Abstract
The latest developments of both prudential (Solvency II) and financial reporting (MCEV, IFRS) frameworks seem to consecrate market consistent valuation as a kind of paragon of insurance liabilities assessment. In this chapter, we initially try to analyze the underlying motivations of this evolution. We show that it results from an objective of harmonization of measurement of quite different insurance contrats. This heterogeneity being the result of heterogeneous national insurance regulations. In the second part, we analyze the limitations of this measurement principle. For that, we mobilize some of the arguments opposed to Fair Value Accounting. Moreover, we insist on the limitations resulting as well from the implementation issues as of their use in a risk management perspective.
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Notes
- 1.
More precisely, the rate of 60 % (with a maximum of 3.5 %) applies beyond eight years and, for the contracts with periodic premiums or variable capital, whatever their duration.
- 2.
This was recently recalled by a judgment of the Final court of appeal (Civ. 2nd, March 5th, 2015, n° 14-13.130) confirming a preceding decision of Conseil d’État (CE, May 5th, 2010, n° 307089).
- 3.
Until 2015, the insurance accounting rules were part of the Code des assurances, like most of the above-mentioned regulatory or legislative provisions. From 2016 and the coming into effect of the new prudential framework Solvency 2, these rules will be transferred to the national accounting standard-setter (Autorité des Normes Comptables).
- 4.
This measurement is associated with impairment rules for financial assets whose value fell significantly to a point at which the perspective of recovering the acquisition value is unlikely.
- 5.
In our schematic approach the financial incomes thus consist of the incomes from amortizable assets and the dividends and gains or losses on ceded non-amortizable assets.
- 6.
These rules also apply to annuity contracts with no surrender options.
- 7.
Source: Étude sur les taux de revalorisation des contrats individuels d’assurance - vie au titre de 2014, Analyse et synthèse n° 47, ACPR, juin 2015.
- 8.
Source: Moody’s.
- 9.
This standard is currently under examination by the European authorities and has not yet been adopted by the European Union.
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© 2016 Springer International Publishing Switzerland
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Thérond, PE. (2016). About Market Consistent Valuation in Insurance. In: Laurent, JP., Norberg, R., Planchet, F. (eds) Modelling in Life Insurance – A Management Perspective. EAA Series. Springer, Cham. https://doi.org/10.1007/978-3-319-29776-7_2
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DOI: https://doi.org/10.1007/978-3-319-29776-7_2
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