Note 23 - Liabilities under reinsurance and insurance contracts (Details)

12 Months Ended

Dec. 31, 2017

Liabilities Under reinsurance and insurance contracts

Nature and extent of risks arising from insurance contracts

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.