Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 368

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 368
---
                  110,052 |                            120,350 |

| HSBC Holdings plcAnnual Report on Form 20-F | 265 |

Insurance underwriting risk Description and exposure Insurance underwriting risk is the risk of loss through adverse experience, in either timing or amount, of insurance underwriting parameters (non-economic assumptions). These parameters include mortality, morbidity, longevity, lapse and expense rates. The principal risk we face is that, over time, the cost of the contract, including claims and benefits, may exceed the total amount of premiums and investment income received. The tables on page 262 analyse our life insurance underwriting risk exposures by composition of the fair value of the underlying items. The insurance underwriting risk profile and related exposures remain largely consistent with those observed at 31 December 2023. Sensitivities (Audited) The following table shows the sensitivity of the CSM, profit and total equity to reasonably foreseeable changes in non-economic assumptions across all our insurance manufacturing subsidiaries. These sensitivities are prepared in accordance with current IFRS. Sensitivity to lapse rates depends on the type of contracts being written. An increase in lapse rates typically has a negative effect on CSM (and therefore expected future profits) due to the loss of future income on the lapsed policies. However, some contract lapses have a positive effect on profit due to the existence of policy surrender charges. Mortality and morbidity risk is typically associated with life insurance contracts. During the year we have revised the sensitivity to mortality and morbidity rates from 10% to 5% to align with reasonably foreseeable changes, and the comparatives have been restated accordingly. The effect on profit of an increase in mortality or morbidity depends on the type of business being written. Expense rate risk is the exposure to a change in the allocated cost of administering insurance contracts. To the extent that increased expenses cannot be passed on to policyholders, an increase in expense rates will have a negative effect on our profits. This risk is generally greatest for our smaller entities. The impact of changing insurance underwriting risk factors is primarily absorbed within the CSM, unless contracts are onerous in which case the impact is directly to profit. The impact of changes to the CSM is released to profits over the expected coverage periods of the related insurance contracts. The sensitivities provided below include the French insurance business, which was classified as held for sale at 31 December 2024. Further details are provided on page 433 .

| Sensitivity of HSBC’s insurance manufacturing subsidiaries to insurance