultures is a national program, founded by Waterstone Human Capital and now in its 19th year, that annually recognizes best-in-class Canadian organizations for having cultures that have helped them enhance performance and sustain a competitive advantage. The award is based on a written submission and interview and decided upon by a board of past winners.
At Optimus SBR, culture is everything. We value our people and their growth, and we firmly believe that our people come first. We’re incredibly proud to receive this prestigious award on behalf of our employees who exemplify our Bold Attitude culture and Entrepreneurial Spirit every day.
Congratulations to all of us for this huge accomplishment!
We’re pleased to announce that Great Place to Work® has named us on the 2022 list of Best Workplaces™ in Ontario! As our 8th Best Workplaces award in 2022, this award complements our recognition on the 2022 Best Workplaces in Canada list as well as Best Workplaces for Giving Back, Hybrid Workplace, Today’s Youth, Professional Development, Professional Services, and Mental Health. As a firm that was built on culture, we value our people and their growth, and we firmly believe that our people come first. We embrace our Bold Attitude and Entrepreneurial Spirit and are guided by our Cultural Pillars: Unified, Engaged, Ambitious, Social, in everything we do. This creates an enriched environment giving employees abundant opportunity to enhance their regular work and have more meaningful careers.
The Great Place to Work® Institute compiles the Best Workplace lists by gaining direct feedback from employees from the hundreds of organizations that are surveyed.
To be eligible for this list, organizations must be Great Place to Work Certified™ in the past year, be headquartered in Ontario, and have at least 15 employees working in the province. The BEST list was determined based on the overall Trust Index score (a research-backed employee engagement survey) from Ontario-based employees.
Optimus SBR is elated to be donating a record-breaking $42,779 to our partner charities, raised during our 9th annual Play It Forward (PIF) fundraising event.
On Thursday, October 27th, we blasted into the future with a Sci-Fi themed PIF event for 2022. After 2 years of being apart due to Covid, PIF was live and in person this year…and the Force was with us! As with every PIF event, our colleagues were encouraged to dress the part, and did they ever! We had Jedis and Droids from Star Wars, children of Zion and agents from The Matrix, researchers from Jurassic Park, Terminators, and Trekkies, just to name a few.
Hosted by our Corporate and Social Responsibility (CSR) and Ministry of Fun (MoF) committees, PIF is one of Optimus SBR’s marquee events that celebrates our culture and provides an opportunity to socialize with colleagues, all while raising funds to support two great local charities who “Play It Forward” everyday, Fort York Food Bank (FYFB) and Engage and Change. The entire event, including food, beverages, decorations, and prizes, is funded or donated by Optimus SBR and local businesses. This means 100% of the funds raised go directly to our charities.
PIF involves a variety of fundraising activities that culminate in a mega event with a silent auction, a raffle, games, challenges, fun, and generous donations from Optimus SBR employees! This year the silent auction and raffle prizes included golf packages, signed sports jerseys, plane rides, skeet shooting, wine tours, and more. Our committees also led a series of live auction games and challenges to drive donations. New tiers were unlocked as friendly competition became heated and participants outbid each other to shatter all initial targets!
This year, for the first time, we decided to open PIF to our wider network to increase our impact in the community. We reached out to friends, family, and colleagues through email, LinkedIn, and other channels to donate Hygiene Kits, Winter Warmth Kits, and “Greatest Needs” Kits to support our partner charities.
A Bit About Our Partner Charities
Fort York Food Bank (FYFB): A vital service that aims to prevent homelessness of Toronto’s most vulnerable groups. They help feed those in need and provide counselling, training, and advocacy services.
Engage and Change: Help assemble and distribute survival kits that provide essential supplies needed by Toronto’s homeless and less fortunate to survive on the streets.
At Optimus SBR we have been giving back to our community for over 10 years, and we’re not about to stop now! Every year PIF gets bigger and better with higher employee engagement, more elaborate costumes, zanier games, and more donations. The $42,779 raised during PIF this year smashed our previous record of $24,000. It’s going to be pretty hard to outdo ourselves next year, but we’re up for it!
We are proud to announce that we have been recognized by The Great Place to Work® Institute on the list of Best Workplaces™ for Mental Wellness for the second time! This award underscores our people first culture and our steadfast commitment to provide a mentally and emotionally healthy workplace. Our dedicated Mental Wellness Committee leads initiatives to eradicate the stigma associated with mental illness and to foster mental wellness in the workplace. We’ve made it a priority for all employees to receive training on recognizing and providing appropriate support to individuals in need of mental health assistance.
One of our most successful programs under the mental wellness umbrella has been “Optimus Days”. All employees are granted one pre-scheduled company-wide day off per month, over and above regular vacation, giving them additional time to schedule personal matters, rest, recharge, and unplug. Other Mental Health supports include a newly established microsite for our Mental Illness & Wellness program, Health Benefits with a Health Spending Account, an Employee Health and Assistance Plan, Lumino (online health network and resources), Mental Wellness Moments, Optimus Chats 1:1, Culture Events & Physical Activities, a guide to Leading Through Crisis, Learning Paths, and a Check-In Model.
Our focus on employee wellness is one of the key qualities that makes Optimus SBR a great place to work.
The Great Place to Work® Institute compiles the Best Workplace lists by gaining direct feedback from employees from the hundreds of organizations that are surveyed.
To be eligible for the 2022 list of Best Workplaces for Mental Wellness, organizations must be Great Place to Work – Certified in the past year and at least 75% of employees must agree their workplace is psychologically and emotionally healthy. The BEST workplace was determined by the overall Mental Wellness Index score based on survey results from hundreds of employees and the complexity of the organization.
The insurance industry is in a period of transition due to the changes in consumer expectations, exposure to climate, health, and economic events, regulatory pressures, and shifting market conditions.
A growing number of companies have seen significant returns when combining transformation objectives with pressing business priorities, such as the regulatory adoption of IFRS 17. Successful organizations are balancing their capabilities and capacity to take a measured approach to transformation by applying strategic elements of digitalization, automation, and prediction to the transformation agenda. Armed with the right tools and information, the office of the CFO and the finance function will continue to play a pivotal role in shaping the future of the insurance landscape.
Following the LDTI explanatory series, this article provides best practices in launching a successful financial transformation program that harnesses digitization, automation, and prediction through platforms, such as Vena and Microsoft Azure, and how to achieve financial transformation through a measured approach.
Understanding the Current State
The insurance industry is a challenging environment within which planning and forecasting become tricky due to the complexity and the many different processes involved in an organization amid rapidly shifting market conditions.
Today’s customers are savvier and more technology-literate than in the past. They are accustomed to using multiple channels to engage with a company and expect digital and accessible solutions across the board.
On the other hand, the frequency and severity of natural catastrophes have increased lately leading to evolving regulatory requirements that businesses need to promptly navigate and comply with, such as the recent global pandemic.
All this coupled with the typical planning technology challenges that face insurers makes for a tough planning environment, but not an impossible one to overcome. With a solid understanding of the current state, the available solutions, your business needs, and the way to strategize for better efficiency optimization, it becomes feasible to comply and thrive through the entire LDTI transformative implementation.
Financial Planning Technology is Key
The value in enabling financial planning technology is the automation and integration gained through the implementation. Taking the manual steps out of your process speeds it up by making it more efficient and removes the need to perform time-consuming validations.
Having a balance of pre-built industry-specific models with the ability to augment with bespoke models expedites time to value by allowing you to focus on what makes your organization unique.
When selecting the best-fit planning technology for your organization, the following capabilities, illustrated in the graph below, should be considered:
Considering the capabilities of the aspired planning technology that suit your business needs, a scalable cloud technology shapes the foundational base of the funnel, and most financial planning technologies have already migrated to the Cloud. Yet, it should be noted that the ones born in the Cloud are the most scalable and optimized for this kind of deployment. Those who have migrated on-premises technologies to cloud often need a few generations before they get it right.
Also, when considering your financial planning technology, predictive planning should matter as it supports the continual evolution of your strategy. It leverages machine learning to take full advantage of internal/external datasets for richer business insights.
The predictive planning process works best when a balance of revenue and expense models are leveraged to tie the overall forecasting model together for your organization.
The predictive planning process can help answer key questions on the minds of insurers including:
- Project net premiums written for each insurance product.
- Project loss claims by loss level.
- Understand projected plan member increases and decreases.
- Understand required staffing levels and expense levels.
- Identify market and growth opportunities.
A Proven Recommendation
When navigating the financial planning technology space, Vena is by far the leader in its offering. The Vena platform uniquely combines the data collection and management capabilities of the cloud with the user experience comfort and familiarity of those accustomed to using Excel.
In addition, Vena provides a model specific for the insurance community as a baseline starting point for the accelerated implementation of the platform. It has a proven track record in connecting the dots for insurers while enabling the flexibility the office of finance needs to move the organization forward.
Helping You Optimize
In working with a number of insurers to advance their planning processes, we have established a predictive planning accelerator on the Vena and Microsoft Azure platforms that accelerates the path to LDTI compliance while advancing an insurer’s planning capability.
We would be pleased to showcase a demo of the predictive planning accelerator and how it can support the LDTI journey.
Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.
Contact us for more information on LDTI
Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128
This piece was developed in partnership with BDO and Valani Global.
Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey. Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.
Service Partners
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With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry. |
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Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17. |
We are honoured to be included on the 2022 list of Best Workplaces™ in Professional Services awarded by Great Place to Work®. This award that we have received for the 4th consecutive year is a testament to our pursuit of excellence in everything we do.
Optimus has succeeded in becoming one of the fasting growing and largest independently owned consulting firms in North America by fulfilling an identified industry need for execution experts who roll up our sleeves alongside our clients to implement real results. While many other firms focus on creating theoretical, blue-sky strategies, we are proud of our proven track record for delivering real solutions with real value to real problems.
Our team of passionate, curious consultants approach client issues as if they were their own. With our Entrepreneurial Spirit and Bold Attitude, we integrate ourselves into client teams to forge true partnerships, and we work collaboratively with them to devise and execute winning solutions.
The Great Place to Work® Institute compiles the Best Workplace lists by gaining direct feedback from employees from the hundreds of organizations that are surveyed.
To be eligible for the 2022 list of Best Workplaces in Professional Services, organizations must be Great Place to Work- Certified™ in the past year and work primarily in the Professional Services Industry. (Professional Services refers to any organization or profession in the tertiary sector of the economy that offers customized, knowledge-based services to clients. This includes doctors, lawyers, accountants, architects, engineers, advertising professionals, to name a few).
However, digitization does not always equal modernization. The industry still wrestles with dated, manual, and time-consuming processes often involving fragmented legacy systems. At the same time, the war on talent is fierce and competition is very high. Our series of articles regarding the recent changes with LDTI implementation surpass compliance and requirement examination and delve into the technological impact it brings about. This piece explores modernized ways the LDTI implementation yields on the insurance landscape while stressing the importance of the human element in equipping the workforce of tomorrow.
Processes and Operational Automation
Insurers are beginning to see major benefits in automating core enrolment, underwriting, claims, customer care, and financial processes. However, insurers need to equip the workforce of tomorrow with the right capabilities to stay relevant in the market and service the changing needs of customers.
One of the catalyst enablers to operations modernizations is Robotics Process Automation (RPA). It is the application of software robots, not physical robots, that mimic human action and connect multiple systems through automation without changing the existing IT landscape. RPA enables organizations to automate existing high-volume and complex process steps as if business users were doing the work. This is enabled through a virtual robot that captures and interprets data across systems, triggers responses, and communicates with other systems.
The graph below illustrates some common transformation use cases that leverage RPA automation in the insurance landscape.
Moreover, RPA relies on basic technologies, such as screen scraping, macro scripts, and workflow automation. Cognitive automation, on the other hand, uses more advanced technologies, such as natural language processing (NLP), text analytics, data mining, semantic technology, and machine learning to make it easier for the human workforce to make informed business decisions. It should be noted that the RPA does not require coding as it depends more on the configuration and deployment of frameworks, whereas cognitive automation uses machine learning and requires the extensive use of programming knowledge.
As a rules-based solution that works on the if-then principle, the RPA is a process-oriented technology, which is often used to work on time-consuming tasks that were previously performed by offshore teams. It leverages the capability of virtual robots to automate existing high-volume repetitive tasks by mimicking human actions.
Unlike RPA which uses foundational technology to mimic basic repetitive human tasks, cognitive automation enables the use of advanced RPA tools to execute more complex processes. Cognitive automation is needed when human intervention, knowledge, and decision-making become a factor in the process. Here, the machine goes through several human-like conversations and behaviors to understand how humans talk or behave and define their own rules. With the use of advanced technologies, cognitive automation can work with a high volume of unstructured data and understand how a human would talk, behave, and execute the right decision in a similar situation/process.
However, in speaking of taking the next level of modernization in the insurance industry, hyper-automation shapes a combination of advanced technologies such as RPA, AI, Machine Learning, and many more to enable the end-to-end automation of processes across the enterprise and amplify the overall ability to automate work.
Legacy applications are less nimble, less flexible, and less responsive to the ever-changing needs of employees and customers. In this competitive market, organizations often struggle to keep up with the newer technology but are constantly looking for ways to optimize the way their business operates with their internal processes and maximize efficiency by eliminating manual and redundant tasks.
Power Apps is great for replacing paper forms, legacy solutions, or even spreadsheets. It provides a low code, no code solution to enterprises struggling to streamline their business operations, and cuts down the cost of outsourcing or traditional in-house app development as it is built for users without any coding experience. Simple yet powerful capabilities enable you to develop business applications and automate business processes with a simple drag and drop features.
Workplace Modernization
Customer and Employee Experience
The way businesses operate has changed as more employees work remotely. Accommodating remote-working or a hybrid model is imperative in order to modernize your workplace. With fewer in-person meetings, formal collaboration, and given the exponential growth of unstructured data internally, the complexity continues to rise while employee experience continues to drop.
The need for employees to access communications, collaboration, and content from anywhere on any device has become a necessity, and without it, employees feel disconnected which causes higher turnover.
In a way of embracing digital, many organizations are now investing in enhancing their customer experience models, and ultimately driving customer and employee satisfaction. As leaders continue to develop employee experiences to provide people with the resources and support to encourage thriving environments, organizations of all types face challenges, and insurance companies are no different.
To provide employees with convenient and secure access to company communication, tools, and information, businesses can capitalize on the use of Microsoft 365 tools with their new rolled-out products which can be embedded within MS Teams to enhance employee experience and modernize the workplace. You can now connect and embed those powerful tools and make MS Teams your one-stop shop for all your business’s collaborative needs.
Many organizations also struggle with understanding their organization’s future needs in the hybrid space and encounter gaps and challenges when modernizing their workplace. We leverage our proven Modern Work DNA framework using 23 traits that helps us understand the challenges our clients face in the workplace and identify ways to create a more collaborative, productive, efficient, and secure work environment that follows the PPTC model—People, Process, Technology, and Culture. These traits determine how well an organization is performing against the industry benchmark and indicate the areas for improvement.
By leveraging this approach, shifting towards a modernized workplace is attainable when developing strategies to adopt new and efficient ways of working.
Secure Collaborative Tools
With distributed teams, brand-new business models, and complex security issues, there is a strong need for secured collaboration as well. And often when collaborating, there is a need for sharing of documents internally and externally.
Enabling your workforce to access information and collaborate remotely across all devices is the heart of frictionless employee experiences. The engine that powers these experiences, however, needs a measure of protection. The security of your data is an absolute prerequisite of modern workplace activities. The right digital tools connect and support employees, wherever they are, to encourage productivity, engagement, and collaboration.
With the help of Microsoft Information Protection, Security, and Compliance capabilities, you can add an extra layer of protection when collaborating and sharing files with others. By classifying and managing information labels, it helps to identify sensitive information including emails, documents in OneDrive, MS Teams, and SharePoint online or wherever your unstructured data lives.
Document Management
Information is growing faster than ever before and is stored in all different places. Finding the right information at the right place at the right time is a must. This is where document management comes into play. However teams decide to structure, organize, and manage their files and documents is key to finding the right information in the right place.
In this context, Microsoft 365 also provides the proper medium for powerful document management and a cohesive ecosystem in order to:
- Adhere to best practices in naming conventions for folders and files
- Setup up workflow approvals to ease up the approval process
- Avoid duplication of data
- Maintain one source of truth
- Classify data with the right labels for sensitivity and retention purposes
Digitizing Your Insurance Company
By now, insurance companies must know that the advent of all these new technologies will lead to a leap in productivity through another layer of change with the LDTI. Part of this implementation resides in understanding and adhering to the requirements whereas the core of it lies in the transformation journey and the adoption of technologies and strategies in order to comply with the new standard.
Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.
Contact us for more information on LDTI
Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128
This piece was developed in partnership with BDO and Valani Global.
Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey. Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.
Service Partners
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With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry. |
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Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17. |
Many insurers are starting to consider their Long Duration Targeted Improvement (LDTI) implementation plan and are working on the design of their solution. This series examines how insurers can make use of LDTI through compliance, data management practices, and how it affects insurance companies and investors.
In this article, we outline the benefits and challenges of advancing data maturity and how to leverage the investments in LDTI as a foundation to address the data needs of the broader enterprise.
What to Consider
As the deadline for LDTI compliance approaches, it is crucial for insurers to examine and act on their compliance plans sooner than later. The question for most insurers now is whether they simply need to create a minimum viable product or seize this opportunity to truly transform their business and take a market leadership position.
In working with many IT leaders on LDTI, we recognize that the adoption of the new standard poses many issues for insurers, including:
- Significant data connectivity asks are being made to fulfill the requirements of LDTI.
- Quick decisions on cloud may be required as many LDTI accounting engines are only available in a cloud model.
- A complex mix of current and legacy infrastructure present challenges for IT teams.
- Considerable differences between insurers in terms of where they are on the data maturity spectrum.
The Silver Lining
Although the adoption of LDTI and its transformative aftermath may pose some challenges, it is often the right approach to address the needs of the broader enterprise. This includes benefits such as:
Data as an Asset
The value of the data for most LDTI implementations is high given the significant footprint of policy, claims, financial, investments, and reinsurance data residing in a variety of source systems. Establishing the right single source of the truth for the LDTI dataset can naturally become the right single source of the truth for the enterprise.
Agile Data Integration
LDTI often requires a significant investment in data integration because of the broad impact across the technology and data landscape. Those who combine both the integration needs of LDTI with the integration needs of other business objectives are able to achieve economies of scale by leveraging the same integration strategy and platform.
LDTI presents a catalyst opportunity for IT to move away from a legacy point-to-point approach and adopt a modern data fabric approach. This enables not only the data connectivity for LDTI but also sets the foundation for data maturity advancement and advanced analytics outcomes by leveraging the potential of AI.
Business Intelligence and Advanced Analytics Maturity
Given the rich dataset required for LDTI and the financial and management reporting requirements, it’s a great opportunity to leverage the business intelligence and advanced analytics used for enterprise LDTI.
Data Governance and Literacy Maturity
The pragmatic data governance and data operations strategy required for LDTI can be applied as the golden standard for other high-value data sets across the organization.
The data literacy and education approach for LDTI is often the same approach for advancing an organization’s data literacy overall.
The chart below details the stages of maturity and the strategic value created during each stage.
Insurers who seek to comply with the new standard need to evaluate data fabric options to determine which will improve the quality of their data at lower costs. Choosing an appropriate fabric, such as a data mesh strategy, may be less costly than upgrading to a point-to-point environment. Over time, insurers should seek to integrate advanced analytics into their new infrastructure to capitalize their overall data maturity and governance.
While many insurers may challenge the cost/benefit of transitioning to newer data fabric as they seek to comply with the new standard, our experience is that building on a point-to-point strategy is just as or more expensive that implementing a new data mesh platform. Such upgrades also do not easily position the insurer to advance their overall data maturity/governance and to set the stage for capitalizing on the potential of advanced analytics.
With the compliance deadline fast approaching, insurers need to actively and quickly examine and execute their compliance plans. We have established deep expertise in building solutions that immediately solve regulation specific requirements while laying the foundation for solid enterprise data management practices.
We have established a data accelerator known as InsurFabric based on the Denodo platform that accelerates the path to LDTI compliance and advances an insurers data maturity for advanced analytics. The InsurFabric accelerator shortens the timeline of LDTI implementations with data connectivity, workflow processing, a calculation library, and reports aligned with the requirements of LDTI.
Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.
Contact us for more information on LDTI
Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128
This piece was developed in partnership with BDO and Valani Global.
Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey. Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.
Service Partners
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With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
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Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17. |
The implementation of Long Duration Targeted Improvement (LDTI) introduces a number of changes from the current Generally Accepted Accounting Principals (GAAP) and spans over cross-functional business units. These changes apply to the measurement of specific traditional, non-participating life products as well as their groupings and assumptions. In addition, changes are introduced to the chart of accounts, financial statements, disclosures, and reporting and analytics of LDTI contracts.
This article looks at how the changes in accounting policies affect actuarial measurements and what they look like before and after the implementation.
Actuarial Measurements – the Impact and Effects
The far-reaching effect of the LDTI implementation will affect the actuarial measurements in many ways including:
- current cash flow assumptions;
- discount rates assumptions;
- retrospective unlocking approach for liability for future policy benefits;
- simplification of the DAC model;
- market risk benefits; and
- an increase in disclosure requirements.
In order to understand how the aftermath of this implementation will impact your organization, we summarize and break down the areas involved and the variances incurred before LDTI and after as follows:
Grouping for Reserve Calculation: The current GAAP has groupings at the policy level whereas LDTI has policies grouped in cohorts—quarterly or annual—with each cohort based on similar characteristics.
Current Best Assumptions for Liability for Future Policy: The current GAAP has assumptions locked in at an issue level with a Provision for Adverse Deviation (PAD) and is updated when a loss recognition event occurs.
However, under LDTI, assumptions are reviewed and updated if needed at least once per year, at the same time each year, with no PAD.
Discount Rate Methodology: The current GAAP has a discount rate equal to the insurer’s expected investment yield. With LDTI, all insurance companies will use the same discount rate assumption of an upper-medium grade (low credit risk) fixed-income instrument yield—rated corporate bond yield.
Retrospective Unlocking Approach for Non-discount Rate Assumptions: Under the current GAAP, the Net Premium Ratio (NPR) is locked in based on the expected future cash flows at the issue level.
On the other hand, LDTI uses the revised NPR by using actual historical experience calculated with updated assumptions and discount rates at the issue level. The difference between the previous and revised NPR is used to determine a revised liability, reflected in the current operating period income.
Simplification of the DAC Model: Under the current GAAP, DAC is amortized in proportion to the expected future profitability or premium recognized with the accrual of interest. Yet with LDTI, DAC is amortized in proportion to the expected life of the contract with no accrual of interest.
Market Risk Benefits (MRBs) Subject to Fair Value Measurement: Under the current GAAP, some guaranteed benefits are valued under an insurance accrual model rather than fair value. Whereas with LDTI, MRBs are measured at a fair value with changes recognized on the income statement.
Increased Financial Statement Disclosure Requirements: Under the current GAAP, the level of disclosure requirements aligns with historical representations and disclosures. With LDTI, there is a significant increase in the disclosure requirement with disaggregated roll-forwards.
Investor and Insurance Companies – the Impact and Effects
Consequences to the changes and volatility introduced from moving to LDTI will affect investors and insurance companies in one way or another.
For instance, investors will now need to recalibrate expectations for the financial position, profitability, and income volatility of insurance companies following the change in the accounting standards from GAAP.
On the other hand, insurance companies should assess the strategic implications of LDTI to their business in order to develop a plan to address the required changes in processes under a narrowing timeline.
This change creates another opportunity for insurers to invest in modernizing finance processes to better understand key drivers of change affecting financial statements. They may also want to engage in strategic divestitures of underperforming business that is not central to their strategy or consolidate a leading position in certain lines of business central to a strategy to strengthen their positions.
Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.
Contact us for more information on LDTI
Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128
This piece was developed in partnership with BDO and Valani Global.
Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey. Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.
Service Partners
|
|
|
With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.
|
|
Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17. |
Great Place to Work® has announced Optimus SBR as a 2022 Best Workplaces™ for Professional Development winner! This recognizes our bold culture of continuous learning – one where our people thrive, and every experience boosts their confidence and helps them reach their full potential. Our people are our business, and as such we are fully invested in their development, and success.
At Optimus it’s all about sparking endless growth opportunities to empower employees to achieve their career goals. It begins with our extensive onboarding program that ensures the talented individuals we hire are well-prepared for success. As employees advance in their careers, they are supported every step of the way by their Career Manager, senior leaders, colleagues, and our extensive Learning and Development program. Customized for each individual’s unique needs and career aspirations, the program includes Learning Paths, LinkedIn Learning courses, and a Career Development Program (CDP).
The Great Place to Work® Institute compiles the Best Workplace lists by gaining direct feedback from employees from the hundreds of organizations that are surveyed.
To be eligible for the 2022 list of Best Workplaces for Professional Development, organizations must be Great Place to Work- Certified™ in the past year. The organizations recognized on this list have met the necessary criteria, with a minimum score of 80% on the Professional Development Index, and a relative level of complexity based on the number of employees. Professional development is also demonstrated in the data as being a priority for their organization. We determined the BEST based on the overall Trust Index score from the organization.
