Long-Duration Target Improvements
Long-Duration Target Improvements (LDTI) is a challenging GAAP regulation which will add new reporting requirements to U.S. life and annuity products in 2025. Conning’s GEMS® Economic Scenario Generator (GEMS®) is ready to help with a major piece of this change: market-related benefits (MRBs). With its risk-neutral capability, GEMS® can help companies easily generate the scenarios needed to perform these market-based calculations.
Conning’s LDTI Offering
Conning is not just about software: we’re all about solutions, and for LDTI, that means going beyond the basics. Our service includes delivery of fully calibrated parameters for the US economy on the first business day after the quarter close. Don’t have the internal expertise to onboard a new piece of software? Conning’s team will generate the data for you in your preferred file format (e.g. CSV, AGU, FAC/FAS). Need help understanding how changing market conditions will impact your reserves? Conning can help you generate shock scenarios to understand those changes.
Roll Forward
One major concern with LDTI implementation is the new accounting requirements, especially the MRB Roll Forward. This new report requires companies to break down the change in their MRB reserve between a number of factors, including changes in interest rates, equity markets, and equity index volatility. Conning has developed an approach that allows our clients to minimize both the cost and the amount of time necessary to create this new analysis.
Reporting
For many of our clients, LDTI is their first introduction to risk-neutral scenarios. As such, they have a lot of questions, like, “How do I know that these scenarios are risk neutral?” and, “How do I know what market prices are being used in the calibration?” To help answer these questions, Conning’s LDTI package includes a complete set of reports as part of each delivery.
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Timeliness
Conning realizes that our LDTI clients face tight timelines to turn this new analysis around. That’s why we are committed to delivering our part of the process as quickly as possible. We get most of our clients the information they need as early as the first business day after the end of the quarter.
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Historical Data
While companies are only required to restate a few years of their earnings and balance sheets under LDTI regulations, most auditors and risk managers aren’t satisfied with the minimum; instead, they want to be able to go back over a decade to see how these regulations would have affected the company’s financial position through both good and bad market conditions. Conning makes this easy with quarterly calibrations going back to 2008.
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Custom Assets
The products covered by LDTI are still evolving, and companies are constantly incorporating new, customized investments that will need to be modeled. Conning’s scenario package includes the same investments as provided in the ESG files supplied to the NAIC for its use in its RBC calculations. These include:
- Treasury bonds of different maturities
- Investment-grade corporate bonds of those same maturities
- High-yield bonds
- Multiple US equity returns
- Two international equity indices: MSCI EAFE and MSCI Emerging Markets
This package can also be easily extended to cover your company’s full range of needs (for example, volatility-controlled funds).
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