The IASB Insurance Project for life insurance contracts: Impact on reserving methods and solvency requirements
Review articleOpen access
Abstract:

AbstractIn this communication, we review the fair value-based accounting framework promoted by the IASB Insurance Project for the case of a life insurance company. In particular, for the case of a simple participating contract with minimum guarantee, we show that the fair valuation process allows for the identification of a suitable safety loading to hedge against default risk; furthermore, we show that, when compared with the “traditional” accounting system based on the construction of mathematical reserves, the fair value approach offers a sounder reporting framework in terms of covering of the liability, implementation costs, volatility of assets and liabilities and solvency capital requirements.

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