Regularly updating assumptions about long-term care insurance (LTCI) obligations could cause new financial headaches for some U.S. LTCI issuers, according to rating analysts at Moody’s Investors Service.
Shachar Gonen and other Moody’s analysts talk about the possible effects of the new push for actuarial assumptions updates in new commentary on the U.S. insurance sector.
New Accounting Rules Near
Big, publicly traded U.S. life and health insurers prepare the main financial reports they show investors using the Financial Accounting Standards Board’s U.S. Generally Accepted Accounting Principles (GAAP) rules.
Today, under the board’s rules, life insurers predict how much insurance policies or annuity contracts will cost them when they write the business.
The board now wants insurers to move toward coming up with obligation cost forecast updates for long-lasting products on a regular basis.
Possible Rule Change Effects
For healthy, well-run life insurers, the new assumption review rules could do more to cause ups and downs in reported earnings and equity than changes in how the insurers are really doing, the analysts write.