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Insurance Contracts

Date recorded:

The staff presented the Board with an education session on the fulfilment value as a possible measurement basis candidate identified by many respondents to the Discussion Paper on Insurance Contracts. No decisions were made or sought.

The staff noted that fulfilment value would more appropriately reflect the intended settlement by the insurer (by continuous fulfilment and not by transfer or settlement at the balance sheet date). Constituents would seek for a measurement excluding the credit characteristics of the liability. The staff highlighted that they would expect fulfilment value to be identical or at least very similar with a current exit value notion. Board members were particularly interested in these differences and how they could arise. The staff highlighted these possible sources of differences:

  • Estimates
  • Risk margins
  • Day one profit
  • Own credit risk

The Board had a lengthy discussion on some aspects of these possible differences.

Some Board member were concerned calling the calculation a 'value' as they seemed not convinced that the amount determined presented a value.

The staff then briefly informed the Board about the next steps. The staff plans to present to the Board at the October 2008 meeting a list and description of all measurement candidates. After consulting with the Insurance Working Group, the staff will ask the Board in November to reach a conclusion on the measurement attribute.

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