IFRS - International Financial Reporting Standards

IFRS 4 - This is the interim standard currently being used at Beazley it will be replaced by IFRS 17 on 1 January 2023.

UK GAAP - Generally Accepted Accounting Practice in the UK is the body of accounting standards and other guidance published by the UK’s Financial Reporting Council (FRC). 

General Measurement Model (GMM) - The GMM is the methodology we are using for our IFRS 17 calculations. It is one of three methodologies available to use under IFRS 17, and it’s the one that suits our business best. It includes four key elements: 

• Estimates of future cash flows
• An adjustment for the time value of money using appropriate discount rates
• A risk adjustment for non-financial risks
• The contractual service margin

Contractual service margin (CSM)

This is a new requirement under IFRS 17. It represents the unearned profit that we will recognise as we provide services in the future. The CSM is created by using the following formula:

Premium Allocation Approach (PAA) - A simplification of the GMM permitted if the coverage period of contracts is one year of less or it can be proven that the PAA approach gives a materially similar outcome to the GMM approach.

Risk adjustment - This is the compensation required for bearing the uncertainty about the amount and timing of cash flows that arise from non-financial risks.

Discounting – this is the adjustment we make to reflect the time value of money.