Multi-peril contracts & Portfolio change

victoriadiazvictoriadiaz
edited April 2023 in CIA.IFRS17-IC

Hola!
I would need some clarification on the following section of the wiki porfavor.

1. What does additive structure mean here? Additive algorithm to price each peril or Contract premium as sum of peril premiums? And why does that lead to inaccurate financial reporting?
2. Do you have an example of a risk that could be split out by contract?
3. I think I might just need examples to put the pieces together...

  • How can a portfolio change over time for NBS, RWL, INF?
  • How can you change portfolio but not group given group is a subset of portfolio?

Muchas gracias in advance :smile:

Comments

  • Staff-T1Staff-T1
    edited April 2023

    1) For example, let's think of a property policy with 2 perils, flood and wildfire.
    In an additive structure, Premium = flood premium + wildfire premium
    In a multiplicative structure, Premium = Base PremiumFlood DifferentialFire Differential
    It's just harder to separate out the exact amount of premium related to each coverage in a multiplicative structure due to the correlation implicit between the differentials
    2) Off the top of my head, maybe TPL-BI and TPL-PD? No explicit examples are provided in the text
    3)

    • Say we have a portfolio for Ontario Auto and another for Alberta Auto. We could decide to create a new portfolio, Canada Auto as the agglomeration of the two prior portfolios. This logic would be the same for NBS, RWL and INF. Logic is the same for splicing a portfolio ino more granular portfolios
    • This is just saying that for example, if Brampton is an onerous group in Ontario Auto, it must also be an onerous group in Canada Auto
  • victoriadiazvictoriadiaz

    Crystal clear. Thank you very much! :smile:

Sign In or Register to comment.