IFRS 17 reference model measuring contracts from discounted cash flows, a risk adjustment and a contractual service margin.
The general measurement model, also called the building block approach, is the reference model of IFRS 17, applied by default to contracts that fall under neither the simplified premium allocation approach nor the variable fee approach. It measures the liability of a group of contracts from three blocks: the best estimate of discounted future cash flows, the risk adjustment for non-financial risk, and the contractual service margin representing future profit. These blocks are remeasured at each closing under rules distinguishing effects relating to future services, which adjust the margin, from those relating to past services or time, which flow to profit. This model is typically applied to long-term life insurance contracts and reinsurance contracts. Its complexity explains the scale of the standard's implementation projects. For the analyst, it offers an updated, economic view of liabilities, at the cost of greater sensitivity to assumptions and discount rates.
A thirty-year life insurance contract is measured under the general model, with discounting of future cash flows and spreading of profit through the contractual service margin.
GMM, general measurement model, building block approach, BBA, modèle général