Sample Question 19
For this question part C
I don't understand why we can group them.
For Auto LOB, you can't legally use credit score for rating, so why are we allowed to group them together? Is grouping different from rating? When they say grouping, does it just have to do with how it is reported? Or does it have to do with classification and setting rates? If its for setting rates, how can we use credit score as criteria for grouping?
Comments
Grouping just refers to ensuring similar risks are placed together. If credit score isn't a factor for rating, then why shouldn't they be grouped together as they'd be seen as virtually identical? Grouping depends on classification, to the extent that it will identify cohorts that are onerous and is a main factor for reporting.
I suggest you reread the measurement considerations under ifrs17 which explains what groupings and level of aggregations are.
Thanks @Staff-T1, really appreciate you answering questions on the weekend! Last push for us haha.
Also for part B.
I just noticed that the first line says "A loss component is evaluated in for the group of contracts below"
Since a loss component was already evaluated, wouldn't that automatically mean they are all onerous since there is a loss component?
Also follow up question for Part C. It was stated in the wiki that:
In this case the group with lower credit score is onerous, shouldn't we not group it with the rest of the PPA contracts?
Since groups need to separate onerous and non onerous?