3.2.2 Performing Initial Measurement

The asset or liability measurement is performed by adding the fulfillment cash flows and the contractual service margin after the initial recognition of insurance contracts.

• Fulfillment cash flows are the current estimate of amounts that the insurer expects to collect from premiums and payout for claims, benefits, and expenses, including an adjustment for the timing and risk of those cash flows.
• The contractual service margin is the expected profit for providing future insurance coverage (unearned profit).

The measurement of the fulfillment cash flows reflects the current value of any interest-rate guarantees and financial options included in the insurance contracts.