ISR vs UW Income

victoriadiazvictoriadiaz
edited March 2023 in MSA.Ratios

Hola!

Reading some of the forums I can see I am not the only one who is confused with the inconsistencies between CCIR.Instructions vs MSA.Ratios...

I understand we need to prepare ourselves to solve MSA Ratios with the new standards. If that is the case, I am confused with the statement that UW Income = ISR.

We have:
UW Inc = EP - APV(incurred claims) - Op expenses (from CCIR.Instructions) or
UW Inc = NEP - NCAE - TotAcq - GE (from MSA.Ratios)

However, General and Operating Expenses are now part of OIE (Other income and expenses) in the IFRS-17 Net Income formula, not part of ISR.

What should we do when solving for ROR or InsRO.NEP then? Replace UW Income with ISR - Op expenses?

Am I missing something or complexifying for no reason?

Thank you in advance!

Comments

  • Staff-T1Staff-T1

    I think I would just replace UW income with ISR. Agreed that it is not clear though and no one really knows how the CAS will choose to test this. @graham thoughts?

  • grahamgraham

    Only the CAS can answer this definitively but here is my educated guess on how they would ask a question:

    • For an MSA question they should give you the information using the pre-IFRS 17 definitions. They can't really do anything else because the old MSA reading is still on the syllabus uses these old concepts and formulas. You can usually recognize when it's an MSA question because they will ask also you whether the ratio is in the acceptable range.
    • For a CCIR question, they should give you the information using the current IFRS 17 definitions.
    • But if they give you an MSA question AND provide the data using current IFRS 17 definitions, then I would just use UW income and ISR interchangeably even though they aren't quite the same thing. Make sure you jot down a couple of phrases to explain yourself however.

    It isn't reasonable for the CAS to expect candidates to update the MSA ratio formulas for the purposes of the exam if the MSA organization itself has not done so. I personally think the CAS dropped the ball on this. The CIA reading on taxes suffers from the same issue because it was written using pre-IFRS 17 standards and has not been updated. My guess is that these readings will eventually be updated, although that doesn't help candidates writing the exam before then.

  • victoriadiazvictoriadiaz

    Perfecto thank you! :smile:

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