Subsection 4: Technical provisions for reinsurance operations

The technical provisions corresponding to accepted reinsurance transactions are as follows:

1° Mathematical provision: difference between the present value of the commitments assumed by the reinsurer and by the reinsured companies;

2° Mathematical provision for annuities: present value of the undertaking's commitments in respect of annuities and annuity-related benefits for which it is liable;

3° Provision for deferred acquisition costs: provision intended to cover charges resulting from the deferral of acquisition costs;

4° Provision for unearned premiums: fraction of premiums corresponding to the period remaining to run on a contract or group of contracts after the end of the financial year in question and up to the end of the guarantee period;

5° Provision for claims payable: estimated amount of principal and expenses, both internal and external, required to settle all claims incurred and not paid, including the capital constituting annuities not yet payable by the company;

6° Provision for increasing risks: provision that may be required for reinsurance operations against sickness and disability risks and equal to the difference between the present values of the commitments made by the reinsurer and the insurer respectively;

7° Provision for profit sharing:

a) Amount payable by the reinsuring company in respect of bonuses paid by the reinsured company to policyholders where these bonuses are not payable immediately after the end of the financial year in which they were earned;

b) Amount payable by the reinsuring undertaking in respect of profits corresponding to the contract between it and the reinsured undertaking;

8° Capitalisation reserve: reserve intended to cover the depreciation of the company's assets and the reduction in their income;

9° Management provision: intended to cover future contract management expenses not covered elsewhere;

10° Provision for liquidity risk: provision intended to meet commitments in the event of a decline in the value of all the assets mentioned in article R. 343-10. The provision to be established is valued in accordance with the conditions defined in article R. 343-5 ;

11° Provision for current risks : Provisions set aside in addition to the provision for unearned premiums to cover the risks to be assumed by the reinsurance undertaking after the end of the financial year, so as to be able to meet all claims and all expenses relating to current guarantees exceeding the amount of unearned premiums and premiums still to be issued net of premiums still to be cancelled, relating to these guarantees, until the date of the first premium due date that may give rise to a revision of the premium by the reinsurer or, failing this, until the end of the contract;

12° Equalisation reserve :

a) Provision intended to meet exceptional expenses relating to operations insuring risks due to natural elements, atomic risk, civil liability risks due to pollution, space risks, risks relating to air transport, and risks relating to attacks and terrorism. The conditions for recording and declaring this provision are set out inarticle 16 A (I) and articles 16 B and 16 C of appendix 2 to the General Tax Code;

b) Provision to offset any credit insurance underwriting losses arising at the end of the financial year, excluding export credit insurance transactions on behalf of and with the guarantee of the State;

c) Provision to cover fluctuations in claims experience relating to group reinsurance operations against death or personal injury risks and to group insurance operations against death risks;

12° bis Provision for resilience: a provision set aside by captive reinsurance companies meeting the conditions set out in II ofArticle 39 quinquies G of the French General Tax Code and intended to meet the charges set out in the same text. The conditions for recording and declaring this provision are set by II of article 16 A as well as articles 16 B and 16 C of appendix 2 to the same code;

13° Provisions justified by the specific features of contracts issued outside the European Union.

Subject to the provisions of this code for the valuation of the provisions mentioned in 1°, 5°, 10°, 12° and 12° bis, the provisions are valued in accordance with the accounting requirements of the Autorité des normes comptables.