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Comments
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Its 1.5 * mincapreq not capreq/1.5 in your denominator
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So that you can use PAA when it is not onerous as onerosity is not a permanent state
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Please see the screenshot below from page 19, second last bullet point
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You are not using brackets which is why it is confusing. 200% MCT Ratio = 2 * (CapAV/(1.5 * MinCapReq)) = (2/1.5) * (CapAv/MinCapReq). Write it out on a piece of paper, it will be clearer
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It's just a variation of the top-down approach and both those terms arbitrary. It's kind of line a linear regression approach to defining the ILP. These terms are just meant to characterize the relationship between the liquidity of the reference por…
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CapAv / (CapReq / 1.5) = CapAv / CapReq * 1.5 this should be 1.5 * CapAv/ CapReq. Your algebra is incorrect. 1/(1/1.5) = 1.5
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From a policyholder's perspective: You are correct. With the LRC/UEP, the PH can cancel and easily get a refund making it really liquid. The LIC is less liquid because the policyholder can't just "withdraw" the amount owed in cash - they need to go …
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A net neutral position, but for capital calculation purposes you just treat it as a net long position of 0
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https://www.cia-ica.ca/publications/222159app8e/ https://www.cia-ica.ca/publications/222159be/
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A margin method would usually reflect an insurer's own view of risk since your own risk appetite would be reflected which is not relevant for reinsurance specifically because that risk is ceded to the reinsurer. The margin for reinsurance should ref…
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yes pretty much - The ceded RA is for your AIC/ARC
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The cash inflows that you expect to receive would be reduced by a portion of the expected annual default from the reinsurer
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I will thanks for pointing it out
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* That's correct. Onerous contracts are recognized immediately, rather than when premium is received which means that the LC appears on your balance sheet when renewals are issued for the next year. * You are right. Recognition of the loss componen…
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You are right there if the FCF is a cash inflow, then you would have a negative amount. Remember, when using the PAA, you are still booking a liability at initial recognition despite the policy being profitable. So at the end of the day, your tot…
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You add premiums because that is more "service that you are owing" whereas subtracting insurance revenue (earned premium) is to remove the portion of premium for which service has already been provided. If service has already been provided, it is no…
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Generally you would look at them from the perspective of a group of contracts, which means yes they would increase until year-end and then gradually start to taper off until two years later. For this example, you can actually think of it as a group …
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When you calculate your FCF, on row 93, the premiums received is not included but the directly attributable acquisition expenses that are paid at inception are still included
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Yes to your first question For your second question, exposure is assumed to be 1 here so it drops out since you are looking prospectively whether the group of contract will be onerous over the next year
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No, the CAS method is incorrect as they are removing the premiums received but not the directly attributable acquisition expenses that are paid at inception (same time as the premium). Removing that gives you 2250. If the contract is PAA eligible…
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If you read the commentary fully, you will see that row 96 states that 2500 is not correct. The derivation is merely to show how the CAS obtained 2500. The correct answer here is either 0 if you are assuming that you are measuring using the GMM meth…
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Please read the commentary at the bottom of the IFRS17 sample questions with BA commentary. I have already explained that this is an error on the CAS side
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Your algebra is incorrect. CapAv/(CapReq/1.5) = 1.5CapAv/(CapReq) Not CapAv/(1.5CapReq)
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You would then be taking out all your unearned premium basically so that wouldn't be correct
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It's more of thinking how to choose your level of aggregation before running your FCT. You could have cases where you'd group two groups of contracts together, such as personal property Canada wide: * You're an insurer who writes personal prope…
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Your LC is unchanged by reinsurance. What changes is your LRECC. Therefore, it is your net LC (LC - LRECC) that changes
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It represents the fact that a portion of the unearned premium will not eventually be earned due to mid-term cancellations
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Have you read section 4.5 of the discount rate paper? I don't think a numerical example will help much here. It's just adding a spread to a constant which is judgmentally selected. The numbers are arbitrary
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Yes, the bottom right corner says that. An ARP is an additional cost to the insured which means it is an increase to the insurance service expenses.
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They are both meant to reflect compensation, but are slightly different - RA is the compensation required to bear the uncertainty around cash flows. Or in other words, extra padding to allow for incorrect assumptions when setting cash flows. Profit …