Strategic Report | Governance | Financial Statements | 189
26. INSURANCE CONTRACTS AND RELATED REINSURANCE
31 December 2022 (restated) £m
31 December 2023 £m
Gross insurance liabilities Reinsurance contract assets Reinsurance contract liabilities Net reinsurance contracts
24,131
19,647
(1,143)
(776)
125
121
(1,018)
(655)
Net insurance liabilities
23,113
18,992
Insurance liabilities and reinsurance assets and liabilities include valuation of the Best estimate of the present value of future cash flows, the Risk adjustment for non-financial risk and the Contractual service margin. A summary of the movement in insurance liabilities and net reinsurance contracts is presented below. Year ended 31 December 2023 Year ended 31 December 2022 (restated) Gross £m Net Reinsurance £m Net £m Gross £m Net Reinsurance £m
Net £m
17,030
76
17,106
Best estimate Risk adjustment
20,574
257
20,831
674
(399) (332) (655)
275
1,023 1,489
(603) (205) (551)
420
1,943
1,611
CSM
1,284
Net opening balance
19,647
18,992
23,086
22,535
(156)
27
(129)
CSM recognised for services provided
(120)
25
(95)
79
(12)
67
CSM accretion
41
(6)
35
583
(173)
410
Other movements in the CSM Release from risk adjustment
533
(146)
387
(11)
4
(7)
(13)
5
(8)
261
(197)
64
Other movements in risk adjustment
(336)
199
(137)
3,728
(12)
3,716
Movements in best estimate
(3,544) 19,647 17,030
(181) (655)
(3,725) 18,992 17,106
Net closing balance
24,131 20,758
(1,018)
23,113 20,822
64
Best estimate Risk adjustment
76
924
(592) (490)
332
674
(399) (332) (655)
275
2,449
1,959
CSM
1,943
1,611
Net closing balance
24,131
(1,018)
23,113
19,647
18,992
The detailed movements analysis of insurance liabilities and reinsurance assets and liabilities are presented in note 26 (c) and (d) respectively. The movements include the CSM split between contracts under the Fair Value Approach (“FVA”) and the General Measurement Model (“GMM”) including those measured under the Fully Retrospective Approach (“FRA”) at transition to IFRS 17. (a) Terms and conditions of insurance and reinsurance contracts The Group’s long-term insurance contracts, written by the Group’s life companies JRL and PLACL, include Retirement Income (Defined Benefit, Guaranteed Income for Life, and Care Plans), and whole of life and term protection insurance. Although the process for the establishment of insurance liabilities follows specified rules and guidelines, the liabilities that result from the process remain uncertain. As a consequence of this uncertainty, the eventual value of claims could vary from the amounts provided to cover future claims. The estimation process used in determining insurance liabilities involves projecting future annuity payments and the cost of maintaining the contracts. The Group uses reinsurance as an integral part of its risk and capital management activities. New business is reinsured via longevity swap and quota share arrangements as follows: • GIfL was reinsured using longevity swap reinsurance at 90% during 2023. • Care new business was not reinsured in 2023. • DB was reinsured using longevity swap reinsurance at c.90% and a small proportion was reinsured using quota share reinsurance in 2023.
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