Test

[Virtual Presenter] Contractual Service Margin (CSM) is the unearned profit of a group of insurance contracts that represents the expected profit that the contract would earn during its lifetime. Initially, the CSM is calculated to ensure no profit is made at the point of sale. This calculation takes into account the premium, benefits paid, risk adjustment, and acquisition expenses. After initial recognition, the CSM is adjusted at the end of each reporting period to reflect changes in the fulfillment cash flows related to future service. These changes can arise from experience variances, such as changes in mortality rates or policyholder behavior, which affect both the income statement and the CSM. The CSM is then run off or amortized over the lifetime of the contracts in a systematic way that best reflects the remaining transfer of services provided under the contract..

[Audio] When preparing a training video, it's essential to provide clear and concise information about the Contractual Service Margin (CSM). The carrying amount at the end of each reporting period of a group of reinsurance contracts held is the sum of two components: the remaining coverage and the incurred claims. The remaining coverage includes the Future Cash Flows related to future service allocated to the group at that date, as well as the CSM of the group at that date. The incurred claims comprise the Future Cash Flows related to past service allocated to the group at the reporting date. Subsequently, the CSM is adjusted to reflect changes in the Future Cash Flows related to future service. These changes are recognized by adjusting the CSM, and if necessary, reducing the CSM to zero and recognizing the excess in insurance service expenses. Conversely, if the CSM decreases, the excess is used to reduce the loss component within the Liability for remaining coverage, reinstating the CSM once the loss component reaches zero..

[Audio] For a group of reinsurance contracts held, the carrying amount of the CSM at the end of each reporting period is adjusted to reflect changes in the FCF in the same manner as a group of underlying insurance contracts issued. This adjustment recognizes changes in the FCF related to future service in the insurance service result. The CSM represents the unearned profit of the group of contracts that relates to the future service to be provided. The amount determined ensures that no gains are recognized in the profit or loss on initial recognition. The contractual service margin is the amount determined to prevent gains being recognized in profit or loss on initial recognition, essentially representing the unknown profit of a group of contracts that relates to the provision of future services..