Provisions for loss can only be deducted if the prospect of a loss is ascertained by the comparison between the costs to be borne and the forecast revenues, for one or several operations.

An insurance company offers consumer credits and loan agreements including a clause by which the company relinquishes to pursue for the payment of the instalments which have not fallen due should the borrower die or be industrially disabled.

The Administrative Court of Appeal was right to judge that if the company feels it likely that it will have to bear, owing to this clause, the loss of a part of the amount of the loans granted to its clients, it can book as a provision only the possible overloss on the revenues released by the challenged agreements, or, in the least, on the part of these revenues which is deemed to offset the guarantee offered to the client. Thus only in the case when the estimated balance-sheet of all loan agreements with a guarantee clause shows a negative balance, the provision is justified (CE, March 13, 1996, no.129631, 8e and 9e s.-s., Societe de credit des societes d'assurance a caractere mutuel; RJF 5/96, no.550).

The French High Court confirms the decision of the Administrative Court of Appeal of Bordeaux dated July 9, 1991. This decision constitutes an implementation of the case law defining the conditions under which the deduction of a provision for loss may be accepted (CE, 26-4-95, no.30077 and CE, 28-6-91, no.77921).

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