The Long Duration Targeted Improvements (LDTI) implementation has been going for a few years now, but that does not mean dealing with its complexity is any less challenging. This is particularly so in the case of the market risk benefits (MRB).

Under LDTI, insurers are required 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. This requires complex and computationally intensive calculations drawing upon market-calibrated risk-neutral scenario generation.

Conning developed an approach that allows its clients to minimise both the cost and the amount of time necessary to create this new analysis.

Since cash flow modelling is typically a time-intensive process, Conning delivers fully calibrated parameters for the US economy on the first business day after quarter close. The company also offers risk-neutral scenario files on clients' behalf if they do not have the expertise or manpower to run the software.

Senior management may also want to know how and why their situation has changed from one period to the next, so Conning gives clients the ability to perform shocks and other tests as part of its LDTI offering.

While companies are only required to restate a few years of their earnings and balance sheets under LDTI regulations, most auditors and risk managers are not 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.

The products covered by LDTI are still evolving, and companies are constantly incorporating new, customised investments that will need to be modelled.

Conning's scenario package includes the same investments as provided in the economic scenario generator files supplied to the National Association of Insurance Commissioners for its use in its RBC calculations, spanning the range of treasury bonds of different maturities to investment-grade corporate bonds, high-yield bonds, multiple US equity returns and international equity indices.

This level of comprehensiveness makes Conning a deserved winner of the LDTI award this year. InsuranceERM's judging panel was also impressed by the firm's technical expertise and broad offering.