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

Ballotta, L., Esposito, G. and Haberman, S. (2006). The IASB Insurance Project for life insurance contracts: Impact on reserving methods and solvency requirements. Insurance: Mathematics and Economics, 39(3), pp. 356-375. doi: 10.1016/j.insmatheco.2006.04.004


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.

Publication Type: Article
Additional Information: © 2015, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Publisher Keywords: Black–Scholes option pricing formula; Fair value; Lévy processes; Mathematical reserves; Participating contracts; Shortfall probability; Solvency requirements
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Actuarial Science & Insurance > Actuarial Research Reports
Date available in CRO: 30 Jun 2015 09:07
Date deposited: 15 September 2016
Date of first online publication: 2006
Text - Accepted Version
Available under License : See the attached licence file.

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