天美传媒

Insurance investment portfolios are more diverse and complex than ever. This blog highlights ten critical data checks and controls that an insurer鈥檚 investment accounting service provider should perform to ensure a timely and accurate month鈥慹nd close, as well as a list of control reports that should be provided as part of the month-end close package.

A robust month鈥慹nd close hinges on validating the completeness and accuracy of all investment activity, from trade settlements and cash movements to valuations, accruals and impairments. Service providers should systematically reconcile income and trades, cash, positions and pricing; verify credit ratings; reconcile accruals and market values; analyze earned income trends; validate impairments; and ensure the general ledger fully aligns with core accounting outputs.

Benefits

Embedding these controls into monthly workflows and packaging the resulting control reports ensures speed, transparency and confidence in the close process, eliminates the need for the insurer鈥檚 internal staff to perform additional labor-intensive reconciliations and data reviews after receiving the close package, and reduces the need for post-close adjustments.

Key Data Checks and Controls

1. Review of Aged Income and Unsettled Trades

   This review identifies all aged income receivables and tracks them for aging. Cleared, unsettled trades are reconciled by matching internal trade blotters to custodian records to identify any timing breaks, as the IBOR records transactions on trade date and the custodian records transactions on settle date.

2. Review of Cash Reconciliations to Custodians

   This review compares cash balances per custodian statements to general ledger cash accounts, investigating and clearing any reconciling items, such as timing differences, unapplied receipts, non-security cash activity or outstanding wires.

3. Review of Multi鈥慞arty Position/Par Reconciliations

   This review reconciles positions and par values across your internal system, custodians and any third鈥憄arty asset managers, resolving mismatches in security counts or par amounts before month鈥慹nd.

4. Review of Missing/Stale Prices and Price Variances

   This review identifies securities with missing or stale market prices. A variance analysis is performed comparing month鈥慹nd valuations to prior periods, flagging any movements beyond established thresholds for potential investigation.

5. Review of Complete NAIC Ratings from the Securities Valuation Office

   This review verifies that all securities held in the portfolio have current NAIC rating designations, as published by the NAIC Securities Valuation Office (SVO) or calculated using NAIC ratings breakpoints. For any security lacking an active rating, the assets are investigated to determine if they should be rated, and if so, "Z" designations are used for securities the SVO hasn't directly evaluated. Performing such a rigorous review eliminates the possibility of securities without an NAIC designation receiving the most unfavorable capital treatment from the NAIC during quarterly or annual filings.

6. Review of Due & Accrued Reconciliations

   This review reconciles accrued interest and other accruals (e.g. fees, income) in the general ledger to supporting schedules or invoices, ensuring no significant accrual remains unrecorded or overstated.

7. Review of Market Value Reconciliations

   This review reconciles market values per custodian and portfolio management systems to the general ledger鈥檚 reported market value balances, resolving any differences outside allowable tolerance levels.

8. Review of Month鈥憃ver鈥慚onth Earned Income

   This review compares earned investment income (realized and accrued) from the current month to the prior month, investigating material fluctuations to detect missed accruals or misclassifications.

9. Review of Client鈥慞rovided Impairments

   This review validates any impairment amounts provided by the insurer or its asset managers against accounting guidance (e.g., AFS debt impairment criteria), reconciling impairment charges to the supporting credit鈥憀oss analyses.

10. Reconciliation of the General Ledger to Core Accounting Reports

    Lastly, this review consists of a mapping reconciliation to ensure that all investment balances in the general ledger agree to trial balances, system鈥慻enerated accounting reports, and both summary and detail extracts before finalizing the month-end close.

Additional Control Reports

In addition to the above control checks and reviews, your accounting service provider should include the following reports in your month鈥慹nd close package, to provide transparency and support for each of the above checks:

• Market and Book Value Progression Reports鈥擲how month鈥慹nd and month鈥憃ver鈥憁onth changes in market vs. book values for all holdings.
• Cash Roll鈥慒orward Reports鈥擠etail beginning and ending cash balances, inflows/outflows and reconciling items.
• Month鈥憃ver鈥慚onth Earned Income Reports鈥擧ighlight realized income, accrued income and variances vs. prior periods.
• Price Variance Reports鈥擫ist securities with price movements exceeding predefined thresholds, including dollar and percentage variances.
• Amortized Cost Roll鈥慒orward Reports鈥擳race beginning amortized cost through purchases, calls, maturities and amortization to ending balances.
• Impairment and Watch List Reports鈥擲ummarize all impaired securities, watch鈥憀ist exposures and related credit鈥憀oss metrics.

By embedding these controls and assembling the corresponding reports each month, an insurer鈥檚 investment accounting service provider can deliver a streamlined, transparent and reliable month鈥慹nd close.

As a best practice, 天美传媒鈥檚 team of tenured, dedicated insurance investment accounting professionals performs a rigorous and thorough review of these controls and checks each month, reviewing the detailed control reports as part of the standard month-end close process for each and every insurance client. In addition, through 天美传媒鈥檚 Singularity platform, insurance clients can run and download these turnkey control reports directly without having to construct them using offline spreadsheets. This reduces the time and effort required by your internal staff to produce and review the reports each month.

To learn more about how 天美传媒 can help improve your month-end close process, please contact us today.