Life insurance reserves are generally longer term than non-life reserves. It is also common that they include a savings element. Meaning that the future liabilities are offset by for instance the value in a fund, accounted for on the asset side of the balance sheet.
Withing life insurance there are many different kinds of contracts. For instance the straight forward 1-year deaths policies or longer contracts as the with-profits business which may have a contract length of 40+ years.
Another feature of the straightforward life insurance contracts is that the amount is often determined. So is the event, death is certain. It is just the timing that is unknown.
Lines of Business
Insured events often covered is:
- Life (Pension)
- Critical Illness
Discounting is usually important part of the reserves because of the longer term.
Options & Guarantees
The longer savings contracts may have a guarantee attached to it. This need to be reserved for accordingly.
The main consideration for pension contracts is the difference between defined contribution and defined benefit.