Sample Question 8 from the CAS & Defining Groups for Insurance Contracts
In the sample IFRS-17 questions on the CAS website, question 8 gives the following table and (a) asks if each group is eligible for PAA & then (b) tells us to combine the groups into the fewest possible groupings.
In part a we establish that group 1 is eligible for PAA, while group 2 is not. Then it says in part b that we should combine groups 1 & 2 since they have similar risks, do not have coverage difference of more than one year and are both non-onerous.
Looking at the diagram from Chapter 5 of IFRS17 Ins Contracts though, it looks like the first step in determining groups after choosing portfolios is to determine if the contract is eligible for PAA.
Should groups that are measured under PAA and GMA be combined, or would this be something that should separate/be used to define groupings?
Comments
No you wouldn't combine groups that are measured under PAA and GMM together. That said, nowhere does it say that either group 1 or 2 are measured under PAA/GMM. They just give you the estimates for both
It says in the solution to part (a) given by the CAS that group 1 is PAA and group 2 is GMA/GMM. Is the solution they gave incorrect (I believe there is a typo in the solution for part (b) where they mix up groups 4 and 5, but it doesn't affect groups 1 and 2)?
A group of contract that is eligible for PAA can still be measured using GMA and combined with a group measured using GMA.
Also, I meant nowhere in the question does it say either group 1 or 2 are measured using PAA/GMA. You can then make your own assumptions based on the table