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Note 23 - Assets and Liabilities under reinsurance and insurance contracts | 12 Months Ended
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Dec. 31, 2018
Assets and Liabilities Under reinsurance and insurance contracts |
Assets and Liabilities Under Reinsurance and Insurance Contracts | 23. Assets and liabilities under insurance and reinsurance contracts The Group has insurance subsidiaries mainly in Spain and Latin America (mostly in Mexico). The main product offered by the insurance subsidiaries is life insurance to cover the risk of death (risk insurance) and life-savings insurance. Within life and accident insurance, a distinction is made between freely sold products and those offered to customers who have taken mortgage or consumer loans, which c over the principal of those loans in the event of the customer’s death. There are two types of savings products: individual insurance, which seeks to provide the customer with savings for retirement or other events, and group insurance, which is taken out by employers to cover their commitments to their employees. The insurance business is affected by different risks, including those that are related to the BBVA Group such as credit risk, market risk, liquidity risk and operational risk and the methodology for risk measurement applied in the insurance activity is similar (see Note 7), although it has a differentiated management due to the particular characteristics of the insurance business, such as the coverage of contracted obligations and the long term of the commitments. Additionally, the insurance business generates certain specific risks, of a probabilistic nature: Technical risk: arises from deviations in the estimation of the casualty rate of insurances, either in terms of numbers, the amount of such claims and the timing of its occurrence. Biometric risk: depending on the deviations in the expected mortality behavior or the survival of the insured persons. The insurance industry is highly regulated in each country. In this regard, it should be noted that the insurance industry is undergoing a gradual regulatory transformation through new risk-based capital regulations, which have already been published in several countries. The most significant provisions recognized by consolidated insurance subsidiaries with respect to insurance policies issued by them are under the heading “Liabilities under insurance and reinsurance contracts” in the accompanyi ng consolidated balance sheets. The breakdown of the balance under this heading is as follows:
Technical Reserves by type of insurance product (Millions of euros)
| 2018 | 2017 | 2016
Mathematical reserves | 8,504 | 7,961 | 7,813
Individual life insurance (1) | 6,201 | 5,359 | 4,791
Savings | 5,180 | 4,391 | 3,943
Risk | 1,021 | 967 | 848
Others | - | 1 | -
Group insurance (2) | 2,303 | 2,601 | 3,022
Savings | 2,210 | 2,455 | 2,801
Risk | 93 | 147 | 221
Provision for unpaid claims reported | 662 | 631 | 691
Provisions for unexpired risks and other provisions | 668 | 631 | 635
Total | 9,834 | 9,223 | 9,139
(1) Provides coverage in the event of death or disability. (2) The insurance policies purchased by employers (other than BBVA Group) on behalf of its employees The cash flows of those Liabilities under insurance and reinsurance contracts are shown below:
Maturity (Millions of euros)Liabilities under Insurance and Reinsurance Contracts
| Up to 1 Year | 1 to 3 Years | 3 to 5 Years | Over 5 Years | Total
2018 | 1,686 | 1,041 | 1,822 | 5,285 | 9,834
2017 | 1,560 | 1,119 | 1,502 | 5,042 | 9,223
2016 | 1,705 | 1,214 | 1,482 | 4,738 | 9,139
The modeling methods and techniques used to calculate the mathematical reserves for the insurance products are actuarial and financial methods and modeling techniques approved by the respective country’s insurance regulator or supervisor. The most important insurance entities are located in Spain and Mexico (which together account for approximately 85% of the insurance revenues), where the modeling methods and techniques are reviewed by the insurance regul ator in Spain (General Directorate of Insurance) and Mexico (National Insurance and Bonding Commission), respectively. The modeling methods and techniques used to calculate the mathematical reserves for the insurance products are compliant with IFRS and pr imarily involve the valuation of the estimated future cash flows, discounted at the technical interest rate for each policy. To ensure this technical interest rate, asset-liability management is carried out, acquiring a portfolio of securities that generat e the cash flows needed to cover the payment commitme nts assumed with the customers. The table below shows the key assumptions as of December 31, 2018, used in the calculation of the mathematical reserves for insurance products in Spain and Mexico, respec tively:
Mathematical Reserves
| Mortality table | Average technical interest type
| Spain | Mexico | Spain | Mexico
Individual life insurance (1) | GRMF 80-2 GKM 80 / GKMF 95 PERMF 2000 PASEM | Tables of the Comisión Nacional de Seguros y Fianzas 2000-individual | 0.26%-3.27% | 2.50%
Group insurance(2) | PERMF 2000 | Tables of the Comisión Nacional de Seguros y Fianzas 2000-grupo | Depending on the related portfolio | 5.50%
(1) Provides coverage in the case of one or more of the following events: death and disability. (2) Insurance policies purchased by companies (other than Group BBVA entities) on behalf of their employees. The heading “Assets under reinsurance and insurance contracts” in the accompanying consolidated balance sheets includes the amounts that the consolidated insurance entities are entitled to receive under the reinsurance contracts entered into by them with t hird parties and, more specifically, the share of the reinsurer in the technical provisions recognized by the consolidated insurance subsidiaries. As of December 31, 2018, 2017 and 2016, the balance under this heading amounted to €366 million, €421 million and €447 million, respectively.

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