209 ANNUAL REPORT 2010 The following table provides information on the liabilities for  guarantees that are included in the valuation of the host  contracts. These guarantees are valued at fair value and are included as  part of insurance liabilities with the underlying host insurance  contracts in note 19. 1  Guaranteed minimum benefit in the Netherlands. 2  Balances are included in the insurance liabilities on the face of the balance sheet; refer to note 19. 3  The net amount at risk represents the difference between the maximum amount payable under the guarantees and the account value. The fair values of guarantees mentioned above (with the  exception of life contingent guarantees in the United States) are  calculated as the present value of future expected payments to  policyholders less the present value of assessed rider fees  attributable to the guarantees. Given the long-term nature of  these guarantees, their fair values are determined by using  complex valuation techniques. Because of the dynamic and  complex nature of these cash flows, AEGON uses stochastic  techniques under a variety of market return scenarios. A variety  of factors are considered, including expected market rates of  return, equity and interest rate volatility, credit risk, correlations  of market returns, discount rates and actuarial assumptions. Since the price of these guarantees is not quoted in any market,  the fair value of these guarantees is computed using valuation  models which use observable market data supplemented with  the Group’s assumptions on developments in future interest  rates, volatility in equity prices and other risks inherent in  financial markets. All the assumptions used as part of this  valuation model are calibrated against actual historical  developments observed in the markets. Since many of the  assumptions are unobservable and are considered to be  significant inputs to the liability valuation, the liability has been  reflected within Level III of the fair value hierarchy. Refer to  note 3 for more details on AEGON’s fair value hierarchy. The expected returns are based on risk-free rates. AEGON adds a  premium to reflect the credit spread as required. The credit  spread is set by using the credit default swap (CDS) spreads of a  reference portfolio of life insurance companies (including  AEGON), adjusted to reflect the subordination of senior debt  Had AEGON used a long-term equity implied volatility  assumption that was 5 volatility points higher or lower, the  impact on income before tax would have been a decrease of  EUR 144 million or an increase of EUR 127 million, respectively,  in 2010 IFRS income before tax (2009: EUR 155 million decrease  and EUR 136 million increase). For equity volatility, AEGON uses a term structure assumption  with market-based implied volatility inputs for the first five years  and a long-term forward rate assumption of 25% thereafter. The  volume of observable option trading from which volatilities are  derived generally declines as the contracts’ term increases,  therefore, the volatility curve grades from implied volatilities for  five years to the ultimate rate. The resulting volatility assumption  in year 20 for the S&P 500 index (expressed as a spot rate) was  24.8% at December 31, 2010 and 25.3% at December 31, 2009.  Correlations of market returns across underlying indices are  based on historical market returns and their inter-relationships  over a number of years preceding the valuation date.  Assumptions regarding policyholder behavior, such as lapses,  included in the models are derived in the same way as the  assumptions used to measure insurance liabilities.  holders at the holding company level to the position of  policyholders at the operating company level (who have priority  in payments to other creditors). Because CDS spreads for United  States life insurers differed significantly from those for European  life insurers, AEGON’s assumptions reflect these differences in  the valuation. If the credit spreads were 20 basis points higher or  lower respectively, and holding all other variables constant in the  valuation model, 2010 income before tax would have been  EUR 158 million and EUR 173 million higher or lower respectively  (2009: EUR 136 million and EUR 145 million higher or lower). FAIR VALUE MEASUREMENT OF GUARANTEES IN  INSURANCE CONTRACTS SHARPENING OUR FOCUS 2010 2009 GMB  1,2 GMB  1,2 At January 1 1,145 2,410 Incurred guarantee benefi ts 511 (1,265) AT DECEMBER 31 1,656 1,145 Account value 13,448 12,929 Net amount at risk  3 1,853 1,658