Net insurance margin under IFRS 17

Under the IFRS 17 income statement, the "net insurance margin" , may be defined as:

NIM = (Insurance service result) / (Net insurance revenue)

Where:

• (Net insurance revenue) = (Insurance revenue) - (Expenses from reinsurance contracts held)

  • (Insurance revenue) = (Premiums written) + + (Change in LFRC)

    • LFRC = Liability for remaining coverage

  • (Expenses from reinsurance contracts held) = (Reinsurance premiums paid) + (Change in ARC)

    • ARC = Asset for remaining coverage

• "Expenses from reinsurance contracts held" are the reinsurance premium payments expense.

• The "Insurance services result" is by definition a net of reinsurance result.

  
  

"Normalised"net insurance margin

When relevant, the normalised NIM adjusts net insurance claims and acquisition costs for:

• Changes to the Ogden discount rate (a way of deciding how much an insured suffering from a long-term injury can claim)
• Weather

Net insurance claims ratio

NICR = (Net insurance claims) / (Net insurance revenue)

Where:

• (Net insurance claims) = (Incurred claims) - (Insurance claims recoverable from reinsurers)

Net expense ratio

NER = (Operating expenses) / (Net insurance revenue)

Net acquisition costs ratio

NER = (Acquisition costs) / (Net insurance revenue)

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