Insurance calculators
IFRS 17 contractual service margin
Fulfilment cash flows, contractual service margin or loss component at initial recognition, interest accretion and release by coverage units.
Inputs
Results
Fulfilment cash flows
-160
Net inflow
CSM at initial recognition
140
CSM released this year
14.42
10.0% of coverage
Closing CSM
129.78
After 4.20 interest
CSM roll-forward, year 1
| Step | Amount |
|---|---|
| Opening CSM | 140.00 |
| Interest accretion | 4.20 |
| Release for services | -14.42 |
| Closing CSM | 129.78 |
Methodology
Conventions
- General measurement model for a group of contracts. Present values are at initial recognition and the risk adjustment is for non-financial risk.
- A net inflow becomes the CSM, with no day-one gain. A net outflow is a loss component recognised at once. Acquisition cash flows paid before recognition reduce the CSM.
- In the year, the CSM accretes interest at the locked-in rate and is then released in proportion to coverage units provided against units provided plus units still to come.
References
- IFRS 17 Insurance Contracts, paragraphs 32 to 52 and B119.
Formulas
- Fulfilment cash flows
- FCF = PV_{\text{out}} - PV_{\text{in}} + RA
- At recognition
- CSM_0 = \max(0, -FCF - ACF),\quad LC = \max(0, FCF + ACF)
- Release
- \text{release} = CSM_0 (1 + i) \times \frac{\text{units}_{\text{year}}}{\text{units}_{\text{year}} + \text{units}_{\text{later}}}