what is an Onerous contract

mimilau5858mimilau5858
in CIA.IFRS17-IC

The answer from CIA.IFRS17-IC Battlecard #43 said

When the CSM is negative, a contract is onerous and a Loss Component is recognized immediately

Is this definition only applicable for GMA method, since PAA does not have CSM?

Is the definition from CIA.IFRS17-1 Battlecard #1 the best definition for onerous contract?

An insurance contract is onerous at the date of initial recognition if there is a total net outflow for the sum of:
→ FCFs (Fulfilment Cash Flows)
→ acquisition cash flows
→ cash flows arising from the contract at the date of initial recognition

Comments

  • Staff-T1Staff-T1
    1. No, you can also be onerous under the PAA method. You'd have to calculate your PAA excluding LC and add a LC to it.
    2. It's one of the definitions. I'm not sure if there are any other definitions so I can't say it is the best ~
Sign In or Register to comment.