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Insurance

  Insurance   |   Terms
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  • May 20, 2020
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Onerous Contract

An insurance contract is deemed to be onerous (loss-laden or loss-making) at initial recognition when the net cash flows associated with the contract are negative (i.e., outflows) at that time. The net cash flows are calculated as the risk-adjusted present value of the insurer’s rights on and obligations to policyholders (the aggregation of the so-called fulfillment cash flows (FCF), any previously recognized acquisition cash flows and any cash flows arising from the contract, at the initial recognition date .


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