Spring 2019 Q13 - Do we include RA in interest rate risk calc?

cornedovcornedov
in OSFI.MCT

The MCT guidelines is pretty clear than LIC and Unexpired Coverage for Insurance Risk do not include RA. However I was wondering if RA impacts the interest rate risk margin?

I noticed in Spring 2019 Q13 that the interest rate risk margin uses unpaid claims and unearned premium liabilities including PfADs when calculating interest rate risk. Would this mean that when calculating interest rate risk for LIC and LRC we would use the amounts including RA?

Comments

  • Staff-T1Staff-T1

    I would say yes because 5.1.1.2 says LIC not LIC excluding RA

  • cornedovcornedov

    Thanks!

  • oxalisoxalis

    the LIC in this context would include both financial and non-financial RA right?

  • Staff-T1Staff-T1

    Yes, but I'd like to make the comment that the risk adjustment for financial risk is not explicitly calculated but rather included implicitly in the calculation of the discount rate

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