Excel illustration

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in CIA.IFRS17-LRC

I have some difficulty understanding the PV factors calculation from Appendix B.

Can we assume AAD of losses will always be 0.33 for current year and 0.58 for next year or it has to be recalculated every time using the parallelogram?

Regarding premiums, should we expect the premium revenue pattern to be given like in older exam questions or are we expected to calculate it?

Thanks in advance!

Comments

  • Staff-T1Staff-T1

    I wouldn't worry about the parallelogram. They should give you the factors. It would be insane to calculate it. Same for the premium revenue pattern. Most of the time you would just assume all premium is received at time 0, or at time 0.25,0.5,0.75,1 in regular intervals rather than assuming premium is received as it is earned in this example. The discounting should be easy in the actual exam

  • MickyBMickyB

    In the practice IFRS question 18, it did require you to calculate it. Do you have any guidance on this or how they came up with .33?

  • Staff-T1Staff-T1

    The proof for it is in one of the older premium liability papers under IFRS4 where they calculated the AAD adjustment for premium liabilities. You can just memorise the 0.33 example since they have stated here that average paid time is in the middle of the year

  • MickyBMickyB

    okay and in general it when does it need to be used? when discounting to calculate the LRC?

  • Staff-T1Staff-T1

    yeah only time you'd have to use it

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