It stands for fulfillment cash flows; according to international accounting standards, this refers to the risk-adjusted present value of an insurer’s rights on and obligations to its policyholders in an insurance contract. It consists of (1) expected/ estimated cash flows (explicit, unbiased and probability weighted estimates): premiums expected to be received from policyholders and claims expected to be paid out to them, (2) discounting to reflect time value of money and the financial risks related to the cash flows (specifically those not included in the estimates of future cash flows) and (3) a risk adjustment for non-financial risk (as reflecting required compensation for risk taking as as well as risk diversification).
June 29, 2024
