2020 Universal registration document and annual financial report - BNP PARIBAS 227
4Consolidated finanCial statements for the year ended 31 deCemBer 2020
4
Notes to the financial statements
4.j TECHNICAL RESERVES AND OTHER INSURANCE LIABILITIES
In millions of euros 31 December 2020 31 December 2019
Technical reserves Non-Life insurance contracts 4,668 4,768
Technical reserves Life insurance contracts 155,129 154,382
Insurance contracts 85,961 87,352
Unit-linked contracts 69,168 67,030
Technical liabilities investment contracts 48,528 48,179
Investments contracts with discretionary participation feature 40,916 40,723
Investment contracts without discretionary participation feature Unit-linked contracts 7,612 7,456
Policyholders surplus reserve liability 27,860 24,980
Total technical reserves and liabilities related to insurance and investment contracts 236,185 232,309
Debts arising out of insurance and reinsurance operations 2,948 3,464
Derivative financial instruments 1,608 1,164
TOTAL TECHNICAL RESERVES AND OTHER INSURANCE LIABILITIES 240,741 236,937
The policyholders surplus reserve arises from the application of shadow accounting. It represents the interest of policyholders within French and Italian life insurance subsidiaries in unrealised gains and losses and impairment losses on assets where the benefit paid under the policy is linked to the return on those assets. It is obtained from stochastic calculations modelling the unrealised gains and losses attributable to policyholders based on economic scenarios and assumptions as regards rates paid to customers and new business inflows. For France, this resulted in an interest of 92% in 2020, compared with 90% in 2019.
The Liability Adequacy Test required by IFRS 4 and performed by contract portfolios consists in comparing reserves (net of deferred acquisition costs) and evaluation of future discounted cash flows.
As at 31 December 2020, this test has led to additional provisions on three Asian life insurance entities for a total amount of EUR 18 million. On domestic market life insurance entities (France, Italy and Luxembourg), the test does not apply for any shortfall impact.
The change in technical reserves and liabilities related to insurance contracts breaks down as follows:
In millions of euros Year to
31 Dec. 2020 Year to
31 Dec. 2019
Liabilities related to insurance contracts at start of period 232,309 209,750
Additions to insurance contract technical reserves and deposits taken on financial contracts related to life insurance 21,309 30,807
Claims and benefits paid (17,708) (17,010)
Effect of changes in value of admissible investments related to unit-linked contracts 708 8,381
Effect of movements in exchange rates (527) 311
Effect of changes in the scope of consolidation 94 70
Liabilities related to insurance contracts at end of period 236,185 232,309
See note 4.i for details of reinsurers share of technical reserves.
