Decision Tree Example 3 Answer (CIA.IFRS17-LRC)

Problem 3: Given the following information about a group of contracts, asses whether the group is onerous and take appropriate action (if any) company is growing by implementing aggressive underwriting and pricing no unfavourable trends are projected FCF = 100 LRC ex. LC = 110 LC = 0

Answer:

• Based on the decision tree, a qualitative assessment of facts & circumstances indicates that this group of contracts may be onerous.
• A quantitative assessment comparing FCF = 100 to LRC ex. LC = 110 indicates the groups is not onerous because FCF < LRC ex.LC.
• No further action required.