The IASB Insurance Project for life insurance contracts: Impact on reserving methods and solvency requirements [An article from: Insurance Mathematics and Economics]

This digital document is a journal article from Insurance Mathematics and Economics, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
In 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.