functional governance structure; (ii) carrying out high-level impact
assessments which span financial, operational, data, and system; and
(iii) designing a future state implementation roadmap which defines
key initiatives, milestones, dependencies and priorities.
Generally speaking, companies are taking one to two years to fully
implement the new accounting rules, depending on the size of the
organisation, the product mix and management’s strategy outlook.
Considering potential significant data challenges reinsurers may
be faced with, it is recommended that reinsurers take a
comprehensive data management approach to improve data and
To start, reinsurers should work with their internal and external
stakeholders to assess the current data flows and identify potential
gaps. In doing so, it’s vital to have the future state in mind to identify
data requirements across the existing data and technology landscape.
A single consistent source of data for finance and actuarial may
need to be implemented to store and feed data for subsequent
consumption by general ledger and actuarial systems, potentially with
required reconciliations in place.
In addition, it’s important for reinsurers to refine/rethink their
data governance strategies; implement an integrated finance and
actuarial data approach; and develop/update the existing data quality
framework, including data retention, data archival, data lineage along
with the related process and controls, etc.
This exercise will contribute to defining the target state data
architecture in meeting the new accounting rules and other strategic
initiatives that involve data management.
Cordelia Davis is a partner in the financial services department of
EY Bermuda. She can be contacted at: firstname.lastname@example.org
contracts together from different original contract issue years for the
purpose of calculating the liability for future policy benefits.
Reinsurers who are actively assuming insurance contracts may have
grouped treaties with different product lines and benefit levels within
one reinsurance treaty. Under today’s practice, such treaties may have
been measured as one unit of account. For assumed treaties with
different product groups and benefit levels, reinsurers are required
to understand the original contract issue years and potentially
regroup the policies into distinctive unit of accounts under the new
Further, while the LDTI accounting rules are silent on grouping
contracts from different product lines, it may not be appropriate to
group contracts at a level higher than the product line. For example,
a reinsurer may assume/acquire a treaty that includes both whole
life and term life. Grouping both product lines into the same cohort
(assuming the original contract issue year is the same) requires
Depending on the unit of account, there will be data and system
implications that will have to be considered. The business will have to
assess whether the current system infrastructure supports the level of
detail required and if needed, what actions should be taken to ensure
that the future needs will be met.
The appropriate level of data will have to be sourced and made
available to actuarial models; the models in return will have to be
updated to accommodate cohort calculations.
The solution: what now?
There are various solution options to meet the objectives of the
new accounting rules, but it is recommended that reinsurers take a
comprehensive and strategic approach on their journey to compliance.
This typically starts with (i) developing and setting up a cross-
“The business will have to
assess whether the current
supports the level of detail
required and if needed, what
actions should be taken.”
SHUTTERSTOCK / ANTON WATMAN