39.2.4. Best estimate of future cash flows

Cash flows within the boundary of an insurance contract are those that relate directly to the fulfilment of the contract, including cash flows for which the entity has discretion over the amount or timing.

The cash flows within the boundary include:

• premiums (including premium adjustments and instalment premiums) from a policyholder and any additional cash flows that result from those premiums;
• payments to (or on behalf of) a policyholder, including claims that have already been reported but have not yet been paid (i.e. reported claims), incurred claims for events that have occurred but for which claims have not been reported and all future claims for which the entity has a substantive obligation;
• an allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs;
• claim handling costs;
• costs the entity will incur in providing contractual benefits paid in kind;
• policy administration and maintenance costs;
• taxes on transactions.

Separate presentation of outward reinsurance contracts and insurance and reinsurance contracts is required under the new standard.

Within each of these two groups, separate presentation is required for assets and liabilities of portfolios depending on whether the sum of the balance sheet items making up the insurance portfolio measurement is a net asset or liability.

Estimates of future cash flows are updated upon each calculation, taking into account all historical data available at the time of valuation and expert assessments of future cash flows.

The individual assumptions, in particular loss ratios, mortality rates and lapse rates, are determined on the basis of an analysis of historical data, but at the same time taking into account their expected changes in the future, e.g. due to tariff modifications or the current economic situation.

The Group does not currently have insurance products with discretionary profit-sharing.