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How do we account for the derivatives embedded in the insurance contracts?

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Question added by Muhammad Adil Iqbal , Assistant Director , Securities and Exchange Commission of Pakistan
Date Posted: 2014/12/22
ايمن محمد عاطف محمد
by ايمن محمد عاطف محمد , Director of the control and regulation unit , ACOLID

Embedded derivatives that meet the definition of an insurance contract or correspond to options to surrender insurance contractsfor a set amount (or based on a fixed amount and an interest rate) are not separately measured. All other embedded derivativesare bifurcated and booked at fair value when material if they are not considered as closely related to the host insurance contractand/or do not meet the definition of an insurance contract.

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