Section 5.2 Premium Allocation Approach
Hi Graham,
I have read this section several times but am having a hard time understanding the details for this.
1) This section keeps referring to explicit valuation approach. Is the explicit valuation approach the same thing as the GMA approach?
2) A bit of a vague question but how does UEP - DAC relate to the Premium Liabilities calculated in CIA.Pr Liabs. I am also not sure what the paper is trying to say by "Provided that UEP - DAC is held".
Would be very helpful if you could please shed some light on this 
Comments
Hey @bkmlocks,
1) I found this reading unclear in some places myself. I don't know what they mean when they refer to the explicit valuation approach. They don't seem to explain anywhere what it is. I googled it but I couldn't find anything.
2) Regarding UEP - DAC, which is the same as UPR - DPAE just in different notation, if you rearrange the basic formula:
Then you get:
The statement in the source text says acquisition costs can only be deferred if UEP - DAC (or equivalently UPR - DPAE) is held. But UEP - DAC, aside from the UEcomm term, is the same thing as PolLiabs(UPR), which according to the CIA reading on premium liabilities is the same thing as premium liabilities. So it seems they're saying you can only defer acquisition costs if you're holding reserves for premium liabilities. I don't know when an insurer wouldn't be holding premium liability reserves however, so I'm not too sure what point they're making.
All of this IFRS 17 stuff is very much in flux and new to Canadian actuaries. I have a feeling it will take a couple of more years for all the relevant knowledge to filter through the Canadian actuarial community and in the meantime there will likely be a lot confusion. For the purposes of the exam, your best bet to focus on key facts to memorize. That's really all they can ask for now. You will likely not get a good understanding of IFRS 17 from studying this reading no matter how much time you spend on it. :-(