Allowance for risk in MCEV and interaction with other accounting measures

Allowance for risk in MCEV and interaction with other accounting measures

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October 2008

On the 4th June 2008, the European Insurance CFO Forum published the Market Consistent Embedded Value (MCEV) Principles© and associated Basis for Conclusions. This will represent the only CFO Forum endorsed method of embedded value reporting from 31st December 2009. The MCEV Principles represent a significant step forward in achieving more consistent embedded value reporting. However, there are a number of areas where companies will have key decisions to make if they are to properly reflect how they view and value their business. One such area is the allowance for risk.

Following the publication of our briefing note on the "CFO Forum MCEV Principles" in June, this technical briefing note outlines the challenges faced in developing methodologies within this evolving area and considers comparison to Solvency II and IFRS Phase II.