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Yup you are right. I'll make the change
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I am not sure why specifically it is different as the papers do not talk too much about the formula much less a comparison between both papers. However, I am pretty sure either definition will be accepted in the exam
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Still the same answer that I made in April. Paper is still on the syllabus
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This is because the diagram is probably immediately after the first premium payment has been made. Yes for non-onerous contracts then LRC = 0 at initial recognition
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AB is prior approval right now for any significant base rate increases or segmentation changes; with file and use for base rate increases < 5%. and an insurer is mandated to provide a full filing every 3 years to the board for review
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That's right
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You are right actually so it is still in the syllabus. I thought it wasn't and must have missed that. But yes I don't think it is important and just memorizing 1/3 should be sufficient
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The DAC is an input into the CSM calculation which is then amortized. For your first calculation: Initial recognition LRC = 1000, CSM = 600 At time 0.25, LRC = 300 (Remaining claims left) +450 (Remaining CSM left) = 750. Release of CSM = 600*0.2…
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It could be positive or negative. See here : https://battleactsmain.ca/vanillaforum/discussion/1514/sample-10/p1
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You calculate the duration of a LoB using the same payment patterns used for discounting. The total duration of your liabilities is then calculated by taking a weighted average of the Actuarial Present Value of each LoB. I think the APV should be re…
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Yup you are right. The ratio questions don't usually reconcile when you approach it with different methods since this is not an actual FS but just a made up one
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Im not sure if Part A and B are relevant without looking at the older paper. Collective area-based plans are not on the syllabus as they are mainly used to cover groups of farmers, rather than any individual farmer
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Yes, the reference curve can be thought of as a yield curve. The ultimate risk free-rate would be part of the reference curve. Usually, when you derive your reference curves, you'd use some form of GoC bonds which only have traded maturities up to…
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You are mixing up the LRC under PAA and the LRC under GMM. The LRC under GMM here is 100, while the LRC under PAA is 105. PPA LRC = LRC ex LC + LC GMA LRC = FCF + CSM PAA LRC will not and should not be equal to GMA LRC, except through random…
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The breakdown makes sense. One additional thing to add: "Hypothetically if we did have LRC booked of 500 and FCF of -500" This is the example in the OP and happens anytime that you use the PAA approach on a non-onerous group of contracts so I don'…
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Sidkiriya is correct. You would only assess new contracts going forwards and not historically. This is a tough question as I'm pretty sure only people who have done some actual PAA eligibility work will be able to get it.
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The AAD is always going to be 1/3 and you would always assume 12 months contracts and uniform writing. Although, you can just scale the 1/3 as needed depending on contract length (I think) The derivation was in the old premium liabilities paper whic…
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Because DAC is indirectly amortized already in the CSM through a reduction in bespoke CSM, which means that it follows the CSM amortization pattern. For your second point, that wouldn't really be possible because of my first statement.
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That's a very good question -> It would depend on the terms of the reinsurance contract. If it only covers contracts that incept after January 1 2024, then there would be no impact on the LRECC. However, a second example where you have a reins…
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* In theory, but how would your acquisition cost be greater than the premium itself? I get it for reinsurance, but i don't think this will happen on the direct side. * I think It should be just your UEP at time 0.5 which should be 500. * Yes, year…
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I agree with sidkiriya here. My understanding is that the risk here is not on the premium side, but on the liabilities (Less cancellations than expected means more liabilities). More or less premium is not really the "risk" since you don't pre-provi…
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If this comes up in an exam, you can automatically assume it is PAA eligible. If a test needs to be done to determine PAA eligibility it would be really obvious as you would be provided with GMA and PAA estimates side by side. Yes that's right. N…
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This inconsistency has come up multiple times here: https://battleactsmain.ca/vanillaforum/discussion/1440/lrc-formula-under-paa#latest I would stick to the first screenshot from OP
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Absolutely your understanding is correct here. This is a restatement of the above and section 5.3.3
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They make small changes to the numbers often for some reason. Conceptually its still the same -> There is even a note saying this in the wiki
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Great! I am glad you are able to solve it. If I were studying this exam again I would view them as more illustrative examples to help understand when the PAA estimate will differ materially from the GMM approach as the main focus. If you have additi…
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Yes that's right. You can always go to the FA or other insurers if that happens
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The answer is 1000 for all of the above. You are not releasing your PAA LRC in your example above. You have to think of profit as the change in what was booked vs what actually happened. You booked a 500 dollar loss (LRC) which turned into a 500 …
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Any expenses directly attributable to the group of contracts, not just acquisition expenses. You can have claim expenses in the LIC and maintenance expenses attributable to the group of contracts for the LRC
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For your first question, that is right. You do need to do a deduction from capital available and also calculate a margin for capital required. Yes to your second question