miguel
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And I'm also confused by the use of the term "timing" to make reference to the payment patterns. Isn't the timing based on the average accident dates using the parallelogram method?
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Does your answer above imply that LIC payment pattern doesn't have to be on a group basis and rather can be at a broader lever? I'd assume the following would apply in that case?
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thank you, I think the part that throws me off is where it says costs related to future contacts are not part of LRC. This seems to apply to the scenario reflected in Excel file but I do see FAC are part of the calculation of FCF which at the end ar…
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And one more question about acquisition costs. I am very confused by this paragraph from the educational note. Do you mind explaining it in plain English? It seems to contradict how DAC/FAC are treated in the calculation of LRC
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Based on your comment above should we interpret "PAA estimate" here as "LRC excluding LC" and "GMA estimate" as "LRC including LC" In that case is it correct to conclude the following? LC = GMA_LRC - (PAA_LRC ex LC)
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On a different note, I think I found another contradiction in the response from the exam committee. The educational note says DAC net of cancellation needs to be included in FCF while their response says only the cancelled portion of DAC is included…
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1) I understand your point about how to view DAC and FAC but the Excel illustration does not seem to use DAC and FAC interchangeably. FAC is not used in the Excel calculation of PAA LRC exc LC. They only use DAC. I thought this was because DAC is pa…
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Does this formula for LRC in the wiki include or exclude LC? If it excludes LC how does this match the approach in Excel illustration? the Excel approach is only doing - DAC (there's no future acquisition cost component) while the formula in th…
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Sorry I don't think you answered my first question. For example in terms of acquisition costs how do you interpret LRC for non-onerous contracts only taking DAC as inflow and LRC for onerous contracts only taking future acquisition costs as outflow?
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But this concept of FCF being a difference of outflows and inflows is only applicable to LRC? FCF applied to LIC would only involve outflows (i.e. expected value of future claims from incurred losses)? So no inflow or premium component?
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I see your point thanks @graham, but if we remove the noise from cancellations another question I have is how to interpret the use of deferred and future acquisition costs. For example: LRC exc LC involves subtraction of deferred acquisition cost…
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Thanks, S&S makes sense. I think I've seen Premium Receivable included in the formula of FCF under PAA. But is that also captured as an inflow under GMA? When you say CSM does not capture premiums, then where does Premium Received would be captu…
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Ok thanks @Staff-T1 , for your first comment since the broad definition of FCF for LRC is: FCF = outflows - inflows - effect of discounting + RA Could you please give examples of inflows related to LRC? that would help to understand what FCF i…
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@graham I'm confused by @Staff-T1 answer above. Is it always like that or what does it mean most of the time? And another question given the following formulas: FCF = PV(future cash flow) + RA FCF = outflows - inflows - effect of discounting …