The ASU 2018-12 guidance, otherwise known as long-duration targeted improvements (LDTI), establishes a significant new category of benefit features called market risk benefits (MRB) that protect the contractholder from other-than-nominal capital market risk and expose the insurer to that risk. Insurers will have to measure market risk benefits at fair value. There are a few examples of MRB, Including the most common one— MGxBs on variable and indexed annuities. This change may bring significant volatility to earnings of these GMxB policies that are currently valued under the insurance accrual model (such as SOP 03-1). How to analyze the changes in volatility in MRBs became the natual question for many companies that haven't been valuing them on fair value basis. Besides the GMxBs, have you wondered when or if the guaranteed annuitization options offered by your company have other-than-norminal risk?
By attending the session, you will:
· Understand different types of MRBs.
· Learn about ways to analyze the changes in volatility in MRBs from SOP 03-1.
· Understand the accounting of MRB change for a contract under reinsurance going through spread and liability assumption updates.
· Understand when the guaranteed annuitization options become MRB and how to evaluate that.