3.1 Valuation principles

• L1-15. The MAV approach is based on the amounts as reported on audited, consolidated, general- purpose GAAP or Statutory Accounting Principles (SAP) accounts, and includes adjustments to the following items:
  • a) Insurance liabilities and reinsurance balances;
  • b) Financial investments (assets) and instruments (liabilities); and
  • c) Deferred taxes.
• L1-16. Unless they are replicable by a portfolio of assets (cf section 3.4), MAV insurance liabilities are the sum of a current estimate and a margin over current estimate (MOCE). The details underpinning the calculation of the current estimate and the MOCE are developed in the following sub-sections as well as in the Level 2 text.
• L1-17. The adjustments to items b) and c) are described in the Level 2 text.
• L2-16. When deriving the adjustments to be made to insurance liabilities, reinsurance balances, financial investments and instruments, and tax, the IAIG applies the following principles:
  • a. Property for own use is adjusted to fair value using the fair value guidance under the IAIG’s GAAP or when the IAIG does not produce a GAAP consolidated balance sheet, the GAAP fair value principles in the IAIG’s jurisdiction.
  • b. Mortgages and loans are adjusted to fair value using the fair value guidance under the IAIG’s GAAP or when the IAIG does not produce a GAAP consolidated balance sheet, the GAAP fair value principles in the IAIG’s jurisdiction.
  • c. Reinsurance recoverables are restated on a basis consistent with the determination of insurance liabilities. Recoverables on paid and unpaid balances are reported net of allowances for estimated uncollectable amounts.
  • d. Deferred tax assets (DTA) and liabilities (DTL) are treated according to section 0.
  • e. Deferred acquisition costs and other deferred expenses that are on the balance sheet at the reporting date are adjusted to zero. Future acquisition costs related to future premiums (within contract boundaries – see section 3.2.2) are reflected in the value of insurance liabilities.
  • f. Premium receivables falling due after the reporting date and related to contracts that are included in the current estimate calculation are reflected in the valuation of insurance liabilities as negative cash flows. Premium receivables for which the due date is prior to the reporting date are not part of the current estimate calculation and remain as assets on the balance sheet.
  • g. Loans to policyholders are reported separately and are not netted against insurance liabilities.
  • h. Other financial assets that are reported on the GAAP balance sheet at amortised cost (eg Hold-To-Maturity investments) are restated to a fair value.
  • i. Financial liabilities: upon initial recognition, the valuation of these items is based on the IAIG’s reported GAAP, and there is no subsequent adjustment to take account of changes to the IAIG’s own credit standing.