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Reinsurance of market risk benefits
−Removed: Effective January 1, 2023, we adopted new U.S.
−Removed: GAAP accounting guidance for long-duration contracts that affects the accounting for GMDB and GLB liabilities, collectively referred to as market risk benefits (MRB).
−Removed: MRB are measured at fair value using a valuation model based on current net exposures, market data, our experience, and other factors.
−Removed: Changes in fair value are recorded to Market risk benefits gains (losses) in the Consolidated statements of operations, except for the change in fair value due to a change in the instrument-specific credit risk which will be recognized in Other comprehensive income.
Chubb views its MRB reinsurance business as having a similar risk profile to that of catastrophe reinsurance, with the probability of long-term economic loss relatively small at the time of pricing.
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Therefore, we evaluate this business in terms of its long-term economic risk and reward.
−Removed: The tables below are estimates of the sensitivities to instantaneous changes in economic inputs (e.g., equity shock, interest rate shock etc.) at September 30, 2023, for both the fair value of the MRB liability (FVL) and the fair value of specific derivative instruments held (hedge value) to partially offset the risk in the MRB reinsurance portfolio.
+Added: The tables below are estimates of the sensitivities to instantaneous changes in economic inputs (e.g., equity shock, interest rate shock etc.) at March 31, 2024, for both the fair value of the MRB liability (FVL) and the fair value of specific derivative instruments held (hedge value) to partially offset the risk in the MRB reinsurance portfolio.
The following assumptions should be considered when using the below tables:
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Treasury curve in the following proportions:
−Removed: 0 percent—15 percent short-term rates (maturing in less than 5 years), 15 percent—25 percent medium-term rates (maturing between 5 years and 10 years, inclusive), and 70 percent—80 percent long-term rates (maturing beyond 10 years).
+Added: up to 15 percent short-term rates (maturing in less than 5 years), 15 percent—30 percent medium-term rates (maturing between 5 years and 10 years, inclusive), and 65 percent—80 percent long-term rates (maturing beyond 10 years).
• A change in AA-rated credit spreads impacts the rate used to discount cash flows in the fair value model.
AA-rated credit spreads are a proxy for both our own credit spreads and the credit spreads of the ceding insurers.
−Removed: • The hedge sensitivity is from September 30, 2023, market levels and only applicable to the equity and interest rate sensitivities table below.
+Added: • The hedge sensitivity is from March 31, 2024, market levels and only applicable to the equity and interest rate sensitivities table below.
• The sensitivities do not scale linearly and may be proportionally greater for larger movements in the market factors.
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All our MRB reinsurance treaties include annual or aggregate claim limits and many include an aggregate deductible which limit the net amount at risk under these programs.
−Removed: The tables below present the net amount at risk at September 30, 2023, following an immediate change in equity market levels, assuming all global equity markets are impacted equally.
+Added: The tables below present the net amount at risk at March 31, 2024, following an immediate change in equity market levels, assuming all global equity markets are impacted equally.
a) Reinsurance covering the GMDB risk only
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.