LDTI

LDTI stands for Long Duration Targeted Improvements, a US GAAP accounting standard update (ASU 2018-12) issued by the Financial Accounting Standards Board (FASB) in August 2018. LDTI modifies how insurers measure and disclose long-duration insurance contracts such as term life, whole life, universal life, and annuities.

LDTI requires insurers to review and update cash flow assumptions at least annually using actual historical experience and current expectations. LDTI mandates that companies use a standardized discount rate based on high-quality fixed-income instruments published by FASB rather than their own expected investment returns.

LDTI eliminates deferred acquisition cost (DAC) “locking,” requiring DAC amortization on a constant-level basis over expected contract terms instead of locking in original assumptions. Public companies had to adopt LDTI for fiscal years beginning after January 1, 2023; all others must comply by January 1, 2025, per the Insurance Information Database.

LDTI increases disclosure requirements with new tables showing rollforwards of liabilities and DAC balances for products like variable universal life or indexed annuities. Insurers report more volatile earnings under LDTI due to regular assumption updates impacting reserves for policies including group long-term care or payout annuities.

Companies estimate that implementing LDTI costs between $50 million and $200 million per large insurer according to Deloitte’s industry survey from October 2022.