https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AGeneral_measurement_model_%28GMM%29 2026-06-13T10:11:47Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:General_measurement_model_(GMM)&diff=11034&oldid=prev 2026-03-11T17:18:08Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>📐 &#039;&#039;&#039;General measurement model (GMM)&#039;&#039;&#039; is the default measurement approach prescribed by [[Definition:IFRS 17 | IFRS 17]] — the international accounting standard for [[Definition:Insurance contract | insurance contracts]] — for recognizing and reporting the financial performance of insurance business over time. Sometimes called the building block approach (BBA), the GMM requires [[Definition:Insurance company | insurers]] to measure groups of contracts using three explicit components: estimates of future [[Definition:Cash flow | cash flows]], a [[Definition:Risk adjustment | risk adjustment]] for non-financial risk, and a [[Definition:Contractual service margin (CSM) | contractual service margin (CSM)]] that represents the unearned profit the insurer expects to recognize as it delivers coverage.<br /> <br /> 🔄 At initial recognition, an insurer estimates the present value of all future cash inflows (primarily [[Definition:Premium | premiums]]) and outflows ([[Definition:Claims | claims]], [[Definition:Expense | expenses]], and [[Definition:Commission | commissions]]) associated with a group of contracts, then layers on a risk adjustment reflecting the compensation the insurer demands for bearing uncertainty. The difference between these amounts — if positive — becomes the CSM, which is not recognized immediately as profit but instead released to the [[Definition:Income statement | income statement]] over the [[Definition:Coverage period | coverage period]] in a pattern that reflects the delivery of insurance service. At each subsequent reporting date, the insurer re-measures its cash flow estimates; changes related to future service adjust the CSM, while changes related to current or past service flow directly through profit or loss. This architecture prevents front-loading of profits, a significant departure from many prior [[Definition:Accounting standard | accounting regimes]].<br /> <br /> 📈 The GMM&#039;s importance to the insurance sector cannot be overstated — it fundamentally reshapes how investors, [[Definition:Insurance analyst | analysts]], and [[Definition:Insurance regulator | regulators]] read an insurer&#039;s financial statements. By decomposing results into an insurance service result and a financial result, the model provides far greater transparency into whether an insurer is generating profit from [[Definition:Underwriting | underwriting]] skill or from investment returns. Implementation has demanded massive investment in [[Definition:Actuarial modeling | actuarial systems]], data infrastructure, and cross-functional coordination between actuarial, finance, and IT teams. While [[Definition:Life insurance | life insurers]] writing long-duration contracts feel the model&#039;s complexity most acutely, [[Definition:General insurance | general insurers]] also apply the GMM to multi-year or complex contracts that do not qualify for the simpler [[Definition:Premium allocation approach (PAA) | premium allocation approach]].<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:IFRS 17]]<br /> * [[Definition:Contractual service margin (CSM)]]<br /> * [[Definition:Premium allocation approach (PAA)]]<br /> * [[Definition:Risk adjustment]]<br /> * [[Definition:Variable fee approach (VFA)]]<br /> * [[Definition:Insurance contract]]<br /> {{Div col end}}</div>

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